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ResearchWorks December 2010

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December 2010    
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 NSP x 3

A picture of an abandoned home in severe disrepair.HUD's Neighborhood Stabilization Program (NSP) helps localities address community problemsresulting from the nation's mortgage foreclosure crisis. Authorized under Title III of the Housing and Economic Recovery Act of 2008, the program has received three rounds of funding targeted specifically to neighborhood stabilization. The Housing and Economic Recovery Act of 2008 provided a first round of formula funding (NSP1) in the amount of $3.92 billion to state and local governments. The American Recovery and Reinvestment Act of 2009 provided a second round of funds (NSP2), which awarded $2 billion by competition. In July 2010, Congress authorized the third and most recent round of funding (NSP3), in the amount of $1 billion, as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The NSP3 funds were distributed by formula to states and units of general government for buying, rehabilitating, and reselling foreclosed and abandoned homes that must remain affordable for the longest feasible amount of time. Recipients may decide what activities to undertake as long as they are allowable under the Act. Acceptable uses for NSP3 funds include the following:

  • Financing mechanisms for foreclosed properties;
  • Purchasing and rehabilitating abandoned or foreclosed homes and residential properties;
  • Land banks for foreclosed properties;
  • Demolition of blighted structures; and
  • Redevelopment of demolished or vacant properties.

Neighborhood stabilization activities must also benefit low-, moderate-, and middle-income households that do not exceed 120 percent of the area median income (AMI). Twenty-five percent of the funds must help households with incomes below 50 percent of the AMI.

Through a partnership between HUD and the National Community Stabilization Trust, NSP3 offers grantees the First Look initiative, a sales method that allows grantees an exclusive 12- to 14-day window to evaluate and bid on properties before others can do so. By giving every NSP grantee a first chance to buy foreclosed and abandoned properties in hard-hit neighborhoods, First Look allows grantees to strategically choose their properties, rehabilitate, and resell foreclosed homes more quickly. In addition, says Jessie Handsforth Kome, HUD Deputy Director of the Office of Block Grant Assistance, "We arestrongly encouraging green and sustainable elements, in accordance with Energy Star standards, in gut rehab and new construction to keep operating costs down over time to help with the affordability of units." NSP also seeks to prevent future foreclosures by requiring families who receive homebuyer assistance to go through housing counseling and borrow from lenders who comply with sound lending practices.

HUD issued the NSP3 Notice of Formula Allocations and Program Requirements on October 19, 2010, and grantees must submit their plans for the funds by March 1, 2011. Kome explained during a webinar (posted online at HUD's NSP Resource Exchange) that at least half of the funds must be expended within two years of funding, and total allocations must be used by the end of three years. As grantees design their programs, Kome suggests that they give careful thought to how they will address local housing market conditions, provide for vicinity hiring in target neighborhoods, and create affordable rental development preferences.

 

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 Moving to Work

With the 1999 implementation of HUD's Moving to Work (MTW) demonstration program, participating public housing authorities (PHAs) have had greater leeway to design and test strategies that fit local needs. In authorizing MTW in 1996, Congress sought approaches for providing and administering housing assistance that are cost effective, help low- and very low- income families with children become financially self-sufficient, and expand the range of housing choices. At just over halfway through the demonstration period that will end in 2018, researchers have studied the experiences of 33 PHAs to learn what strategies might shape future rental reform and public housing assistance policies. This inquiry found a number of promising strategies enacted by individual agencies that fell into four general categories.

Preserve and Revitalize Public Housing
At the time MTW was implemented, the public housing stock was in dire need of an estimated $22 billion in upgrades and preservation measures. Yet the growing need for capital repairs was not adequately met with in the necessary federal capital funds, causing a significant inventory loss of public housing units. With the preservation and modernization of public housing, MTW agencies have been able to expand housing choices for low-income families while also improving the appearance of their communities and neighborhoods. The flexibility built into MTW allows PHAs to use demonstration funds to develop new units, with greater freedom to streamline processes, coordinate and intermingle funds, leverage investment, and employ private-sector business practices while being responsive to area markets and opportunities. For example, the Atlanta Housing Authority leveraged MTW to revitalize its distressed public housing stock with mixed-income, mixed-finance developments, resulting in additional market rate rentals, Tax Credit rentals, public housing with Tax Credit units, Tax Credit with Project-Based Rental Assistance units, market-rate homes for sale, and affordable homes for sale.

Streamline Operations
No new allocations accompany an MTW designation. Rather, these PHAs may combine their Housing Choice Voucher (HCV), public housing capital, and public housing operating funds for MTW activities. Thus, they avoid duplicated administrative costs, save money, establish reserves, fund social services, and can add to a development account. This streamlining appears to make obtaining housing assistance an easier, less burdensome process for applicants. For example, the Lawrence-Douglas County Housing Authority has been able to combine their public housing and HCV program waiting lists, resulting in quicker turnaround times and fewer revenue losses attributable to vacancies.

