Foreclosure Aid Is More Than Some States Need
So why did Congress give it nearly $20 million in 2008 to deal with empty homes from the mortgage crisis? The same amounts went to Nebraska, Wyoming, West Virginia, Utah, and each of the Dakotas, which also have extremely low foreclosure rates. Will this affect home values in your neck of the woods?
Those are the kinds of questions the Obama Administration is now asking about the Neighborhood Stabilization Program, which has distributed $5.9 billion across the country to help states and cities board up, repair, sell or tear down empty, foreclosed houses.
Congress' first round of grants gave states a total of $3.9 billion to spend to stop vacant homes from blighting their streets. Every state got something, with a minimum of $19.6 million, no matter how few foreclosures they had. Hundreds of cities received grants as well.
They got 18 months to decide what to do with the money, and until 2013 to actually spend it.
Now the U.S. Department of Housing and Urban Development projects that nearly $1 billion of that money won't be committed by the first round of deadlines, coming up this September and October – and it wants it back.
"We want to put grantees on notice," says HUD spokesperson Melanie Roussell, "If you don't spend your NSP funds they will be reallocated."
By taking back cash from cities and states that failed to spend their money, HUD is hoping to make more money available for the worst-hit parts of the country – like Detroit, which is midway through demolishing 10,000 abandoned houses (like the one pictured above) and needs more money to finish the job.
Vermont, for one, isn't giving up a penny. It's dedicating its $19.6 million to: repairing an apartment building for low-income tenants along the Connecticut River in Bellows Falls; building a senior residence and affordable homes for sale; tearing down old buildings in downtown Barre; and rebuilding a movie theater in Springfield.
Vermont is on track to fix and sell fewer than 60 vacant single-family homes, but it's finding plenty of productive uses for its federal funding.
By contrast North Dakota, which had just 145 foreclosed properties go back into the hands of banks in the first three months of this year, has committed to plans for only $5.6 million out of its $19.6 million grant. It is spending most of it building housing for the elderly, mentally ill and other low-income residents.
The handful of times it has tried to fix and sell foreclosed homes, the results are sometimes absurdly expensive: for instance, $104,000 in NSP funds, plus another $70,000 from another federal program, to rebuild just one house for one family in Fargo -- and this was in a neighborhood where perfectly nice homes are on the market for less than that.
Time's up. Other states need the money more.