Proposals Due Soon On Use of $22 Million
By Rosalind S. Helderman and Ovetta Wiggins
Washington Post Staff Writers
Saturday, November 8, 2008
The massive housing bill that passed Congress this summer will deliver $22 million to the Washington region's jurisdictions, and local governments must decide in the next few weeks how to spend that money to erase the blight of abandoned and foreclosed homes.
Officials are considering whether to buy properties and resell or rent them to low-income residents or help people hoping to buy the houses. Or jurisdictions could buy blocks of abandoned properties, demolish the homes and hold the land until housing markets improve.
Approved in July, the $3.92 billion measure includes grants to Virginia, Maryland, the District and several hard-hit localities, such as Prince George's and Prince William counties.
Local governments must submit plans for their grants to the U.S. Department of Housing and Urban Development by Dec. 1 and then commit the money in the 18 months after approval -- an exceptionally short timeline for large, new and complicated federal programs.
The local grants provision of the new Neighborhood Stabilization Program was the most controversial of the housing bill, which also included rescue plans for Fannie Mae and Freddie Mac and a program to help 400,000 homeowners facing foreclosure refinance their mortgages.
President Bush opposed the program but dropped a veto threat over the issue, paving the way for the intense local discussions on how to spend the new money.
Unlike programs that help families that have fallen behind on loan payments, the new grants assist communities where home values have fallen because of foreclosed and abandoned houses.
"The grass grows tall. The swimming pools become fetid. They become magnets for crime. A foreclosed home by its very nature will indirectly impact property values of surrounding homes," said Brian Sullivan, a HUD spokesman. "When a home is abandoned, it can really have an almost viral effect on the surrounding homes."
Maryland Housing and Community Development Secretary Raymond A. Skinner said yesterday that the state will decide in the next weeks which local governments will receive a portion of the $26.7 million that has been allocated to Maryland. Local governments that received their own grants can apply to the state for more.
"It's a great opportunity to work with our local partners to deal with foreclosed properties so they are not a continuing eyesore and blight in our communities," Skinner said.
Prince George's, which HUD estimated has had a foreclosure rate of 5.6 percent during the past 18 months, has been awarded $10.88 million directly through the federal program, the largest grant of any local government in the region. There, a vigorous debate has emerged over how to best spend the dollars.
Officials with the county's housing department have proposed buying 40 foreclosed homes, rehabilitating them and then selling them to residents in the low to middle income range.
At a hearing this week, the County Council expressed deep skepticism about the idea, worrying that 40 home purchases would do little to address a gaping problem.
The county's Association of Realtors has recommended offering loans for down payments to residents willing to buy homes. The group estimates that the small loans could help more than 700 families -- potentially removing hundreds of vacant homes from bank ownership.
"It's pretty simple math," said Michael A. Graziano, director of government affairs for the association. "If we could leverage $10.8 million to upward of 700 households, we felt that would be a huge impact to cleaning up these vacant properties."
James Keary, a county spokesman, said officials are "considering significant modifications" to the plan based on input from the council, which is scheduled to discuss it again Thursday.
Prince William has been awarded $4.1 million. Elijah Johnson, director of the county's Office of Housing and Community Development, said the Board of Supervisors is considering plans to provide potential homebuyers with closing costs, down payment assistance and rehabilitation help. Funds will also be used for nonprofit organizations that want to create homeownership or rental plans.
In Fairfax County, housing officials have suggested to the Board of Supervisors that most of Fairfax's $2.8 million grant be used to provide second loans to potential homebuyers who are able to obtain one loan to cover a portion of the cost of a house now owned a bank.
In Montgomery County, officials hope to use the money to address a long-standing lack of affordable rental properties. Rick Nelson, director of the county's department of housing and community affairs, said Montgomery's $2.07 million grant would probably go toward buying seven houses, which would then be rented to low to middle income residents.
Nelson said resale of the properties would make little sense in Montgomery because the federal rules require that if new residents sell homes purchased through the program within 20 years, any profits gained on the sale would have to be returned to the government.
"It just kills any reason to go into homeownership -- I can't understand the rationale for it," he said.
Sullivan, the HUD spokesman, said Nelson's interpretation of the law would probably be correct in Montgomery, where high home prices mean the government's investment in each home will be high. Elsewhere, some new homeowners might be able to build equity.
In the District, a preliminary plan for $2.8 million should be completed by Thursday, and a hearing on the proposal will be held Nov. 20 at the Urban League, said Sean Madigan, a spokesman for Deputy Mayor Neil O. Albert.
Many of the 308 states and localities awarded federal money through the new program are debating whether to use the funds to finance home purchases by individuals or to buy properties and rehabilitate them, said Andrew Jakabovics, associate director of the economic mobility program at the Center for American Progress and an early proponent of the program.
He suggested the latter option might help governments target funds more effectively at neighborhoods eroding because of abandoned properties.
"I think in terms of this intent of the program, the county has it right," Jakabovics said of the discussions in Prince George's.
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