Washington, D.C–U.S. Housing and Urban Development Secretary Shaun Donovan announced yesterday that the Obama Administration will work with Congress to find up to $1 billion in additional funding for the Neighborhood Stabilization Program (NSP) and foreclosure prevention counseling, in an effort to help state and local governments more effectively combat the ongoing effects of the housing crisis and home foreclosures.
Donovan made his remarks at a roundtable with Washington, D.C.-based reporters, sponsored by the Christian Science Monitor.
The Administration also announced it will reallocate funds awarded through NSP1 that have not yet been committed to specific projects, in order to drive more funding to hardest hit communities. HUD has already awarded nearly $6 billion in NSP grants to help state and local governments respond to rising foreclosures and sinking home values: $4 billion funded NSP1, through the Housing and Recovery Act of 2008 (HERA), and an additional $2 billion funded NSP2, through the American Recovery and Reinvestment Act of 2009.
The initial NSP funds provided each state government with a “base allocation” of $19.6 million, without regard to need. Under this new initiative, HUD will recapture money from communities that not yet committed NSP 1 funding, and reallocate it to city and county governments with very high foreclosure and/or vacancy rates, based on recent data.
The Administration plans to work with Congress on new foreclosure counseling efforts to help homeowners facing foreclosure to remain in their homes. HERA provided $150 million for housing counseling to connect homeowners with their mortgage servicer or lender to explore options that will keep them in their homes.
But one real estate professional who keeps a close eye on the epicenter of the foreclosure crisis, Las Vegas, expressed skepticism about the NSP. “I haven’t really seen an effect,” says John Restrepo, principal at Restrepo Consulting. “I haven’t seen it stabilize anything,”
The only way to fix the problem, in hard-hit areas such as Nevada and Arizona, is for banks or the federal government to write down troubled mortgages, Restrepo says, but the expense involved with that likely means that will not happen, he explains.
“That means the banks or the feds will have to take a large hit,” Restrepo says.
“The foreclosure trend continues to push down prices for single-family and condo townhomes [in Las Vegas],” says Brian Gordon, principal of Applied Analysis.
Falling single-family home prices have meant that those homes have become more affordable, Gordon says, thus increasing vacancy and driving down rents in multifamily properties. Also, Las Vegas’ swooning economy has had a huge negative impact, as Gordon notes that Southern Nevada’s unemployment rate is 13.8 percent, and 130,000 residents are looking for work but can’t find it.
Restrepo says investors are buying pools of houses, 15 or so, and renting them out, eventually hoping to sell them when the market turns, which hurts multifamily vacancy.
He says, though, there has been an increase in buying activity of apartment communities. “At the peak, buildings were selling for $160,000 to $165,000 per unit,” he says. “Now, prices per unit are more in the $50,000 to $60,000 range.”
Las Vegas is very dependent on a healthy national economy that will spur travel, Restrepo says. As the gaming sector stabilizes, that will have a positive impact on Las Vegas’ multifamily sector, although he does not see a speedy comeback.
“I don’t see a V-shaped recovery,” he says. “It will be more like an elongated Nike swoosh.”