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Communities to benefit from Neighborhood Stabilization Program
November 23rd, 2008 by Mike Knutson
Does your rural community have foreclosed or abandoned properties? If so, you’d better get your community members together to figure out how to take advantage of the Neighborhood Stabilization Program.
Set up by the Housing and Economic Recovery Act of 2008 (Congress’ first attempt to bailout the housing markets), the Neighborhood Stabilization Program provides grant funds to states and communities.
The purpose of the money is “to purchase foreclosed or abandoned homes and to rehabilitate, resell, or redevelop these homes in order to stabilize neighborhoods and stem the decline of house values of neighboring homes.” (HUD description) In South Dakota, Governor Rounds authorized South Dakota Housing Development Authority (SDHDA) to administer the program.
If you hear a clock ticking, it’s because South Dakota should receive its share ($19.6 million) in the first quarter of 2009. (click here for your state’s allocation) Then, states have 18 months to commit those funds to projects. That’s operating at light speed for the federal government!
While $19.6 million is a lot of money, there’s going to be tremendous interest in it. Currently, South Dakota’s plan calls for 20% to go to Sioux Falls, 20% to Rapid City, and 20% to the Indian Reservations. But let’s get down to the details. How can your rural community use this infusion of capital?
What the money can be used for?
- Create finance mechanism to assist with homeownership. This includes: down-payment assistance, closing costs assistance, or interest rate reduction assistance. The key here is that homes purchased must meet HUD’s abandoned or foreclosed definitions. That may be tough in rural communities where the number of foreclosed homes is low.
- Purchase, rehab, and resell abandoned and foreclosed properties. What an idea! Again, a rule requiring that homes be purchased at “at a discount” might make this more difficult to implement. Why? The values of homes in rural communities in some communities haven’t depreciated greatly in the last year. But how could they; home values haven’t risen in these communities in the last 20-30 years?
- Demolish “blighted structures”. Many communities have been doing this for years under the guise of beautification. This program will help them recover some of the money used to clean up the property, which they can hopefully pass along to new homeowners.
- Redevelop demolished or vacant properties. This is very similar to demolishing blighted structures, but opens up the possibility of dealing with land that may not have a home on it. It may also mean, they can use the money to deal with infrastructure issues in the development process?
That’s a lot to mull over, and you don’t have a lot of time to do it. Those communities that have a community plan – one like the Rural Housing Playbook advocates – are probably ready to act right away. I hope those who aren’t ready yet get right to work because I’m sure your community could benefit from this opportunity.
Learn more about the Neighborhood Stabilization Program in your state
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Tags: homeownership, Neighborhood Stabilization Program, Purchase Rehab Resell, rural housing, South Dakota
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