Michigan Neighborhood Stabilization Program

1. MichiganNeighborhood Stabilization Program December 3, 2008

2. First Steps • Action Plan published 11/5/08 • Incorporate public comment and finalize: 11/24/08 • Submit to HUD: 12/1/08 • Michigan has 18 months from HUD approval to get all funds committed to projects (i.e., under contract to specific address)

3. Distribution of Funds • Data was developed on relative need in various parts of the state. • Activities to be funded and production goals were incorporated into the Action Plan. • Plan does not set minimums or maximums for any communities, regions, or specific activities. • Applicants will still need to address how the project meets the greatest needs in their part of the state.

4. Distribution of Funds • MSHDA Action Plan • MSHDA has identified 17 high-need cities for expedited access to funds • These cities are CDBG entitlements that would have received $500,000-$2 million direct from HUD, except for HUD’s $2 million NSP cut-off (plus two Cities of Promise) • These cities will have expedited access to up to $21.75 million of MSHDA’s allocation including 10% admin • Application will basically follow the HUD NSP template.

5. Distribution of Funds • MSHDA has identified factors to document relative need statewide. • Foreclosure rates • Vacancy rates • Poverty rates • Developed scores for all areas of the state, and proportioned another $59 million for competitive funding • $10 million for projects demonstrating innovation and addressing greatest needs • Approximately $7.5 million for admin

6. Eligible Activities • Establishing financing mechanisms for the purchase and redevelopment of abandoned and foreclosed upon homes • Purchase and rehabilitation of homes and residential properties that have been abandoned or foreclosed for sale or rental • Acquisition and disposition of property by land banks • Demolition of blighted structures • Redevelopment of demolished or vacant property

7. NSP Basics • Income Limits • 120% AMI • 25% of funds must provide housing for households at or below 50% AMI • Purchase at a discount • All foreclosed property purchased must be acquired at a discount • HUD is looking for an average of 15% discount from appraised value, given current condition

8. Rehab standard • Must meet Michigan rehab code • May include energy efficiency and/or green building • Sale for owner-occupancy must be for amount at or less than the total project cost • But impact of HUD’s program income requirements on future home equity is still unclear • Up to 10 percent admin • MSHDA expects to fund developer/delivery fees where appropriate

9. Ineligible Activities • Generally, if an activity is ineligible under CDBG, it is ineligible under NSP • Not eligible under HERA: • Foreclosure prevention • Demolition of non-blighted structures • Purchase of properties not abandoned or foreclosed upon

10. Financing Mechanisms • Provide interest rate write-downs on the redevelopment of foreclosed, abandoned and vacant property for rent to persons with incomes <50 percent AMI • Provide down payment assistance for buyers of NSP-assisted properties; buyers eligible up to 120 percent AMI

11. B. Acquisition and Redevelopment • Nonprofits and local governments, in target areas • Redevelopment of SF homes • May include both homeownership and rental moving to homeownership, such as lease-purchase models • Rental management of SF homes under HOME rules • Rentals would be placed under one management entity in each market • Rental tenants selected based on being likely to qualify for mortgage within three years

12. B. Displacement Prevention • Enable purchase by nonprofits of homes deeded back in lieu of foreclosure by approved households • Nonprofits would rent to foreclosed household to avoid displacement • NSP-funded counseling to support eventual repurchase of home by household • Rent would include a purchase escrow to assist the eventual purchaser of the unit

13. C. Land Banks • Funding for land banks for acquisition, maintenance, and disposition of properties acquired under NSP

14. D. Demolition • Michigan Land Bank properties • Includes projects implemented by workforce development programs (can include maintenance) • Demolition of blighted properties in target areas by local governments, nonprofits, for-profits

15. E. Redevelopment of Vacant Land • Multifamily • Rental development, especially very low-income (including supportive housing) • Single family homeownership, based on market demand • Mixed-use buildings • Possible community facilities • Parks, gardens, community centers

16. Next Steps • MSHDA is addressing implementation issues • Inventories of REO/Land Bank properties • Data systems—enhancements based on elements from OPAL, Cities of Promise, LINKS • Application forms • Legal documents (mortgages, use agreements, etc.) • Workforce development programs

17. Application Time Frames • 17 non-HUD-entitled NSP cities • Application template available on MSHDA website soon • Application for local targeted programs • Developer/counselor/property manager roles • Regional training expected by mid-January • Applications due early-mid February for first competitive round • Multifamily Development division will be working with projects for direct application • MSHDA Interdivisional Team will review and approve all applications and projects

18. Commitment of Funds • Readiness to proceed is extremely important • For programs involving multiple projects, especially where addresses are not yet identified or market is uncertain, funds will be awarded incrementally • A total “intent to fund” amount, subject to timely commitment and expenditure • Commitment and expense will be tracked and increases in the award up to the “intent to fund” amount will depend on: • Timely progress • Satisfactory monitoring

19. Michigan is well-positioned • Michigan is well-positioned to handle this responsibility and to maximize this opportunity • Michigan Land Bank is a national model • Substantial local nonprofit capacity • Strong local network of supportive housing developers • Strong collaborative relationships • Established workforce development programs • Extensive experience with Single-Family Redevelopment, homebuyer projects and targeted neighborhood revitalization

20. The Right Approach (we hope!)… • Allan Meltzer, Carnegie Mellon University, 21/1/08 • “…Throwing all this money into mortgage markets is addressing the wrong end of the problem….What needs to be done most is to clean up the excess supply of housing… Until we see an reduction in the excess supply of housing, we’re not going to see an end to the drop in housing prices… What I want them to say is that if you buy a house this year and make a down payment, we’ll give you a tax credit for the down payment. And if you don’t pay taxes, we’ll give you the money. That will stimulate the demand for houses now, and through 2009.” • http://www.npr.org/templates/story/story.php?storyId=97629355

21. The End Result • Reduction of the number of surplus housing units • Rebalancing of supply and demand in neighborhood markets • Creation of Communities of Choice