Kristopher Rengert, Community Development Expert, OCC
Federal funds authorized by Congress to help communities cope with housing market disruptions are proving critical to emerging neighborhood revitalization efforts across the nation. The Neighborhood Stabilization Program (NSP) is working to get these funds to state and local governments and nonprofit partners helping to revitalize neighborhoods hit hard by high vacancy and foreclosure rates.
Faced with falling tax revenues and rising expenses, state and local governments rely on NSP grants to address the rising numbers of vacant housing units in their communities and to begin new revitalization partnerships with groups such as the National Community Stabilization Trust.
Created by the 2008 Housing and Economic Recovery Act and expanded by the 2009 American Recovery and Reinvestment Act, the NSP is helping to return to productive use foreclosed and abandoned homes across the nation. The NSP, administered by the U.S. Department of Housing and Urban Development, is rolling out community stabilization grants in two phases. Each phase has different goals and requirements.
Phase one: A total of $3.92 billion was allocated for 309 grantees in all 55 states and territories and 254 selected local jurisdictions. Funds were allocated so communities facing the greatest risk received the most funds (see map). Each state received a minimum grant of $19.6 million; other grantees received at least $2 million. As of May 2009, grant agreements had been signed with all 309 grantees and many grantees had received money. Grantees have 18 months to assign the funds to a project and four years to spend them.
OCC calculations based on data from the U.S. Department of Housing and Urban Development and the U.S. Census.
Phase two: A total of $1.93 billion has been designated for state and local governments and nonprofits working alone or in partnership, with grantees selected via a competitive grant application process. Applications were due July 17, 2009. Successful applicants will receive at least $5 million and must spend at least 50 percent of their grant within two years and 100 percent within three years of the grant date. No more than 10 percent of the grant may be used for demolition costs.
Technical assistance: A total of $50 million is available, on a competitive basis, to technical providers supporting NSP grantees and sub-recipients. The deadline for this funding was June 8, 2009.
NSP grants may be used to:
- Secure financing to buy and redevelop foreclosed homes and residential properties.
- Buy and rehabilitate abandoned or foreclosed homes and residential properties.
- Create and operate land banks for foreclosed homes and residential properties.
- Demolish blighted, privately owned (not government-owned) properties.
- Redevelop demolished or vacant properties as housing.
NSP grantees are free to develop their program and funding plans. But they must use at least 25 percent of the funds to purchase and redevelop abandoned or foreclosed homes or residential properties that will house individuals or families with incomes that do not exceed 50 percent of the area's median income. In addition, all NSP-funded activities must benefit low- and moderate-income recipients with incomes that do not exceed 120 percent of the area's median income. No more than 10 percent of a grant may be used for administrative and planning costs.
NSP grants may be used to acquire REO properties but only if the sales price is at least 1 percent lower than the current market value. This market value must be determined by an appraisal conducted within 60 days of a purchase offer. NSP guidelines encourage recipients to negotiate with lenders to obtain price reductions commensurate with the avoided costs of holding, marketing, and selling the homes.
Banks and other institutions with REO properties to sell should contact the Stabilization Trust to find partners. They also may contact state or local NSP grantees directly to negotiate property transfers.
For more information about the NSP and its requirements, visit the Web site.
To learn more about required REO discounts, visit the Web site.