It is clear that the foreclosure crisis has dominated the national headlines, though much of the interest has been on foreclosures in urban areas. Our study examines the impacts of foreclosures in the rural communities of Rice County, Minnesota.

Foreclosures in Rice County

Most of the data collected on foreclosures focus primarily on urban centers. This can often lead to an under-count of foreclosures in rural areas like Rice County. To gain an accurate picture of foreclosures in the area, we analyzed foreclosure numbers produced by local city governments in the Rice County Joint Stabilization Action Pan (2009).

• Rice County: 142 (2006), 245 (2007), 367 (2008)
• Faribault: 49 (2006), 93 (2007), 112 (2008)
• Londsdale: 16 (2006), 44 (2007), 84 (2008)
• Northfield: 25 (2006), 45 (2007), 113 (2008)

As shown, foreclosures in Faribault, Lonsdale, and Northfield account for 81 percent of all foreclosures in Rice County.

Impacts of Foreclosures

The rise in the number of foreclosures has serious and negative impacts on the local community. From our conversation with organization staff members, we identified several ways in which foreclosures affect neighborhoods in Rice County:

• Neighborhood blight - Abandon properties contribute to the deterioration of then neighborhood. The neglect makes the house and neighborhood less attractive to potential buyers.

• Health and safety issues - Lack of regular maintenance can lead to serious health and safety hazards, such as bursting pipes. This not only damages the homes but also increases the level of mold.
• Lower property values - The presence of foreclosed houses leads to a devaluation of other properties in the neighborhood. This also has the affect of deterring potential buyers.

As demonstrated above, the presence and growing number of foreclosed properties negatively affect neighborhoods. The longer these houses stay vacant, the worse the impacts local governments have to face.

Identified Need

Local governments and organizations are currently grappling to adequately the dramatic rise in the number of foreclosures. The most pressing need from our conversations with local government and organization staff is funding. This is needed to rehabilitate foreclosed and abandoned houses and to sell them at affordable rates to buyers.

Responses to Foreclosures

The core strategy for city governments and local organizations to address this crisis has been to apply for Neighborhood Stabilization Program (NSP) funding, administered by the Housing and Urban Development (HUD) department under the Housing and Economic Recovery Act of 2008 (HERA).

The focus of HERA is to provide funding to "high-need" areas, mainly those with the highest rates of foreclosures. Rice County, having one of the highest rates in Minnesota, qualifies for this funding. 

The City of Faribault, Lonsdale, and Northfield and Three Rivers Community Action, Inc. applied jointly under the Rice County Joint Stabilization Action Plan. The cities prioritized their needs by focusing on neighborhoods severely affected by foreclosures:

• City of Faribault: the focus is on the area in and around its downtown, which has the highest concentration of foreclosures as well as some of the oldest housing stock

• City of Lonsdale: the stabilization area is the Legacy Meadows neighborhood where 17 homes are already in foreclosure though construction is not even fully finished.

• City of Northfield: the target area is the oldest area of town—the center of the city—which has increasing numbers of foreclosures.

The cities recieved $800,000 to target those high-need areas. While the economic downturn has certainly led to substantial increases in foreclosures, local governments and organizations in Rice County are working together to leverage funding and resources to address the crisis.