The foreclosure crisis hasn’t ended, but states and localities will soon have some money to address the problem, thanks to the housing rescue bill that Congress passed last summer.
That legislation established what is known as the Neighborhood Stabilization Program, which provided $3.9 billion in block grants for stabilizing areas experiencing high levels of foreclosure. The money should be going to work soon; local HUD offices are currently reviewing the more than 300 plans that were submitted for approval.
As for the money itself, it has already been allocated to the states and localities most hard-hit by the housing crisis. Local agencies will be allowed to use the grants to buy foreclosed homes; provide down-payment assistance or closing cost help to qualified buyers; rehab homes to bring them up to code; and do new construction on abandoned or foreclosed property. The money cannot be used to refinance existing mortgage or prevent foreclosures.
HUD released the allocation list earlier this fall, and the top state recipients, not surprisingly for anyone who follows housing, are Florida ($541 million) and California ($530) million, both of which are experiencing high foreclosure rates and foreclosure numbers. Neither, sadly, are the local areas: Miami-Dade County will receive $62 million, Chicago will get $55 million, and Riverside County, Calif., will be given $49 million.
It illustrates just how bad the housing market is Riverside, which is part of California’s Inland Empire and a former darling of the new-home industry. According to foreclosure data provider RealtyTrac, nearly 30,000 properties in Riverside County are currently bank-owned. Another 13,000 are in the early stages of foreclosure. Based on HUD’s formula, which takes into account the percent of loans entering foreclosure in the past 18 months and the risk that those homes will be abandoned, Riverside will receive more money than 31 states.
“The supply of foreclosed homes in California—particularly in the Inland Empire—is quite large,” says Andrew Henderson, vice president and general counsel of the Building Industry Association of Southern California. “The amount of money is very small compared to the number of foreclosed homes we see; however, all the help is wanted and needed.”
The NAHB agrees. “We would have liked to have seen more money,” acknowledges Claudia Kedda, NAHB’s director of multifamily finance, “but it’s a start.”
At the least, the program should bring down the number of foreclosures, which are flooding the housing market and choking new-home builders. But the NSP money might help builders in less obvious ways too. “Depending on the community, it may be an opportunity for builders to get work,” says Kedda, who notes that NSP grants can be used for rehabbing existing properties as well as doing new construction on vacant lots. She urges builders to contact their local or state agencies to see how they can get involved in any NSP projects in their communities.
Alison Rice is senior editor, online, at BUILDER magazine.
States Allocated the Most HUD Money
1. Florida $541 million
2. California $530 million
3. Michigan $264 million
4. Ohio $258 million
5. Texas $178 million
6. Illinois $173 million
7. Georgia $153 million
8. Indiana $152 million
9. Arizona $121 million
10. New York $100 million
Localities Allocated the Most HUD Money
1. Miami-Dade County (Fla.) $62 million
2. Chicago (Ill.) $55 million
3. Riverside County (Calif.) $49 million
4. Detroit (Mich.) $47 million
5. Phoenix (Ariz.) $40 million
6. Los Angeles (Calif.) $33 million
7. Indianapolis (Ind.) $29 million
8. Cook County (Ill.) $28 million
9. Orange County (Fla.) $28 million
10. Palm Beach County (Fla.) $28 million