Charlotte.com: Today's Observer
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• Construction rolls on in foreclosure zones
  Builders continue hammering together new houses in Charlotte's high-foreclosure areas.This year, they received permits for almost 1,100 starter homes in or near these neighborhoods.Nearly 700 of those permits are for houses in a suburban swath north and east of uptown. That's where three-fourths of the city's starter homes have been built during the past decade, and that's where foreclosures have hurt the most.The clustering of starter homes raises questions as the city faces costly foreclosure problems of rising crime, falling property values and families wrenched by economic disaster.Should city officials have discouraged the clustering?Should they allow it to continue?"You'd think that building more of the same in an area experiencing a lot of problems is probably not wise," said Roberto Quercia, a UNC Chapel Hill professor of city and regional planning.Nationwide, easy credit fueled a foreclosure crisis that rattled stock markets, depressed home prices, wiped out jobs and threatened the country with recession.City officials have no control over lending practices. They couldn't have stopped the lax lending that enabled people with spotty credit and little or no down payment to buy houses.However, they do regulate development planning. Some municipalities have tried to disperse starter houses or cap the number built in a region."Obviously the ideal would be that we have mixed-income communities all across Mecklenburg County," Debra Campbell, Charlotte's nationally recognized planning director said in an interview this month. "The challenge is how we achieve it."The city wants affordable, nearby housing for workers. Lower-priced houses tend to go where land is least expensive.Planners say they can't consider the selling price of proposed houses when approving a subdivision. The city also doesn't track foreclosures, but Campbell says they aren't a driver in planning decisions anyway."What do you say to a developer?" she said. " `Because there has been an increase in foreclosures, you can't build?'"Tighter lending standards will likely reduce future bad loans. Major mortgage companies will help some homeowners stave off foreclosure by freezing rate hikes. Heightened consumer awareness could encourage people to buy only what they can afford.But many more homeowners nationwide are expected to lose their homes. The chief executives of Charlotte's two behemoth banks, Bank of America and Wachovia, last week said that the depths of the mortgage crisis are "unknowable."Last week, city officials said they were stunned by Observer reports of sharply rising crime in the 10 areas with the highest foreclosure rates, all starter-home projects built in the past decade.Two years ago, city officials expressed surprise at Observer reports of spiraling foreclosures, led by starter-home buyers. Neighborhood groups also have protested.Elected officials, planners and police are talking but so far have identified few concrete steps. Discussions range from increased consumer education to forcing landlords to better screen tenants and maintain property.Officials groping for solutions face powerful competing needs."You want business to be free and to invest and to cause growth and make it possible for people to buy first homes," said Rosemarie Tong, a UNC Charlotte ethics professor. "On the other hand, you don't want...to take advantage of vulnerable people, to crush dreams, to ruin lives."Building near foreclosuresNorthwest Charlotte's Peachtree Hills and neighboring Grass Meadows form one of the city's highest foreclosure areas.Both starter-home subdivisions have foreclosure rates of more than 20 percent. They form a neighborhood where police say crime is rising.Now two companies are building new starter-home projects next door.National builder C.P. Morgan is working on Kyliglen, wedged between the two. Company spokeswoman Blair Kendall says the Indianapolis builder chooses locations based on where it sees a market.The company's Web site shows a dozen projects with starter-home prices in the foreclosure region. Some are small or nearly complete. They include adding homes in northwest Charlotte's large Brookmere subdivision, one of the 10 highest foreclosure areas, and new projects such as Kyliglen, adjoining Peachtree.Morgan didn't build Peachtree, but said last week that it will commit money, materials and labor to help spruce up the community. Morgan's offer follows an Observer story last Sunday that identified the 4-year-old subdivision as one facing decay and rising crime.Company officials are talking with police and city officials and have written to owners of distressed Peachtree houses about repair plans. The company plans to meet Monday night with Peachtree property owners."We're not the savior coming in, but we want to be part of the solution," Kendall said. "We've got an interest in making sure the community around where we are building is desirable."New projects, more controlJudson Stringfellow is co-owner of the company that developed Peachtree. He regrets the state of the neighborhood, but says he had no control. He prepared the land but did not build or finance houses.He and partner Allan Newcomb also are helping patch up Peachtree. Stringfellow said workers will pick up trash. On Monday, they plan to repair dilapidated park benches and also want to talk with residents about other ways they can help.The men were surprised to see an Observer map showing some other Charlotte projects they developed also have above-average foreclosure rates. Stringfellow blames lenders who made risky loans and says foreclosures have unfairly tarnished starter homes."It would be a shame to see the opportunity taken away from lower-income, good, hard-working people to buy their own home and build up equity due to a problem created by some overly aggressive lenders," Stringfellow said.His current projects include Barley Greens, a planned 27 houses nestled alongside Grass Meadows. Prices mostly range from about $140,000 to $150,000, in the starter-home range.Stringfellow now owns a home builder, giving him more control of how projects evolve. Stringfellow says he is building better quality houses, adding amenities such as brick fronts and energy-saving features, including extra insulation and more efficient heat and air systems. He said he's also limiting sales to investors. That's an effort to reduce rentals, which have created problems in some new subdivisions.He and development partner Newcomb plan a big project: This year, they paid $2 million for the former Pawtuckett golf course in west Charlotte. For the 150-acre site, they envision about 300 homes with parks, a pool, community center and walking trails along the creek, all at a moderate price. They are counting on tighter lending to reduce foreclosure woes. Signs at two projects advertise fixed-rate mortgages, provided by lenders."All this subprime, high-risk financing that went on the last few years seems to be the real problem, not the fact that there are people who don't make a lot of money who want to buy homes," Stringfellow said.Concerns over clusteringThree years ago, city officials were warned."American Dream or Foreclosure Nightmare," read a protester's sign in January 2005 when Charlotte City Council approved a starter-home subdivision in the northwest."We were trying to bring attention to the City Council that you need to start watching this because trouble is going to come," said Steve Swicegood, who attended and leads a coalition of neighborhood groups. "Trouble has now arrived."City Councilwoman Susan Burgess recalls those protests and said she was surprised to hear foreclosure worries."That was the first I knew of the problem," said Burgess, who heads the council's housing committee and has for 20 years been active in housing issues. "I wish the light bulb had gone off at that time, that maybe salespeople were selling to people who couldn't afford the houses."Bankers also miscalculated the disaster now costing billions.But even before foreclosures became a national crisis, planning experts raised concerns about clustering lower-priced housing in one region. They say it can create an economic segregation that yields fewer stores and services and can weaken schools in the lower-cost areas.Buyers at the entry level also may have less of an economic cushion to tide them over during an illness, job loss or other paycheck pinches.More than 50 neighborhoods, nearly all new starter-home subdivisions, had foreclosure rates of 15 percent to 61 percent, the Observer has found.Any double-digit rate is a "bright red flag," said Nicolas Retsinas, director of Harvard University's Joint Center for Housing Studies. Twenty percent is "a really high number.""Then I would say, we're doing something wrong here," he said, adding that public officials should be answering the question: "Why do we expect it's not going to happen again?"Clustering starter homes is "not only a bad idea from the perspective you are seeing now but in general," said Quercia, the UNC Chapel Hill planning professor. Combining a range of prices, sometimes called mixed-income development, can create a stronger community."If you let the market do what it does, then low-income housing will tend to be built where land is cheap," he said. "The city could have required or encouraged de