Financial Reform Law Includes Another $1B for Neighborhood Stabilization Program
- Jul 22, 2010
Dees Stribling, Contributing Editor
Washington, D.C.–The Neighborhood Stabilization Program, which allows local governments and other entities to buy foreclosed residential properties and oversee their renovation with federal grants, has received a fresh infusion of $1 billion with the signing of the Restoring American Financial Stability Act of 2010 into law this week. The money represents the third round of funding for the NSP.
In 2008, the Housing and Economic Recovery Act included $3.92 billion initial NSP funding, which was allocated to state and local governments directly. The American Recovery and Reinvestment Act of 2009 authorized an additional $2 billion for the NSP, allocated by a competitive bidding process than allowed nonprofits and for-profit/nonprofit partnerships to compete for funding. The latest round of $1 billion in funding brings the total NSP funding to about $7 billion.
The recipients of the funding may establish financing mechanisms for the purchase and redevelopment of foreclosed residential properties; purchase and rehabilitate residential properties that have been abandoned or foreclosed upon and then sell, rent, or redevelop them; establish land banks for homes that have been foreclosed upon; demolish blighted structures; or redevelop demolished or vacant properties. The funds aren’t limited to a particular kind of residential property, and in fact in some places, multifamily figures highly into the scheme of NSP-funded redevelopment.
As of 1Q10, for example, New York City had received about $24.2 million in NSP funds. Considering the housing stock of the city, much of that sum was used in a multifamily context, including 25 percent of the total set aside for the acquisition and rehabilitation of multifamily buildings in foreclosure where the owner had abandoned the property and wasn’t providing adequate repairs, management, or other caretaking.
As of 1Q10, according to Real Capital Analytics, there are about 2,100 “troubled” multifamily properties nationwide–that is, properties with mortgages currently in default or foreclosure or already lender REO. Troubled multifamily problems tend to be concentrated in low- to moderate-income neighborhoods.
The bill signed into law by President Obama this week allows and redevelopment of vacant properties to count toward the requirement that 25 percent of funds be spent on families with very low incomes. This change will make it easier to leverage NSP funds with private dollars, reduce the per-unit cost to rehabilitate and sell low-income residential properties, and return more vacant properties to productive neighborhood assets, according to the National Foreclosure Prevention and Neighborhood Stabilization Task Force, which lobbied for the change.