Communities Receive Foreclosure Assistance to Stabilize Neighborhoods

By Jose Fernandez and Charles Smith, AICP, ASLA

NSP funds will enable communities to rehabilitate, resell, or redevelop foreclosed home properties to help ease a decline in value of neighboring homes. Home foreclosures have topped one million nationwide, the highest rate ever recorded.

The foreclosure crisis has touched every sector of our society, from individual homeowners to neighborhoods and local governments. Foreclosures reduce property values in neighborhoods with foreclosed or vacant homes. They also stress the fiscal capacity of local governments by reducing revenues without reducing service demands. Even a small number of foreclosures can push an otherwise stable neighborhood into a downward spiral from which it is difficult to recover. The U.S. Department of Housing and Urban Development’s (HUD) Neighborhood Stabilization Program (NSP) is designed to mitigate the high rates of foreclosure and vacancy in communities that have been most affected by the crisis. As part of the Housing and Economic Recovery Act (HERA) of 2008, HUD allocated $3.92 billion through the Community Development Block Grant (CDBG) Program to state and local governments to acquire and redevelop foreclosed and vacant properties that might otherwise become sources of abandonment and blight. An additional $1.98 billion was allocated to NSP for competitive applications as part of the American Recovery and Reinvestment Act of 2009. HUD will provide notice of funds availability for this second round of competitive funding by May 3, 2009. Communities that were determined to have the greatest need will directly receive HUD funds beginning in early 2009. Other communities may seek HUD funds allocated to state governments using an application process. Funding allocations were determined based on a formula that weighed the foreclosure rate, number of subprime mortgages and mortgage defaults and the mortgage delinquency rate for all communities across the country. Neighborhood stabilization funds can be used to: Acquire foreclosed and vacant property Demolish or rehabilitate abandoned properties Offer downpayment and closing cost assistance to low- to moderate-income homebuyers Create “land banks” to assemble, temporarily manage and dispose of vacant land for the purpose of stabilizing neighborhoods and encouraging re-use or redevelopment of urban property, especially including the provision of affordable housing.

The nature of the HERA and NSP are to quickly mitigate the impact of foreclosures on communities. As a result, NSP funds must be obligated within 18 months of award and fully spent within 4 years. This very fast schedule requires municipalities to move quickly, identify areas of greatest need, develop a strategy to address foreclosures, prepare applications, and obligate funds to begin implementing projects all in less than 2 years. The 18-month timeframe requires a comprehensive, yet timely approach to ensure your community gets the most benefit out of funds received.

All NSP direct recipients were required to have an adopted Action Plan submitted to HUD by December 1, 2008, with innovative strategies to help communities weather the foreclosure crisis. Communities that did not receive direct allocations must apply to either State or County agencies for NSP funding consideration. Application deadlines, requirements and procedures differ by state and agency. Wade Trim has been working closely with communities such as Dearborn Heights, Highland Park, Redford Township, Riverview, and Southgate, in Michigan, and Manatee County in Florida, to develop Action Plans that:

• Identify areas of greatest need in the community and map foreclosed and vacant properties
• Address unique challenges within the community and develop creative solutions to the unique problems in each community
• Design plans that create opportunities to maximize redevelopment opportunities and funding
• Incorporate the public input to be approved by the government body
• Offer implementable strategies that benefit those in need within the established program timeframe
• Can be managed mostly by municipal staff
• Can be evaluated throughout implementation to ensure accountability and success
• Meet Federal HUD requirements

Some of the NSP management actions that Wade Trim recommends to communities are:

• Develop specific procedures for the implementation of the suggested strategies/programs
• Establish a set of indicators to measure progress
• Include the collaboration of non-profit organizations, lenders and other community-based and housing entities to effectively manage your community’s NSP
• Provide timely reporting procedures to HUD or the State, etc.
• Ensure proper closing of the program when time expires

Wade Trim is helping numerous communities transform unstable neighborhoods into sustainable places with human, environmental, and economic value. We can customize our services to help you plan, design and manage your NSP, as well as make neighborhoods sustainable places through redevelopment activities. Contact us for more information about how our urban planners, landscape architects, redevelopment specialists, engineers, and surveyors can provide your local government with the experience, creativity and tools to maximize your NSP benefits.

Jose Fernandez is a Community Planner in our Tampa, FL, office who has more than 15 years of urban and land use planning experience. He can be reached at 888.499.9624 or jfernandez@wadetrim.com.

Charles Smith, AICP, ASLA, is a Senior Community Planner in our Detroit, MI, office who has been helping communities redevelop their urban cores for more than 10 years. He can be reached at 313.961.3650 or csmith@wadetrim.com.

Originally published in Innerview Vol. 23, No. 1, 2009

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