Test Rent Reform
Public housing and HCV rents are traditionally calculated at 30 percent of adjusted income, as documented by residents and verified by PHAs. MTW allows innovative rent models that disallow all or a portion of earned income in setting the rent amount, turning employment and self-sufficiency into incentives. Alternative rent systems are acceptable if they do not impose excessive burdens, costs, or hardships on renters or administrators and are within program parameters. Researchers found several promising approaches, tailored to local conditions, for future rent reform design. One housing authority in Cambridge, Massachusetts uses a tiered rent structure in which a flat rent is set at 30 percent of income at the low end of an income range. As a household's income increases within that range, the rent burden constitutes a smaller portion of a family's budget, freeing money for other necessities. Other housing authorities are experimenting with models featuring time limits, flat rents, minimum rents, and minimum earned income requirements. The full effect of these alternative rent systems, however, has not yet been determined, indicating a need for additional research.

Encourage Self-Sufficiency
MTW challenges housing authorities to design supportive services for residents of public housing that take a holistic approach to the issue and foster self-sufficiency. They may combine federal funds, collaborate with community-based organizations, and otherwise be innovative in how they help residents move beyond a need for housing assistance. This might include combinations of services, case management, classes in literacy and budgeting, work requirements, time limits, rent in escrow accounts, and other activities. Among the many different practices implemented, the researchers found vouchers for supportive services and programs that serve special needs groups, such as prisoners reentering society and homeless families.

Because every MTW project is unique, success was difficult to define and applicable outcome measures were unavailable for this review. Yet from surveying these projects and talking to participating housing authorities, the researchers came away from this interim evaluation with a sense of the kind of agency best positioned to achieve cost efficiency and self-sufficiency while increasing housing choices for disadvantaged families. Such an organization would be innovative, able to report on performance, practice strict fiscal controls, have (or have access to) good evaluation tools, able to count on local community supports, and understand its role in meeting community needs.

 

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Need for Housing Assistance in the Suburbs

Suburban social service providers are seeing new clients and experiencing increased
demand. The Metropolitan Policy Program at the Brookings Institution found that from
June 2009 to April 2010, 60 percent of nonprofit suburban providers from jurisdictions
outside of Chicago; Los Angeles; and Washington, DC, reported a rising need for
mortgage and rent assistance. Half of the sampled providers help low-income
households find affordable housing or make rent payments, and one-third offer
temporary shelter or housing. Go to Strained Suburbs: The Social Service Challenges
of Rising Suburban Poverty to see the full study by Scott W.Allard and Benjamin Roth.




 

 The Time to Preserve Affordable Rental Housing Is Now

A picture of an abandoned multifamily housing development being demolished.A 2009 survey of 20 metropolitan areas by AARP, the National Housing Trust, and Reconnecting America identified 250,000 privately owned, assisted apartments within walking distance of public transportation. Such access is crucial for low-income families, who spend an average of 57 percent of their income on housing and transportation. Low-income households who must use a car spend nearly three times more on transportation than those with access to public transit.

Two-thirds of the surveyed apartments were under federal housing contracts due to expire within five years. If property owners choose to stop participating in assisted housing programs, possibly for greater opportunity in the open market, the nation's affordable housing stock will suffer even greater losses than it has already experienced. The Joint Center for Housing Studies at Harvard University reports that between 1997 and 2007, the loss of low-cost housing stock escalated dramatically. Demolition, disaster, abandonment, conversion to nonresidential use, owner occupancy, and upgrades to higher rent ranges are among the reasons for the loss of affordable rental units.

With transit-oriented development increasingly seen by urban planners as a catalyst for economic growth, Enterprise Community Partners, the National Housing Trust, and Reconnecting America conducted case studies to identify strategies, resources, and tools that can help communities preserve affordable rental housing near transit. Using the experiences of Atlanta, Denver, Seattle, and Washington, DC, the study highlights opportunities for preservation and shows how each of the four metro areas are successfully preserving affordable housing near transit.

Despite regional differences, the researchers found sufficient similarities across the community approaches to be able to identify some immediate basic initiatives that all four areas found necessary, beginning with an inventory of the properties and locations of assisted, subsidized, and unsubsidized housing that would be appropriate to target. The necessary and available resources for acquiring targeted properties, such as financing tools and partnerships, had to be identified. Finally, resources and opportunities to develop or redevelop distressed properties were paired to be consistent with regional transit planning and project funding strategies.

Although new challenges accompany transit-oriented development, these case studies demonstrate that communities can strategically meet the critical need for affordable housing near accessible transportation, while curtailing the loss of rental units available to low-income families.

 

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