Struggling housing markets to receive $1B in federal dollars

Areas hardest hit by the nation’s housing
crisis could get a
share of up to $1 billion in reallocated federal funds. 

Housing and Urban Development Secretary Shaun
Donovan said
during a breakfast with reporters Tuesday that his department intends
to create
a new formula for allocating dollars from an existing program launched
by the George W. Bush administration.

Funding in the Neighborhood Stabilization Program
will be
shifted to communities hit hardest by foreclosures, vacancy rates,
falling home
values and unemployment during the recession, Donovan said.

The Bush administration spread funding more broadly, with
each state government receiving a base allocation of $19.6 million,
Donovan
said. 

The reallocation could offer big benefits to states
such as
Nevada, California and Arizona that are among the hardest hit by the
housing
crisis. Donovan said the reallocation could help Las Vegas more than any
other
single place.

The reallocated funding will be shifted from
communities
that haven’t committed to projects.

The idea behind the program is to avoid blight.
Much of the
funding will be used to demolish or revamp vacant properties. Those
properties
would then be sold to new buyers.

Funds would also be used to create “land banks” to
assemble,
temporarily manage and dispose of foreclosed homes, Donovan said. 

Funds could also be used to help some homeowners
avoid
foreclosure, and to help prospective low- to middle-income homebuyers
with a
down payment or closing costs.

“We want this to produce a quality product that
will create
demand,” Donovan said. 

Under the program, 17,000 homes so far have been
renovated. HUD estimates that more than 63,000 homes will be demolished or
fixed up.

The Neighborhood Stabilization Program has received
$6 billion
in funding — $4 billion to improve housing and $2 billion in targeted
stimulus
funding, which was awarded in December, Donovan said. 

Donovan said he intends to work with Congress to
procure
more funding for the housing program and new foreclosure counseling
efforts.
The Housing and Economic Recovery Act of 2008 provided $150 million for
counseling to provide options for struggling homeowners.