Neighborhood Stabilization Program

$172.5 Million In Neighborhood Stabilization Funds Awarded Statewide

On September 26, the United States Department of Housing and Urban Development (HUD) announced the formula allocations for the Neighborhood Stabilization Program (NSP), supplemental Community Development Block Grant (CDBG) funds to acquire and redevelop foreclosed properties. The funds were appropriated as part of the Housing and Economic Recovery Act of 2008, signed into law at the end of July. The total allocation statewide is $172.5 million. The City of Chicago and 12 other local governments received allocations, as did the State of Illinois. State funds can be used in parts of the Illinois not otherwise funded and to supplement funds allocated to local governments.

How Can the Funds Be Used?

• Establish financing mechanisms for purchase and redevelopment of foreclosed homes (including soft-seconds, loan loss reserves, and shared-equity loans for low- and moderate-income homebuyers).
• Purchase and rehabilitate properties that have been abandoned or foreclosed. Rehabilitation may include improvements to increase energy efficiency or provide a renewable energy source for such homes and properties.
• Establish land banks for homes that have been foreclosed.
• Demolish blighted structures.
• Redevelop demolished or vacant properties.

What are Limitations on the Funds?

• Discount requirement. Purchases of foreclosed homes must be at a discount from the current market appraised value of the home or property, taking into account its current condition.
• Resale restriction. Resales of these rehabbed homes and redeveloped properties to an individual as a primary residence must be in an amount equal or less than the cost to acquire and rehabilitate such home or property.
• Income targeting. All funds must be used for the benefit of individuals and families whose income does not exceed 120 percent of area median income and at least 25 percent must be used to purchase and redevelop housing for individuals and families whose incomes do not exceed 50 percent of the area median income.
• Reinvestment of profits. For the first five years after enactment, states and communities must reinvest all profits in additional sales, rentals, redevelopment, and rehabilitation of foreclosed homes and properties.

Each recipient government must submit a plan to use the funds to HUD by December 1 and will have 18 months to obligate these funds. Any funds not spent within four years will be recaptured by HUD. Draft plans had to be made available on the Internet by November 15 and there was a mandatory two-week public comment period prior to submission of the final plans. Housing Action Illinois will post links to final plans as they become available at http://www.housingactionil.org. HUD plans to complete reviewing plans by mid-January 2009 and hopes to finalize grant agreements with NSP recipients by mid-February 2009. More information on the NSP is available at http://www.hud.gov/nsp.

Information on Illinois NSP Plans