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Federal Reserve Survey of Neighborhood Stabilization Program

Federal Reserve Survey of Neighborhood Stabilization Program. Paul Wenske Senior Community Affairs Advisor January 27, 2010. What is the NSP?. $3.92 billion HUD grant on September 27, 2008. Additional $2 billion allocated in 2009 Stimulus.

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Federal Reserve Survey of Neighborhood Stabilization Program

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  1. Federal Reserve Survey of Neighborhood Stabilization Program Paul Wenske Senior Community Affairs Advisor January 27, 2010

  2. What is the NSP? • $3.92 billion HUD grant on September 27, 2008. • Additional $2 billion allocated in 2009 Stimulus. • Provides emergency assistance to state and local governments. • Encourages acquisition and redevelopment of foreclosed properties. • Grantees have 18 months to obligate funds and four years to expend them.

  3. NSP Goals • Buy abandoned or foreclosed homes. • Redevelop demolished or vacant properties • Demolish or rehabilitate abandoned, foreclosed or blighted properties. • Offer down payment and closing cost assistance to low- and moderate-income homebuyers. • Reuse properties for affordable rental housing.

  4. Need for Evaluation • Daunting task to address national problem. • Funding is generally insufficient for task. • Program time frame is compressed. • Little hands-on training provided. • Varying technical capacity among grantees. • Need to provide timely information. • Identify and replicate early successes.

  5. Face Of Need: Foreclosed properties that become vacant or abandoned are more vulnerable to neglect and crime, leading to destabilized and dangerous neighborhoods.

  6. Effect of Foreclosed and Vacant Homes • Surrounding properties within 1/8 mile (660) feet are negatively affected. • Banks face dilemma of selling houses at steeply lower prices. • Tax revenues fall as values plummet or homes are abandoned; utility bills aren’t paid. • Governments may have to raise taxes elsewhere.

  7. Survey Structure • System-wide, written survey questions. • Conducted with officials implementing NSP. • Responses are entered into a database. • NSP case studies in selected areas. • Creation of a final report on NSP. • Circulation of report throughout system.

  8. Share of Communities Working on Single Family Housing Eligible Use Are Not • Purchase and rehab: 86% 5 % • Financing mechanism: 81 % 17 % • Demolition: 61 % 33 % • Redevelopment: 53 % 32 % • Land Banking 29 % 65 %

  9. Top Five Challenges to Administer • Time to implement: 45 % • Complexity of program: 25 % • Working with very low income: 15 % • Changes in program: 13 % • Discount: 13 %

  10. Top Five Hurdles Encountered (Outside HUD Control) • Capacity 18 % • Investors: 15 % • Time: 15 % • State-related: 15 % • Availability of Housing: 09 %

  11. Crunch Time • Deadline to obligate funds is September 18, 2010. • Money not obligated by then can be lost. • What if you can’t buy REO properties in time? • Scenario One: Need to contract with lender before home is sold to private investor. • Scenario Two: Need to obligate funds by deadline or lose money to buy homes in future.

  12. Some Relief Conditional Contracts: • Before: HUD frowned on conditional contracts. Required reviews could take 60 to 90 days. • Now: HUD will allow conditional contract language for environmental reviews. Contracting with Third Party to Buy Homes: • Before: Money not committed to purchase contracts by deadline could be forfeited. • Now: HUD expected to allow communities to obligate funds by contracting with third-party to buy homes.

  13. For More Information • Federal Reserve Bank: www.federalreserve.gov • U.S. Housing and Urban Development: www.hud.gov • NSP Data: www.huduser.org/datasets/nsp.html • National Community Stabilization Trust: www.stabilizationtrust.com

  14. Paul Wenske Senior Community Affairs Advisor Community Affairs Department 1 Memorial Drive Kansas City, MO 64198 (816) 881-2886

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