federal reserve survey of neighborhood stabilization program paul wenske senior community affairs...

Federal Reserve Survey of Neighborhood Stabilization Program

Paul WenskeSenior 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.• 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.

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.

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.

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

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.

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.

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 %

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 %

Top Five Hurdles Encountered (Outside HUD Control)

• Capacity 18 %

• Investors: 15 %

• Time: 15 %

• State-related: 15 %

• Availability of Housing: 09 %

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.

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.

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

Paul WenskeSenior Community Affairs Advisor

Community Affairs Department1 Memorial Drive

Kansas City, MO 64198(816) 881-2886