OV # - 1

MichiganNeighborhood Stabilization Program

December 3, 2008

OV # - 2

First Steps

– Action Plan published 11/5/08

– Incorporate public comment and finalize:

11/24/08

– Submit to HUD: 12/1/08

– Michigan has 18 months from HUD approval to

get all funds committed to projects (i.e., under

contract to specific address)

OV # - 3

Distribution of Funds

o Data was developed on relative need in various parts of

the state.

o Activities to be funded and production goals were

incorporated into the Action Plan.

o Plan does not set minimums or maximums for any

communities, regions, or specific activities.

o Applicants will still need to address how the project meets

the greatest needs in their part of the state.

OV # - 4

Distribution of Funds

• MSHDA Action Plan

• MSHDA has identified 17 high-need cities for expedited access

to funds

• These cities are CDBG entitlements that would have

received $500,000-$2 million direct from HUD, except for

HUD’s $2 million NSP cut-off (plus two Cities of Promise)

• These cities will have expedited access to up to $21.75

million of MSHDA’s allocation including 10% admin

• Application will basically follow the HUD NSP template.

OV # - 5

Distribution of Funds

• MSHDA has identified factors to document relative need

statewide.

– Foreclosure rates

– Vacancy rates

– Poverty rates

• Developed scores for all areas of the state, and proportioned

another $59 million for competitive funding

• $10 million for projects demonstrating innovation and

addressing greatest needs

• Approximately $7.5 million for admin

OV # - 6

Eligible Activities

A. Establishing financing mechanisms for the purchase and

redevelopment of abandoned and foreclosed upon

homes

B. Purchase and rehabilitation of homes and residential

properties that have been abandoned or foreclosed for

sale or rental

C. Acquisition and disposition of property by land banks

D. Demolition of blighted structures

E. Redevelopment of demolished or vacant property

OV # - 7

NSP Basics

• Income Limits

– 120% AMI

– 25% of funds must provide housing for households at or

below 50% AMI

• Purchase at a discount

– All foreclosed property purchased must be acquired at a

discount

– HUD is looking for an average of 15% discount from

appraised value, given current condition

OV # - 8

• Rehab standard

– Must meet Michigan rehab code

– May include energy efficiency and/or green building

• Sale for owner-occupancy must be for amount at or less than

the total project cost

– But impact of HUD’s program income requirements on future

home equity is still unclear

• Up to 10 percent admin

– MSHDA expects to fund developer/delivery fees where

appropriate

OV # - 9

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

OV # - 10

A. Financing Mechanisms

• Provide interest rate write-downs on the

redevelopment of foreclosed, abandoned and vacant

property for rent to persons with incomes <50

percent AMI

• Provide down payment assistance for buyers of

NSP-assisted properties; buyers eligible up to 120

percent AMI

OV # - 11

B. Acquisition and Redevelopment

• Nonprofits and local governments, in target areas

• Redevelopment of SF homes

– May include both homeownership and rental moving to

homeownership, such as lease-purchase models

• Rental management of SF homes under HOME rules

– Rentals would be placed under one management entity in

each market

– Rental tenants selected based on being likely to qualify

for mortgage within three years

OV # - 12

B. Displacement Prevention

• Enable purchase by nonprofits of homes deeded

back in lieu of foreclosure by approved households

– Nonprofits would rent to foreclosed household to avoid

displacement

– NSP-funded counseling to support eventual repurchase

of home by household

– Rent would include a purchase escrow to assist the

eventual purchaser of the unit

OV # - 13

C. Land Banks

• Funding for land banks for acquisition, maintenance,

and disposition of properties acquired under NSP

OV # - 14

D. Demolition

• Michigan Land Bank properties

– Includes projects implemented by workforce

development programs (can include

maintenance)

• Demolition of blighted properties in target

areas by local governments, nonprofits, for-

profits

OV # - 15

E. Redevelopment of Vacant Land

• Multifamily

– Rental development, especially very low-income

(including supportive housing)

• Single family homeownership, based on market

demand

• Mixed-use buildings

• Possible community facilities

– Parks, gardens, community centers

OV # - 16

Next Steps

• MSHDA is addressing implementation issues

– Inventories of REO/Land Bank properties

– Data systems—enhancements based on elements from

OPAL, Cities of Promise, LINKS

– Application forms

– Legal documents (mortgages, use agreements, etc.)

– Workforce development programs

OV # - 17

Application Time Frames

• 17 non-HUD-entitled NSP cities

– Application template available on MSHDA website soon

• Application for local targeted programs

– Developer/counselor/property manager roles

– Regional training expected by mid-January

– Applications due early-mid February for first competitive round

• Multifamily Development division will be working with projects

for direct application

• MSHDA Interdivisional Team will review and approve all

applications and projects

OV # - 18

Commitment of Funds

• Readiness to proceed is extremely important

• For programs involving multiple projects, especially where

addresses are not yet identified or market is uncertain, funds

will be awarded incrementally

– A total “intent to fund” amount, subject to timely commitment

and expenditure

– Commitment and expense will be tracked and increases in the

award up to the “intent to fund” amount will depend on:

• Timely progress

• Satisfactory monitoring

OV # - 19

Michigan is well-positioned

• Michigan is well-positioned to handle this

responsibility and to maximize this opportunity

– Michigan Land Bank is a national model

– Substantial local nonprofit capacity

– Strong local network of supportive housing developers

– Strong collaborative relationships

– Established workforce development programs

– Extensive experience with Single-Family Redevelopment,

homebuyer projects and targeted neighborhood

revitalization

OV # - 20

The Right Approach (we hope!)…

• Allan Meltzer, Carnegie Mellon University, 21/1/08

– “…Throwing all this money into mortgage markets is addressing

the wrong end of the problem….What needs to be done most is

to clean up the excess supply of housing… Until we see an

reduction in the excess supply of housing, we’re not going to

see an end to the drop in housing prices… What I want them to

say is that if you buy a house this year and make a down

payment, we’ll give you a tax credit for the down payment. And

if you don’t pay taxes, we’ll give you the money. That will

stimulate the demand for houses now, and through 2009.”

– http://www.npr.org/templates/story/story.php?storyId=97629355

OV # - 21

The End Result

• Reduction of the number of surplus housing units

• Rebalancing of supply and demand in neighborhood markets

• Creation of Communities of Choice