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California Department of Housing and Community DevelopmentDeputy Director Chris Westlake - Division of Financial Assistance

Neighborhood Stabilization Program—Stakeholder Meeting

November 3, 2008

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Agenda

Overview of the NSP Determining the State’s Greatest Need Survey of Jurisdictional Readiness and Capacity An Overview of the State’s Implementation Plan The Recommended Steps for Potential

Applicants Responses to Questions Open Forum

Neighborhood Stabilization Program—

Overview

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Allocations

HERA Provides $3.92 Billion to assist States and localities in redevelopment efforts

Considered a Special Allocation of 2008 CDBG Funds

Amounts determined by formula established by HUD using criteria specified by HERA

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Criteria for Local Distribution

NSP grantees must target funds to give priority emphasis and consideration to areas with greatest need, including those: With the greatest percentage of home foreclosures; With the highest percentage of homes financed by a

subprime mortgage related loan; and Identified as likely to face a significant rise in the rate

of home foreclosures.

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Period to Use Funds

NSP grantees must use funds to purchase and redevelop abandoned and foreclosed homes and residential properties no later than 18 months after execution of the grant agreement

Use=obligate for a specific project

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Information for States

HERA established minimum 0.5% grant allocation for each state

Effective state minimum allocation is $19,600,000

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Information for States Role of States

Fund nonentitlement local governmentsFund CDBG or NSP entitlement granteesFund private or public nonprofits, Tribes,

quasi-governmental entitiesDirectly carry out activitiesUse contractors or developers

But must distribute funds to areas of greatest need, including jurisdictions receiving NSP

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National Objective Issues

HERA preempts regular CDBG national objectives

Directs that all funds be used to benefit individuals at or below 120% of area median income

Slum/blight and urgent need national objectives not applicable to NSP

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National Objective Issues

CDBG 70% overall low-mod income benefit test not encompass NSP funds

Additional HERA requirement - Not less than 25% of funds available to each grantee must be used for housing activities that benefit individuals whose incomes do not exceed 50% of area median income

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1. Establish financing mechanisms for purchase & redevelopment of foreclosed upon homes & residential properties…

•As an activity delivery cost for an eligible activity (designing & setting it up)

•Financing of an NSP eligible activity, to carry out that activity, is eligible as part of that activity

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2. Purchase and rehabilitate homes and residential properties that have been abandoned or foreclosed upon, in order to sell, rent, or redevelop such homes and properties

•Acquisition •Disposition•Relocation•Direct homeownership assistance•Eligible rehabilitation and preservation activities for homes and other residential properties•Housing counseling for those seeking to take part in the activity

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3. Establish land banks for homes that have been foreclosed upon

•Acquisition

•Disposition (includes maintenance)

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4. Demolish blighted structures

Clearance, for blighted structures only

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5. Redevelop demolished or vacant properties

•Acquisition•Disposition•Public facilities and improvements•Housing Counseling Public Services (limited to prospective purchasers or tenants of redeveloped properties) •Relocation

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5. Redevelop demolished or vacant properties (continued)

•New housing construction •Direct homeownership assistance

•570.204 activities by Community Based Development Organizations

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Eligible Uses Summary All grant funds must be used for an eligible activity

according to HERA Each activity must also be CDBG eligible and meet a

LM national objective HUD must grant written approval for any CDBG

activities not listed for that eligible use CDBG regulatory definitions of eligible activities apply

to NSP except where specifically modified New housing construction is eligible as redevelopment

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Ineligible Activities

Ineligible Activities:Generally, if an activity is ineligible under

CDBG, it is ineligible under NSPNot eligible under HERA:

Foreclosure prevention Demolition of non-blighted structures Purchase of properties not abandoned or

foreclosed upon

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Rehabilitation Standards Any purchase of a foreclosed upon home

or residential property under this section should be at a discount from the current market appraised value of the home or property.Current condition must be taken into account

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Sale of Homes

The sale of an abandoned or foreclosed upon home or residential property to an individual as a primary residence must be in an amount equal to or less than the cost to acquire and redevelop or rehabilitate such home or property up to a decent, safe, and habitable condition.

