While members of Congress wrestle with the housing crisis, states are stepping up their efforts to help financially troubled homeowners, according to research released today by the Pew Charitable Trusts.

They have little choice. According to the 48-page report, "Defaulting on the Dream," as many as one in 33 homeowners will be in foreclosure during the next two years, with higher figures in states such as Georgia, Nevada, California, and Florida.

The growing number of distressed properties across the country has the potential to seriously affect the stability of communities as well as state and local government budgets. The Pew report estimates that the tax base for states and localities will shrink by $356 billion in coming years as homes lose value.

Such financial damage will affect even those homeowners without mortgage troubles. Subprime foreclosures in the neighborhood could slice nearby home property values by an average of $8,771, according to Pew researchers. "Moreover, homes in the foreclosure process may become vacant, leading to increased crime and other problems in the neighborhood," the report points out.

In the hopes of averting such problems, states are experimenting with lengthening the foreclosure process (Maryland), creating loan funds for homeowners at risk of losing their properties (Michigan), and restructuring subprime ARMs in cooperation with lenders (Ohio). Will such strategies work? Nobody knows.

"The severity and speed of the crisis have meant that, in many cases, states are experimenting with innovative but as yet unproven approaches," the report says. "The jury is still out about whether and to what extent they will be effective."

For more information, including a link to the full report, visit http://www.pewtrusts.org/news_room_ektid37950.aspx.