102808 Housing Economic RecoverHOUSING & ECONOMIC RECOVERY
ACT OF 2008
Briefing for City Council
October 28, 2008
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Foreclosed Property in Indian Lakes Neighborhood
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What is the Housing and Economic
Recovery Act? (HERA)
Federal legislation passed on July 30, 2008
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to help the country deal with the mortgage
crisis and foreclosures.
Provides $4 billion to assist states and
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localities
Requires rapid obligation of funds
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What is Virginia Beach’s Status in
Regard to HERA?
Virginia Beach did NOT get a direct
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allocation of funds –in Virginia only Fairfax
and Prince William counties did
State received $38 million and will be
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allocating some to localities
We expect to receive some funding via the
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state
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What is the Purpose of this Briefing?
To provide basic information for Council in
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preparation for possible receipt of funding
and program approval
To discuss potential plans for use of funding
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To receive Council’s feedback
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The Neighborhood Stabilization
Program (NSP)
This is the key program established by the
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act that we expect to receive funds under
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Neighborhood Stabilization Program
(NSP)
How can the funds be used?
1)Establish financing mechanisms for purchase and
redevelopment of foreclosed homes
2)Purchase and rehabilitate properties that have
been abandoned or foreclosed
3)Establish land banks for homes that have been
foreclosed
4)Demolish blighted structures
5)Redevelop demolished or vacant properties
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Neighborhood Stabilization Program
What are some of the requirements for these
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funds?
Discount Requirement-Purchase of foreclosed
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homes must be at a discount from the current
market appraised value, taking into account its
current condition
Resale Restriction-Resale value* must be equal
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or less than the cost to acquire and rehabilitate
*
–resale to homeowners is covered by this restriction, but not to
other buyers
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Who Must Benefit from the Funds?
Neighborhood Stabilization Funds are
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targeted and must be used as follows:
All funds must be used for individuals and families
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whose income does not exceed 120% of Area
Median Income (AMI) (Household of 4 in Virginia
Beach would be $78,120)
And
at least 25% of the funds must be used to
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serve households whose incomes do not exceed
50% of AMI (Household of 4 in Virginia Beach
would be at $32,550)
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Neighborhood Stabilization Funds
Other Requirements
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Reinvestment of profits: for the first five years
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after enactment all profits must be reinvested in
additional sales, rentals, redevelopment and
rehabilitation of foreclosed homes and properties
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How Will Funds Be Distributed?
The State of Virginia received $38 million
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We are participating in a process to define how it will
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allocate funding within the state
The state’s plan must be submitted to HUD by
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December 1
If Virginia Beach receives funds, they will be
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governed by the Federal requirements and any
state-imposed requirements
Deadline to use funding is within 18 months of
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allocation of funds
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Other considerations
Funds will be considered as Community
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Development Block Grant (CDBG) funds
Houses purchased, rehabilitated, demolished or
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redeveloped with these funds are subject to all of
the Environmental Review requirements and
other federal regulations that apply to CDBG
funds
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Council’s Input Requested
We will have to act quickly to develop a
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proposal for any funds received via the state.
Council will review and decide on the use.
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Your input today will help us develop our
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proposal.
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Staff’s Initial Recommendation
Grant funds to non-profits to acquire and
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rehabilitate vacant, foreclosed properties
Leverage funds by:
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City addition of other Federal funds
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Non profit borrowing
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Non-profit “sweat equity”(Habitat for Humanity)
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Other sources?
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Staff’s Initial Recommendation
Use foreclosure information to target
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acquisitions in one area of the city
To meet Federal income targeting
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requirements, some housing would be
acquired, rehabilitated and sold to private
buyers who intend to be owner-occupants
Some would be acquired, rehabilitated and
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rented by the non-profit.
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Next Steps re: Neighborhood
Stabilization Fund
Decision by the State –December 1
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Staff develops proposal for review by
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Manager and Council (Jan, 2009)
Receive State approval and contracts/ begin
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sub-contracting to non-profits (starting Feb,
2009)
Funds must be obligated by approximately
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May, 2010.
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Housing and Economic Recovery Act
of 2008
Your suggestions regarding the approach to
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the use of funds, questions and comments!
Thank you
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