Former HUD Assistant Housing Secretary and current Harvard University scholar William Apgar has co-published a research report quantifying the costs foreclosures impose on municipal governments, neighboring residents and others in the community. 

According to the report, the foreclosure of a single-family house, especially one that leaves the home vacant and unsecured, may, in some cases, cost cash-strapped municipal governments in excess of $30,000 per property. Typical costs include loss of tax revenue, increasing policing, building inspections, legal expenses, administrative costs to manage the foreclosure policy and more.

Left unchecked, Apgar concludes that the nationwide municipal cost of foreclosures could easily top the one billion dollar mark, money, he notes, that is being diverted away from meeting more pressing urban needs. In addition, foreclosures can have a dramatic affect on a neighborhood. Apgar provides an example of one demolished home in a Chicago neighborhood where some 13 homeowners within 150 feet of the newly vacant lot collectively lost some $220,000 in property values as a result of that failed loan. Vacant and boarded up homes also reduce the willingness of customers to shop at nearby stores and limits the ability of nearby employees to attract qualified employees, particularly since the greatest growth in foreclosures has come in nonprime loans, which tend to cluster in ways that generate significant spillover effects.

The full report is available here.