Gary, Indiana, plans to offer houses for $1 US in an effort to attract residents back to the once-thriving city.

Mayor Karen Freeman-Wilson has spearheaded the plan that would allow people to buy abandoned homes if they demonstrate the financial ability to bring them up to code within six months.

Prospective owners would have to meet income requirements (starting at $35,250 US for one person) and would be required to live in the home for five years before they received full ownership.

About one third of the homes in the city — about 10,000 houses — are unoccupied and many have fallen prey to vandals and arson.

In June, the city moved to begin the scheme with 12 homes up for offer in a single neighbourhood.

"Essentially what we do is give those houses out through a lottery process. People have to qualify, families have to qualify through income, through the ability to fix up the homes, because these homes have been abandoned and so they do need some work – anywhere between $25,000 to $50,000 worth of work," Freeman-Wilson said in an interview with CBC's Lang O'Leary Exchange.

The benefit would be that the new homeowners would pay taxes, remove the homes from the city’s list of derelict buildings, and improve the character of the neighbourhoods where they settle, Freeman-Wilson said.

"The way that we make money is that these homes that currently are not paying taxes because they are vacant are returned to the tax rolls, but it also raises the value of adjacent homes because what is happening is that because houses are abandoned, the houses on the block that are well-maintained by their residents are also losing value," she said.

She envisions 50 to 100 homes a year offered under the scheme if the pilot is successful.

Gary, about 32 kilometres southeast of Chicago, was a steel town with 180,000 residents in the 1960s. It is now home to fewer than 80,000 people and decades of layoffs have scuttled its industrial base.

Like Detroit, which filed for bankruptcy last month, it suffered racial friction that caused waves of residents to flee to the suburbs. But the city does not face a debt load like the one that sank Detroit. Instead, its liabilities are around $8.4 million, though it has a backlog of infrastructure maintenance that cannot be met until it has more revenue.

Freeman-Wilson, who bought her own first home through a similar program years ago, believes that stabilizing neighbourhoods and encouraging home ownership will make the city a more attractive place to live, despite its high crime rate.

She says the city is rebuilding as a transportation hub, investing in its airport and lake port as well as becoming home to several trucking terminals.

An application process for the $1 homes attracted about 400 people and, after a preselection process, the qualifying finalists will be chosen by lottery.

Other post-industrial cities including Detroit, which has hundreds of square kilometres of hollowed-out neighbourhoods, are watching the experiment.