Determining the State’s Greatest Need

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AlpineAmador

Butte

Calaveras

Colusa

Del Norte

El Dorado

Glenn

Humboldt

Imperial

Inyo

Kings

Lake

Lassen

Madera

Marin

Mariposa

Mendocino

Merced

Modoc

Mono

Monterey

Napa

NevadaPlacer

Plumas

San Benito

San Francisco

San Luis Obispo

San Mateo

Santa Barbara

Santa Cruz

Shasta

Sierra

Siskiyou

Sonoma

Sutter

Tehama

Trinity

Tuolumne

Ventura

Yolo

Yuba

Tulare

Solano

Santa Clara

Alameda

Orange

Contra Costa

San Diego

Stanislaus

Fresno

Kern

San Joaquin

Sacramento

San Bernardino

Riverside

Los Angeles

$2,126,927 to $10,000,000

$10,000,001 to $20,000,000

$20,000,001 to $30,000,000

$30,000,001 to $40,000,000

$40,000,001 to $50,000,000

$50,000,001 to $60,000,000

$60,000,001 to $70,000,000

$70,000,001 to $80,000,000

State administered funds*

HUD’s NSP Allocations by County

*All jurisdictions statewide are eligible to apply for NSP funds with the State      

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HUD’s Allocations by Region

Region Foreclosures (Number)

Foreclosures As

Percentage of State Total

(%)

HUD Allocation

As Percentage of State Total

($529 million)

Central CA 78,955 18.73% 14.34%

Southern CA 243,709 57.83% 45.12%

Northern CA 43,540 10.33% 6.46%

Bay Area 55,157 13.09% 6.05%

Source: HUD Methodology

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State Allocation

Priorities: Highest percentage of foreclosures Highest percentage of subprime loans Significant rise in foreclosure rate

Abandonment Risk:• = vacancy rate/ foreclosure rate • Available by Census Tract at

http://www.huduser.org/publications/commdevl/nsp/nsp_a-f.html

Survey of Jurisdictional Readiness and Capacity

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Entities Surveyed Cities 35 Counties 12 Nonprofit organizations 4

51Focus Capacity Need Eligible Activities Others

Survey Overview

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Experienced In-House Staff and/or Expertise? 12% Yes 88% No

Example: Monterey County • Established an inter-jurisdictional agreement between

the County and South County cities to address foreclosure crisis;

• Adopted ordinance requiring notification of foreclosures within each jurisdiction.

Results - Capacity

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Maintain an Inventory of REOs? 5% Yes 95% No

Most used:■ Real Quest■ Realty Track ■ Title company■ Treasurer■ Tax Collector■ multiple listing service■ Notice of Default (NOD)

Example: West Sacramento Realty Track data cross-referenced by Code Enforcement surveying

condition of housing, NODs, title companies.

Results - Needs

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Mechanisms in place? 79% None 14% Soft-Seconds 6% Shared Equity 1% Loan-Loss Reserves

Habitat for Humanity – Shared Equity depending on length of term

> 45 years, 0%

< 45 years, up to 3%

Eligible Activity – Financing Mechanisms

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Acquisition/Rehab Programs in place? 9% Yes 91% No

Example: Self-HelpDesigned acquisition/rehab program guidelines for HOME Program

Eligible Activity – Acquisition/Rehabilitation

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Land Banks? Land Trusts?

2% Yes 4% Yes 4% Pending 4% Pending 94% No 92% No

LISC –land banking:

http://www.lisc.org/content/publications/detail/793/

Oakland -Urban Strategies –land trust:

http://www.urbanstrategies.org/foreclosure/Community_Land_Trust/

Eligible Activity – Land Banking

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Have experience and/or plans to demolish and redevelop?

