Milwaukee officials are proposing a sale of 21 vacant city-owned duplexes to a Madison-area developer that plans to renovate them into 40 rental units.
The city obtained the houses through property tax foreclosure, and plans to sell them to Gorman & Co. for $5,000 apiece, said Clifton Crump, a Department of City Development project manager. He said the houses need extensive repairs, and would be demolished if the sales didn’t occur.
The transaction needs Common Council approval, and the council’s Zoning, Neighborhoods and Development Committee is to consider the proposal at its Tuesday meeting. The homes are in a central city area bordered by W. North Ave., W. Vliet St., Washington Park and N. 20th St.
Gorman, based in Oregon, Wis., will renovate the houses and then rent them at below-market rates to families whose median income is less than 60% of the Milwaukee area’s median income.
In return, Gorman is receiving federal affordable housing tax credits totaling $6.1 million, which will provide most of the financing for the $7.4 million project, Crump said.
Other financing includes a $915,000 bank loan and $250,000 in federal neighborhood stabilization funds, according to Gorman. The firm also is providing $148,703 in equity financing.
Gorman plans to use one of the houses for a leasing office.
The 20 remaining duplexes will be renovated to provide 40 rental units. The monthly rents for the two- and three-bedroom units will range from $559 to $797.
The proposed sale to Gorman became possible after the Common Council in April approved a change in city policy to allow sales of tax-foreclosed homes to investors, not just owner-occupants.
The city’s long-standing policy was to sell foreclosed homes with one to four living units only to people who will live in the houses. That restriction was designed to keep the properties from being purchased by absentee landlords, whom city officials feared would be more prone to neglect the properties or allow them to be rented to troublesome tenants
The policy change, proposed by Ald. Michael Murphy, occurred because the number of properties acquired through tax foreclosure has increased steeply since the housing bubble burst.
The 808 properties acquired in 2009 and 2010 are greater than the number during the previous six years, city records show. The city treasurer’s office forecasts acquiring another 500 to 600 properties in 2011.