California Department of Housing and Community Development

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Neighborhood Stabilization ProgramStakeholder
Meeting November 3, 2008

• California Department of Housing and Community
  Development
• Deputy Director Chris Westlake - Division of
  Financial Assistance

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Agenda

• Overview of the NSP
• Determining the States Greatest Need
• Survey of Jurisdictional Readiness and Capacity
• An Overview of the States Implementation Plan
• The Recommended Steps for Potential Applicants
• Responses to Questions
• Open Forum

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Neighborhood Stabilization ProgramOverview
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Allocations

• HERA Provides 3.92 Billion to assist States and
  localities in redevelopment efforts
• Considered a Special Allocation of 2008 CDBG
  Funds
• Amounts determined by formula established by HUD
  using criteria specified by HERA

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Criteria for Local Distribution

• NSP grantees must target funds to give priority
  emphasis and consideration to areas with greatest
  need, including those
• With the greatest percentage of home
  foreclosures
• With the highest percentage of homes financed by
  a subprime mortgage related loan and
• Identified as likely to face a significant rise
  in the rate of home foreclosures.

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Period to Use Funds

• NSP grantees must use funds to purchase and
  redevelop abandoned and foreclosed homes and
  residential properties no later than 18 months
  after execution of the grant agreement
• Useobligate for a specific project

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Information for States

• HERA established minimum 0.5 grant allocation
  for each state
• Effective state minimum allocation is 19,600,000

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Information for States

• Role of States
• Fund nonentitlement local governments
• Fund CDBG or NSP entitlement grantees
• Fund private or public nonprofits, Tribes,
  quasi-governmental entities
• Directly carry out activities
• Use contractors or developers
• But must distribute funds to areas of greatest
  need, including jurisdictions receiving NSP

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National Objective Issues

• HERA preempts regular CDBG national objectives
• Directs that all funds be used to benefit
  individuals at or below 120 of area median
  income
• Slum/blight and urgent need national objectives
  not applicable to NSP

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National Objective Issues

• CDBG 70 overall low-mod income benefit test not
  encompass NSP funds
• Additional HERA requirement - Not less than 25
  of funds available to each grantee must be used
  for housing activities that benefit individuals
  whose incomes do not exceed 50 of area median
  income

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Eligible Use
Eligible Activities

• As an activity delivery cost for an eligible
  activity (designing setting it up)
• Financing of an NSP eligible activity, to carry
  out that activity, is eligible as part of that
  activity

1. Establish financing mechanisms for purchase
redevelopment of foreclosed upon homes
residential properties
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Eligible Use
Eligible Activities

• Acquisition
• Disposition
• Relocation
• Direct homeownership assistance
• Eligible rehabilitation and preservation
  activities for homes and other residential
  properties
• Housing counseling for those seeking to take part
  in the activity

2. Purchase and rehabilitate homes and
residential properties that have been abandoned
or foreclosed upon, in order to sell, rent, or
redevelop such homes and properties
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Eligible Use
Eligible Activities

• Acquisition
• Disposition (includes maintenance)

3. Establish land banks for homes that have been
foreclosed upon
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Eligible Use
Eligible Activities
Clearance, for blighted structures only
4. Demolish blighted structures
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Eligible Use
Eligible Activities

• Acquisition
• Disposition
• Public facilities and improvements
• Housing Counseling Public Services (limited to
  prospective purchasers or tenants of redeveloped
  properties)
• Relocation

5. Redevelop demolished or vacant properties
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Eligible Use
Eligible Activities

• New housing construction
• Direct homeownership assistance
• 570.204 activities by Community Based Development
  Organizations

5. Redevelop demolished or vacant properties
(continued)
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Eligible Uses Summary

• All grant funds must be used for an eligible
  activity according to HERA
• Each activity must also be CDBG eligible and meet
  a LM national objective
• HUD must grant written approval for any CDBG
  activities not listed for that eligible use
• CDBG regulatory definitions of eligible
  activities apply to NSP except where specifically
  modified
• New housing construction is eligible as
  redevelopment