15% Yes 85% No

Eligible Activity – Demolish and Redevelop

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Working with lenders to identify foreclosed properties? 2% Yes 98% No

Established outreach program for potential buyers? 18% Yes 82% No

Example: Dinuba Outreach through local newspapers, water bill, posters and

flyers posted in government and public buildings throughout the City

Eligible Activity – Others

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Eligible Activity – Others

Targeting lower income families for homeownership?

8% Successful

Example: Clearlake

Signed MOU with Habitat for Humanity to provide assistance in targeting lower-income families for homeownership

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Want to share your best practice?

Please contact the State’s NSP staff at:

(916) 552-9398

cdbg@hcd.ca.gov

The State’s Implementation Plan—

Overview

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Implementation Timeline (Tentative)

11/15/08 Post Substantial Amendment 11/21/08 Public Hearing on Amendment 12/01/08 Submit Amendment 1/09 Disseminate Application 2/09 Application Deadline 3/09 Award Grants 5/09 Execute Contracts

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Allocation Methodology—Status Report

Consulting with multiple sourcesHUDOther statesJurisdictions

Analyzing multiple data sets Assessing results of various factors

Rankings by numbers and percentages

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Funding Factors

Greatest Need. State to determine the areas of greatest need based on HUD data.

Capacity. Applicants considered for NSP funding must demonstrate previous and current capacity to carry out the proposed NSP activities.

Eligibility. The proposed activity(ies) must be eligible per the Housing the Economic Recovery Act of 2008.

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LMMI Benefit. The proposed activity(ies) must clearly demonstrate compliance with the national objective of low-, moderate-, middle-income (LMMI) benefit.

Note: For NSP, LMMI benefit includes households whose incomes are 120% or less of area median income.

Readiness. All applicants must clearly demonstrate readiness to begin implementing the proposed activity(ies).

Funding Factors

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Other Considerations

Property Rehabilitation. If the proposed activity(ies) involve rehabilitation of property while the city/county holds title, State and federal prevailing wages may be applicable.

25% Targeted Funding. Not less than 25% of the State’s total NSP Allocation must be used to house individuals or families whose incomes do not exceed 50% of area median income.

Recommended Steps for Potential Applicants

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Recommended Steps

Pre-Award CostsGrantees may incur pre-award costs necessary to develop an application, conduct environmental reviews, and adhere to citizen participation procedures prior to the State’s award.

Note: Reimbursements can only be made after final contract execution.

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Recommended Steps

Joint Applications Contiguous cities/counties may submit joint

requests resulting in a single combined NSP Application to the State.

The NSP Application must be submitted by the identified lead agency.

The lead agency and participating cities/counties must enter into a Memorandum of Understanding or a Joint Powers Agreement prior to application submittal.

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Recommended Steps

Citizen Participation Potential applicants should initiate the citizen

participation requirements by noticing and conducting the “Program Design Phase” public hearing.

Joint applicants must include citizen participation in all participating cities/counties.

Public hearing notices must be available in the appropriate languages for persons with limited English proficiency.

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Recommended Steps

Citizen Participation (continued) Prior to NSP Application submittal, applicants

must notice and conduct the “Application Submittal” public hearing before the governing board.

Public notice must include all activities included in the application, dollar amount requested, and the anticipated low-, moderate-, and middle-income benefit.

Public notice in the appropriate languages for persons with limited English proficiency.

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Recommended Steps

National Environmental Policy Act (NEPA) &CA Environmental Quality Act (CEQA) Applicants are highly encouraged to begin compliance

with State and federal environmental requirements.

The State will only monitor for compliance with NEPA.

NEPA documentation/compliance must be cleared by the State, in writing, prior to commencing any program/project.

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Recommended Steps

NEPA Compliance Begin the process now.

For guidance, refer to CDBG Grant Management Manual, Chapter 3, at www.hcd.ca.gov/fa/cdbg/manual/

If required, conduct any environmental public noticing (e.g., Finding of No Significant Impact/Notice of Intent to Request Release of Funds (FONSI/NOI RROF))

Questions and Answers

Open Forum

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For More Information

Department of Housing and

Community Development

www.hcd.ca.gov

cdbg@hcd.ca.gov

(916) 552-9398