How to Spend $3.92 Billion: Stabilizing Neighborhoods by Addressing Foreclosed & Abandoned Properties

The Housing and Economic Recovery Act of 2008 created the Neighborhood Stabilization Program (NSP), under which states, cities, and counties will receive a total of $3.92 billion to acquire, rehabilitate, demolish, and redevelop foreclosed and abandoned residential properties. These funds can stabilize hard-hit neighborhoods, putting them on the path to market recovery. This will only happen, however, if they are used in ways that are strategically targeted and sensitive to market conditions. This paper outlines 11 key principles that states, counties, and cities should follow as they plan for and use NSP funds.

• Understand the local housing market.
• Think strategically about how to use NSP funds.
• Target property acquisition to maximize neighborhood impact while reflecting realistic resource and capacity constraints.
• Develop multiple acquisition strategies to reflect different property ownerships and conditions.
• Develop ground rules to determine when to demolish and when to rehabilitate foreclosed or abandoned properties.
• Design financing strategies for property reuse to reflect program and policy goals.
• Build the capacity to hold and maintain properties until reuse.
• Establish sound ground rules for disposing of properties.
• Integrate acquisition and rehabilitation strategies with other neighborhood stabilization strategies.
• Create a coordinated, effective local government management structure for neighborhood stabilization.
• Form partnerships with other public, private, and nonprofit entities to maximize capacity and resources.

By focusing on these principles, government and its partners, including CDCs, Realtors, developers, and others, can bring about sustainable neighborhood stabilization and market recovery. Despite the short time frame that states and localities have to submit action plans and spend NSP funds, strategic targeting is critically important.  If the NSP funds are scattered about rather than used strategically, at the end of the day some properties will be rehabilitated or demolished, but cities and towns are unlikely to see any sustained improvement in their neighborhoods, their quality of life, or their fiscal condition.