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Ineligible Activities

• Ineligible Activities
• Generally, if an activity is ineligible under
  CDBG, it is ineligible under NSP
• Not eligible under HERA
• Foreclosure prevention
• Demolition of non-blighted structures
• Purchase of properties not abandoned or
  foreclosed upon

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Rehabilitation Standards

• Any purchase of a foreclosed upon home or
  residential property under this section should be
  at a discount from the current market appraised
  value of the home or property.
• Current condition must be taken into account

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Sale of Homes

• The sale of an abandoned or foreclosed upon home
  or residential property to an individual as a
  primary residence must be in an amount equal to
  or less than the cost to acquire and redevelop or
  rehabilitate such home or property up to a
  decent, safe, and habitable condition.

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Determining the States Greatest Need
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HUDs NSP Allocations by County
All jurisdictions statewide are eligible to
apply for NSP funds with the State      
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HUDs Allocations by Region
Source HUD Methodology
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State Allocation

• Priorities
• Highest percentage of foreclosures
• Highest percentage of subprime loans
• Significant rise in foreclosure rate
• Abandonment Risk
• vacancy rate/ foreclosure rate
• Available by Census Tract at http//www.huduser.or
  g/publications/commdevl/nsp/nsp_a-f.html

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Survey of Jurisdictional Readiness and Capacity
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Survey Overview

• Entities Surveyed
• Cities 35
• Counties 12
• Nonprofit organizations 4
• 51
• Focus
• Capacity
• Need
• Eligible Activities
• Others

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Results - Capacity

• Experienced In-House Staff and/or Expertise?
• 12 Yes
• 88 No
• Example Monterey County
• Established an inter-jurisdictional agreement
  between the County and South County cities to
  address foreclosure crisis
• Adopted ordinance requiring notification of
  foreclosures within each jurisdiction.

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Results - Needs

• Maintain an Inventory of REOs?
• 5 Yes
• 95 No
• Most used
• Real Quest
• Realty Track
• Title company
• Treasurer
• Tax Collector
• multiple listing service
• Notice of Default (NOD)
• Example West Sacramento
• Realty Track data cross-referenced by Code
  Enforcement surveying condition of housing, NODs,
  title companies.

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Eligible Activity Financing Mechanisms

• Mechanisms in place?
• 79 None
• 14 Soft-Seconds
• 6 Shared Equity
• 1 Loan-Loss Reserves
• Habitat for Humanity Shared Equity depending on
  length of term
• 45 years, 0

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Eligible Activity Acquisition/Rehabilitation

• Acquisition/Rehab Programs in place?
• 9 Yes
• 91 No
• Example Self-Help
• Designed acquisition/rehab program guidelines
• for HOME Program

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Eligible Activity Land Banking

• Land Banks? Land Trusts?
• 2 Yes 4 Yes
• 4 Pending 4 Pending
• 94 No 92 No
• LISC land banking
• http//www.lisc.org/content/publications/detail/79
  3/
• Oakland -Urban Strategies land trust
• http//www.urbanstrategies.org/foreclosure/Communi
  ty_Land_Trust/

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Eligible Activity Demolish and Redevelop

• Have experience and/or plans to demolish and
  redevelop?
• 15 Yes
• 85 No

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Eligible Activity Others

• Working with lenders to identify foreclosed
  properties?
• 2 Yes
• 98 No
• Established outreach program for potential
  buyers?
• 18 Yes
• 82 No
• Example Dinuba
• Outreach through local newspapers, water bill,
  posters and flyers posted in government and
  public buildings throughout the City

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Eligible Activity Others

• Targeting lower income families for
  homeownership?
• 8 Successful
• Example Clearlake
• Signed MOU with Habitat for Humanity to provide
  assistance in targeting lower-income families for
  homeownership

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Want to share your best practice?

