Wednesday, May 13, 2009

Neighborhood stabilization funding to be tweaked

Cincinnati City Council is considering a modification to the 2008 Action Plan Substantial Amendment for the Neighborhood Stabilization Program (NSP), which would adjust the amount of U.S. Department of Housing and Urban Development (HUD) funding for ten neighborhoods to deal better with the increase in foreclosed and vacant properties.

Cincinnati's $8.4 million in funding is part of $3.92 billion budgeted as part of the 2008 Housing and Economic Recovery Act to provide funding to local communities to purchase these homes and to rehabilitate, resell, or demolish and redevelop them for homeownership.

City staff chose to target NSP funding to the ten neighborhoods that they identified as having the greatest need, then assigned them to a High Priority or a Priority classification:

  • High Priority: East Price Hill, Madisonville, Northside, West Price Hill, Westwood
  • Priority: Avondale, Bond Hill, College Hill, Evanston, South Fairmount
A recent Working in Neighborhoods study, The Crisis Next Door (PDF) found that foreclosures had increased 6.3 percent in Hamilton County and had decreased 10 percent in the City of Cincinnati between 2007 and 2008 – foreclosures decreased nearly 11 percent in the Priority and High Priority neighborhoods.

Under HUD guidelines, NSP program funds have five allowable uses: establishing funding mechanisms for the purchase and redevelopment of foreclosed homes and residential properties, purchasing and rehabilitating homes and residential properties that have been abandoned or foreclosed on, establishing land banks for homes that have been foreclosed on, demolishing blighted structures, and redeveloping demolished or vacant properties.

Community process

Modifications to the 2008 Action Plan began with an introductory meeting with the ten selected communities in January, followed by February meetings between the neighborhoods and Department of Community Development (DCD)staff.

NSP proposal documents were submitted in mid-March, followed by an additional meeting with DCD staff to iron out the final details.

"Every effort has been made to tailor the program to the neighborhood and to avoid a 'one size fits all' approach," city manager Milton Dohoney Jr. said in a recent report on the plan.

One major change over the preliminary 2008 amounts is the increase in financing mechanisms, which will help put more homeowners into foreclosed and abandoned properties.

"This funding will establish financing mechanisms for purchase and redevelopment of foreclosed-upon homes and residential properties, including such mechanisms as soft-seconds that will include downpayment and closing cost assistance for low-, moderate-, and middle-income homebuyers," Dohoney said.

Dohoney said that the American Dream Downpayment Initiative will be used as a model for this program, having had a very low rate of foreclosure since 2004.

"Providing homebuyer assistance will enable otherwise qualified buyers to purchase the home rehabbed or redeveloped with NSP funds, avoid a long-term restriction on resale of the property, and reduce the affordability and monitoring period for the City," he said. "This is crucial to attracting market-rate buyers to these properties in the new mortgage environment that has very strict loan to value lending standards."

City administration also recommends moving the entire "50 percent at or below Area Median Income" program set-aside into redevelopment to fund low-income senior housing, all of which will go to the neighborhood of Evanston.

This is because law requires new construction for people at or below 50 percent of the Area Median Income to be built on demolished or vacant land that has either been abandoned or foreclosed upon.

New allocations

Total neighborhood allocations and action plans are as follows:

  • Evanston ($2.495 million): 4 units demolished, 7 units acquired, 3 units rehabbed, 24 new construction units
  • Northside ($704,000): 22 units demolished, 10 units acquired, 8 units rehabbed, 2 new construction units
  • East Price Hill ($702,000): 18 units demolished, 9 units acquired, 9 units rehabbed
  • West Price Hill ($621,000): 18 units demolished, 8 units acquired, 8 units rehabbed
  • Westwood ($599,000): 18 units demolished, 5 units acquired, 3 units rehabbed, 2 new construction units
  • South Fairmount ($574,000): 41 units demolished
  • Avondale ($559,900): 10 units demolished, 7 units acquired, 7 units rehabbed
  • Madisonville ($468,000): 12 units demolished, 5 units acquired, 5 units rehabbed
  • Bond Hill ($414,000): 11 units demolished, 7 units acquired, 4 units rehabbed, 3 new construction units
  • College Hill ($388,533): 12 units demolished, 4 units acquired, 4 units rehabbed
An emergency ordinance scheduled for a full council vote would create project accounts for each of the five allowable uses.

City being audited

Because the NSP is classified as a "high risk" program, the Office of the Inspector General began an audit of the City of Cincinnati on April 13.

The audit seeks to determine the City's administrative capacity to carry out effectively the program.

Because of the audit, the City has boosted its administration budget to 10 percent of the NSP grant allocation, consistent with federal regulations.

"Additional administrative funding is recommended to properly maintain regulatory compliance," Dohoney said. "In the absence of additional staffing, the City is risking future federal entitlement funding."

A final audit report is scheduled to be submitted to HUD and to Congress on June 26.

The 'other' NSP

As part of the "other" NSP, the Neighborhood Support Program, council has approved unanimously the payment to three community councils of funding that was unavailable due to a break in services that occurred prior to February 5.

As a moral obligation, council will advance $1,021.90 to the Spring Grove Village Community Council, $681.15 to the Mount Washington Community Council, and $501 to the Avondale Community Council.

Administration of the Neighborhood Support Program is in the process of being transferred from Invest in Neighborhoods to the City's Department of Community Development.

Previous reading on BC:
NHI funded neighborhoods in question (4/13/09)
Neighborhood Homes Initiative could begin in April (3/19/09)
Foreclosure initiative presented in Cincinnati council committee (5/14/08)