A public-private partnership is trying a new foreclosure-to-rental strategy in Oakland, Calif., that will involve purchasing, renovating and renting up to 100 homes in two of the least affluent, inner-city neighborhoods in this city on San Francisco Bay.

Columbia, Md.-based Enterprise Community Partners, a national nonprofit with 30 years of experience investing in affordable housing projects, and Oakland, Calif.-based property management startup Waypoint Homes, which has focused on turning distressed single-family homes into rentals since its founding in 2008, have teamed up on the project.

The program’s total cost is $20 million, $1.6 million of which has been raised so far, the companies said. Waypoint and Enterprise have partnered to raise the rest, and are starting the project slow with a first phase of 20 homes to begin by this September.

In the collaboration, Waypoint will select, renovate and manage the properties, and Enterprise will provide tenant financial education and workforce development to be associated with the remodel projects.

What’s new about the program — advertised as a "first of its kind" — is that it brings private capital specifically to low-income neighborhoods, said Rob Grossinger, a vice president at Enterprise.

The program is also unique in that it will be highly geographically focused, said Colin Wiel, Waypoint co-founder and managing director. Focusing on rougher neighborhoods serves the project twice, he said: Funds can be stretched further, and the social benefit of a turnaround is even higher.

"We’re trying to prove that you can make money while serving affordable housing," Grossinger said. "It’s a great pilot for us."

If the program can generate a return for investors in Oakland, that could pave the way for it to expand to other markets.

As a kind of "mission-driven capital," returns on investment are not expected to be in the high double digits, like investing in suburban foreclosures often are, Grossinger said, but they won’t be tiny either. "They’ll be close to market," he said, somewhere between 5 and 15 percent.

Efforts to revitalize neighborhoods that have been plagued by a glut of bank-owned properties have had varying degrees of success during the downturn.

In early February, the Federal Housing Finance Agency (FHFA), Fannie Mae’s and Freddie Mac’s regulator, announced a new program to sell bundled real estate owned (REO) properties to private investors for conversion into rentals.

The National Association of Realtors wants such programs to be "implemented on a strictly limited, as-needed basis," citing recent estimates by analysts at Barclays Capital that private investors are already converting 800,000 homes a year into rentals.

Last month, California Realtors welcomed a bill introduced by Rep. Gary Miller, R-Brea, that would prohibit bulk sales of Fannie Mae REO homes in the state.

Foreclosures continue to challenge neighborhoods — and the banks that own them and are responsible for their maintenance. In February, foreclosure analysis company RealtyTrac, reported that of the 1.4 million properties then in some stage of foreclosure, just under 50 percent were REOs.

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