Recent gains in home prices have done little for blighted neighborhoods in the working-class, largely black and Hispanic town of Richmond, Calif. Federal promises of help have not amounted to much either. So Richmond is about to become the first city in the nation to try a novel way to stop foreclosures: turning to eminent domain.
Traditionally, eminent domain, or the compulsory sale of private property to governments for a public purpose, works against homeowners – as when houses are bought up to make room for a highway or a commercial development. But in this case, the use of eminent domain is meant to help people stay right where they are.
The results will be closely watched by both Wall Street banks, which have vigorously opposed the use of eminent domain to buy mortgages and reduce homeowner debt, and a host of cities across the country that are considering emulating Richmond.
The banks have warned that such a move will bring on a hail of lawsuits and all but halt mortgage lending in any city with the temerity to try it.
But local officials, frustrated at the lack of large-scale relief from the Obama administration, relatively free of the influence that Wall Street wields in Washington, and faced with fraying neighborhoods and a depleted middle class, are beginning to shrug off those threats.
“We’re not willing to back down on this,” said Gayle McLaughlin, the former schoolteacher who is serving her second term as Richmond’s mayor. “They can put forward as much pressure as they would like, but I’m very committed to this program and I’m very committed to the well-being of our neighborhoods.”