• Please contact the States NSP staff at
• [phone]
• cdbg_at_hcd.ca.gov

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The States Implementation PlanOverview
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Implementation Timeline (Tentative)

• 11/15/08 Post Substantial Amendment
• 11/21/08 Public Hearing on Amendment
• 12/01/08 Submit Amendment
• 1/09 Disseminate Application
• 2/09 Application Deadline
• 3/09 Award Grants
• 5/09 Execute Contracts

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Allocation MethodologyStatus Report

• Consulting with multiple sources
• HUD
• Other states
• Jurisdictions
• Analyzing multiple data sets
• Assessing results of various factors
• Rankings by numbers and percentages

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Funding Factors

• Greatest Need. State to determine the areas of
  greatest need based on HUD data.
• Capacity. Applicants considered for NSP funding
  must demonstrate previous and current capacity to
  carry out the proposed NSP activities.
• Eligibility. The proposed activity(ies) must be
  eligible per the Housing the Economic Recovery
  Act of 2008.

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Funding Factors

• LMMI Benefit. The proposed activity(ies) must
  clearly demonstrate compliance with the national
  objective of low-, moderate-, middle-income
  (LMMI) benefit.
• Note For NSP, LMMI benefit includes households
  whose incomes are 120 or less of area median
  income.
• Readiness. All applicants must clearly
  demonstrate readiness to begin implementing the
  proposed activity(ies).

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Other Considerations

• Property Rehabilitation. If the proposed
  activity(ies) involve rehabilitation of property
  while the city/county holds title, State and
  federal prevailing wages may be applicable.
• 25 Targeted Funding. Not less than 25 of the
  States total NSP Allocation must be used to
  house individuals or families whose incomes do
  not exceed 50 of area median income.

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Recommended Steps for Potential Applicants
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Recommended Steps
Pre-Award Costs Grantees may incur pre-award
costs necessary to develop an application,
conduct environmental reviews, and adhere to
citizen participation procedures prior to the
States award.
Note Reimbursements can only be made after final
contract execution.
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Recommended Steps

• Joint Applications
• Contiguous cities/counties may submit joint
  requests resulting in a single combined NSP
  Application to the State.
• The NSP Application must be submitted by the
  identified lead agency.
• The lead agency and participating cities/counties
  must enter into a Memorandum of Understanding or
  a Joint Powers Agreement prior to application
  submittal.

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Recommended Steps

• Citizen Participation
• Potential applicants should initiate the citizen
  participation requirements by noticing and
  conducting the Program Design Phase public
  hearing.
• Joint applicants must include citizen
  participation in all participating
  cities/counties.
• Public hearing notices must be available in the
  appropriate languages for persons with limited
  English proficiency.

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Recommended Steps

• Citizen Participation (continued)
• Prior to NSP Application submittal, applicants
  must notice and conduct the Application
  Submittal public hearing before the governing
  board.
• Public notice must include all activities
  included in the application, dollar amount
  requested, and the anticipated low-, moderate-,
  and middle-income benefit.
• Public notice in the appropriate languages for
  persons with limited English proficiency.

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Recommended Steps

• National Environmental Policy Act (NEPA)
• CA Environmental Quality Act (CEQA)
• Applicants are highly encouraged to begin
  compliance with State and federal environmental
  requirements.
• The State will only monitor for compliance with
  NEPA.
• NEPA documentation/compliance must be cleared by
  the State, in writing, prior to commencing any
  program/project.

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Recommended Steps

• NEPA Compliance
• Begin the process now.
• For guidance, refer to CDBG Grant Management
  Manual, Chapter 3, at www.hcd.ca.gov/fa/cdbg/manua
  l/
• If required, conduct any environmental public
  noticing (e.g., Finding of No Significant
  Impact/Notice of Intent to Request Release of
  Funds (FONSI/NOI RROF))

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Questions and Answers
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Open Forum
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For More Information

• Department of Housing and
• Community Development
• www.hcd.ca.gov
• cdbg_at_hcd.ca.gov
• [phone]

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