Rough outlines of Texas $178m Neighborhood Stabilization Program emerge

In an attempt to deal with the foreclosure crisis Congress has allocated substantial funding to cities, counties and states to buy up for close to an abandoned properties to prevent them from further depressing property values and causing neighborhoods to deteriorate. We will soon learn whether cities, counties and the state of Texas can successfully carry out this program. The critical planning process is going on now.

While the program has great potential to live up to its promise I have concerns about whether the program will be effectively administered in Texas.

Fifteen grantees across Texas will receive funding from HUD under the new HUD Neighborhood Stabilization Program.  The Texas allocation totals $178,143,197.  The funding is provided through HUD’s Community Development Block Grant (CDBG) Program under the Housing and Economic Recovery Act of 2008. These targeted funds will be used to purchase foreclosed or abandoned homes at a discount and to rehabilitate or redevelop them in order to respond to rising foreclosures and falling home values.

State and local governments can use their neighborhood stabilization grants to acquire land and property; to demolish or rehabilitate abandoned properties; and/or to offer downpayment and closing cost assistance to low- to moderate-income homebuyers (household incomes not exceed 120 percent of area median income). In addition, these grantees can create “land banks” to assemble, temporarily manage, and dispose of vacant land for the purpose of stabilizing neighborhoods and encouraging re-use or redevelopment of urban property.

Entities in Texas receiving funds direct from HUD are…

Community                NSP Allocation    Local Foreclosure Rate
TEXAS STATE PROGRAM      $101,996,848               3.2%
ARLINGTON                  $2,044,254               3.8%
DALLAS                     $7,932,555               3.7%
DALLAS COUNTY              $4,405,482               4.6%
EL PASO                    $3,032,465               5.1%
FORT BEND COUNTY           $2,796,177               3.4%
FORT WORTH                 $6,307,433               4.2%
GARLAND                    $2,040,196               5.0%
GRAND PRAIRIE              $2,267,290               5.3%
HARRIS COUNTY             $14,898,027               4.5%
HIDALGO COUNTY             $2,867,057               8.2%
HOUSTON                   $13,542,193               4.1%
MESQUITE                   $2,083,933               5.9%
SAN ANTONIO                $8,635,899               3.9%
TARRANT COUNTY             $3,293,388               2.9%

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Now, let’s look at how the State of Texas, through the Texas Department of Housing and Community Affairs (TDHCA) proposes to use its share of the funds.

The State of Texas is required to submit a plan to HUD by December 1 for how the $101,996,848 in funds the state will receive will be utilized and programmed. The draft plan was posted by TDHCA on the agency’s website for public comment.

As with its regular Community Development Block Grant program, the state of Texas proposes to sub allocate the HUD funds to local units of government. I have doubts that this will result in an effective program in the case of the Neighborhood Stabilization Program. The reason being that this sort of activity is unprecedented, will require detailed and careful planning at the local level and there are no readily available models to follow. With each local jurisdiction likely to receive only a fairly small amount of funds I am concerned that the program may be under subscribed, local programs may suffer from delays and slow implementation, and program funds thus put in jeopardy.

I do understand however why the Texas Department of Housing and Community Affairs has elected to sub allocate funds rather than to attempt to implement the program itself. The sheer size of the state makes it difficult to centrally administer a program, the state is already administratively burdened with implementation of the Hurricane Rita housing rebuilding program and now with establishing programs to deal with the housing destruction brought about by Hurricane Ike and the department frankly lacks the administrative capacity to undertake direct administration.

As for the activities the state proposes, the state proposes to tell HUD that it will engage in virtually all of the eligible activities since the state does not know what the local grantees will propose.

{The] Department will propose a broader plan as it will be easier to cull activities that are underperforming and expand performing activities rather than justifying entirely new activities.  The following activities are proposed:
• Demolish blighted structures.
• Purchase abandoned or foreclosed homes with the intention to sell or rent properties.
• Provide financing such as mortgage financing for households earning 50% or less of the
area median income or down payment and closing cost assistance for households earning
up to 120% of the area median income.
• Acquire, demolish and/or rehabilitate foreclosed and blighted properties and hold
properties for up to 10 years in land banks.
• Redevelop demolished or vacant properties.

The Texas NSP anticipates making at least the following number of homes available to low-, moderate-, and middle-income households as a result of NSP-assisted activitieswithin the first two years of the program:

50% or less AMI: 250 units ($25,499,212)
51% to 80% AMI: 175 units ($28,148,975)
81% to 120% AMI: 115 units ($28,148,975)

The state proposes to allocate funds into three funding pools.

Program Distribution of Texas NSP Funds: 
Direct Allocation              $ 50,692,336
Select Pool                    $ 41,274,512
Land Banking                   $ 10,000,000
Administration (10%)           $ 10,196,685
Total Texas NSP Allocation     $101,966,848

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Direct Allocation: The State will provide a reservation for a specified amount of direct
NSP allocation for use in the top-ranked counties identified based upon the need factors.

County Name Direct Texas NSP Allocation Need Score 
Tarrant           $7,320,349
Dallas             4,684,332
Cameron            3,465,632
Bexar              3,150,408
Hidalgo            3,005,258
Harris             2,875,584
Nueces             2,522,253
Collin             2,278,454
Webb               2,025,812
Travis             2,017,952
Montgomery         1,697,675
El Paso            1,648,634
Brazoria           1,586,234
Potter             1,579,681
Jefferson          1,498,945
Denton             1,166,500
Taylor             1,099,259
Williamson         1,066,554
Bell               1,064,488
Lubbock            1,057,705
Galveston          1,003,104
Wichita              803,464
Fort Bend            726,857
Ector                699,232
McLennan             647,971

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Select pool:  An additional 76 counties are eligible to submit application as a Select Pool county: The list of these counties can be found in TDHCA’s draft plan posted on the agency’s web site.  To address HUD’s concern about allocating small amounts of funds that have no meaningful impact on stabilizing of property values in an area the awards will be a minimum of $500,000.

Land Banking: Land bank activities through TSAHC provides funding in greatest need communities for a land bank activity since many local communities interested in this activity do not currently have the capacity or authority to complete such transactions.

2 thoughts on “Rough outlines of Texas $178m Neighborhood Stabilization Program emerge

  1. Does Texas have a homeowner stabilization income program that pays for the house payment for one yr or 20,000 whichever comes first like Oregon does. The criteria is 25% loss of income with in the last 3 yrs. The drawing is random.

    • Oregon’s program is funded through the “Hardest Hit Fund,” a Federal program targeted at the 17 states with the highest levels of foreclosure.

      While Texas is not among the states designated to received these funds, Texans will be eligible for the Emergency Homeowners Loan Program (EHLP). EHLP will will offer a forgivable, deferred payment “bridge loan” (zero percent interest, non-recourse, subordinate loans) for up to $50,000 to assist eligible borrowers with their mortgage arrearages and payments on their for mortgage principal, interest, mortgage insurance premiums, taxes and hazard insurance for up to 24 months.

      EHLP is not yet up and running, and at this point it’s not clear where the program will be run in Texas. If immediately you need such assistance, I would recommend contacting a HUD Approved Housing Counseling Agency or Neighborworks Affiliated Counseling Agency to review your options.

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