CITY OF TALLAHASSEE
CITY COMMITTEE AGENDA ITEM
ACTION REQUESTED ON: March 25, 2009
SUBJECT/TITLE: Adoption of the Neighborhood Stabilization Program application for submission to the Department of Community Affairs
TARGET ISSUE: Affordable Housing

STATEMENT OF ISSUE
The Federal government created the Neighborhood Stabilization Program (NSP) in the Housing and Economic Recovery Act in July 2008. The program distributes funding to local governments to acquire vacant, bank-owned foreclosed properties and rehabilitate them to re-enter the occupied-housing stock. These Federal funds are being distributed to eligible local governments through the Florida Department of Community Affairs (DCA). The State allocated approximately $2.94 million for Tallahassee.

A Federal requirement for the NSP funds is that 25% of the allocation be spent to create rental housing for very-low income households earning less than 50% of area median income (AMI). DCA separated 25% of the State allocation and distributed the funds as a distinct Low-Income Supplemental Allocation (NSPLI) to each jurisdiction. Tallahassee must use its NSPLI funds for rehabilitation of foreclosed properties for rental to households earning 50% AMI. The Regular Allocation has more flexibility, although all activities include acquisition of foreclosed properties. Staff has proposed to use the Regular Allocation for rehabilitation of single family homes for homeownership, purchase assistance for the rehabilitated homes, land banking foreclosed properties, demolition and redevelopment of single family properties, and rehabilitation of units for rental to households earning less than 120% AMI. The NSP application is due to DCA by April 6, 2009. The Long Range Target Issue committee reviewed the application March 16.

RECOMMENDED ACTION
Approve Option 1. Approve the Neighborhood Stabilization Program application for submittal to the Department of Community Affairs before April 6.

FISCAL IMPACT
The City is positioned to receive $2,945,670 for the Neighborhood Stabilization Program. The Office of Budget and Policy has reviewed this agenda item and concurs it meets budgetary guidelines.

Thomas H. Lewis, Director, Economic & Community Development

Anita Favors Thompson, City Manager

For information, please contact: Joyce Martinez, Housing Administrator, 891-6500.

SUPPLEMENTAL MATERIAL/ISSUE ANALYSIS
HISTORY/FACTS & ISSUES
The Federally created Neighborhood Stabilization Program (NSP) distributes funding to local governments to acquire vacant, bank-owned foreclosed properties and rehabilitate them to re-enter the occupied-housing stock. The banks dispose of foreclosed properties; neighborhoods have fewer vacant houses; and income-eligible households benefit from newly renovated homes. The State of Florida received just over $91 million in the NSP program to distribute to local jurisdictions through the Department of Community Affairs (DCA).

States are required to spend 25% of their allocations on rental housing for households earning less than 50% of area median income (AMI). DCA separated their funds into a Regular Allocation with no restrictions, and the Low-Income Supplemental Allocation (NSPLI), which must be used to create rental-housing units for very low-income households. Tallahassee is slated to receive $1,693,435 in the Regular Allocation, and $1,252,235 in the NSPLI Allocation. The total Tallahassee will receive is $2,945,670. 6.8% of the allocation may be spent on administrative costs. Staff attended multiple trainings related to NSP by Florida Housing Coalition and DCA.

The US Department of Housing and Urban Development (HUD) released data related to the risk of foreclosure by census tract. The data determined the funding allocations for Florida communities. All NSP funds must be expended in areas of greatest need identified in the data. Risk scores were determined by three factors: greatest rate of home foreclosures, highest percentage of homes financed by sub-prime mortgage loans, and identification as likely to face a rise in the rate of home foreclosures. The map of these census tracts shows that the highest foreclosure risk areas in Tallahassee are located in the Southern Strategy Area and Greater Frenchtown neighborhood (See Attachment 1. Map of foreclosure risk score). The advantage of this NSP target area is that Community Redevelopment Area (CRA) funds may be used in conjunction with NSP funds for greater impact.

One of the Federal objectives of the NSP is to expend the funds quickly. Properties should be acquired and rehabilitation contracts should be developed within 10 months of DCA signing its contract with HUD (signed March 3, 2009). DCA plans to visit Tallahassee to monitor progress. All NSP funds must be expended within 15 months (by July 2010) or DCA will recapture unexpended funds for re-distribution to faster performing jurisdictions. Likewise, if Tallahassee spends their money quickly, the City may receive additional funds in 2010, recaptured from under-performing Florida jurisdictions. The City will have four years to “close” each project by selling or renting homes to income-eligible buyers.

Tallahassee must submit its application for funding to DCA by April 6, 2009 (Attachment 2). The NSP application requires Tallahassee to choose the eligible NSP activities that would address the highest priority local needs. Eligible activities through the NSP program are as follows:

· Acquisition-Rehabilitation of housing for homeownership: benefiting up to 120% AMI.
· Acquisition-Rehabilitation of housing for homeownership: benefiting up to 50% AMI.
· Housing Finance mechanisms for purchase of foreclosed homes.
· Land banking (limited to 10% of Regular Allocation): must be built and occupied within 10 years
· Demolition and redevelopment (limited to 5% of Regular Allocation).
· Acquisition-Rehabilitation of housing for rental: benefiting up to 120% AMI.
· Acquisition-Rehabilitation of housing for rental: benefiting up to 50% AMI.

Staff was required to hold an advertised public meeting as part of the application process, and a meeting of a Citizen Advisory Task Force (CATF). The public meeting was held March 10 and the CATF meeting was held March 11. The Long Range Target Issue committee reviewed the application March 16. Staff presented the following proposed budget:

The City Commission has expressed the desire to expend housing assistance funds on multi-family rental units. The NSP program will address that need. All of the NSPLI funds must be spent on Acquisition Rehabilitation of housing for rental units benefiting households earning less than 50% AMI (Strategy 5 in the NSP application). Additionally, staff proposed spending $899,114.19 of the Regular Allocation dollars on rental housing for various low and moderate-income levels to address the rental housing need expressed by the City Commission. The provision of different housing types and costs is a policy of the Southern Strategy Area Plan within Tallahassee’s Comprehensive Plan. Potential property managers for the rental units are Good News Outreach and the Tallahassee Housing Authority.

The more flexible Regular Allocation may be spent on any of the strategies. The Southern Strategy Area Plan encourages homeownership opportunities, and the area may be losing owner-occupied units to foreclosure. A preliminary search of bank-owned foreclosed properties located in the highest priority need areas of the City found that there were some relatively new, available units that would not require extensive rehabilitation. These units may be ideal for re-sale. Staff proposes that NSP funds be used to address the need for continued homeownership in areas at highest risk of foreclosure, while recognizing the competition in the housing inventory now. Strategy 1 in the NSP application recommends $300,000 for acquisition and rehabilitation of homes for re-sale to households earning less than 120% AMI. Strategy 2 offers a down payment assistance incentive to purchase an NSP-assisted home. Houses acquired for Strategy 4, demolition and redevelopment, would also be sold to income-eligible buyers. Demolition funds are restricted in the NSP program to encourage communities to preserve housing. The advantage of the land banking strategy (Strategy 3) is that it allows more time to redevelop and sell or rent the properties (10 years). The land banking strategy has a funding limit so that housing units are produced in the short term.

Staff has been conservative in estimating the number of units that will be delivered under each strategy. One reason for this is the State will require that we formally amend our application if, once under operation, we discover that we need to reduce the number of units under any of the strategies. Amending the application involves repeating all the initial application steps including convening the Citizen Advisory Task Force and conducting a public hearing. However, we do not have to amend the plan if we exceed the number of units delivered under each approach. Given the aggressive timetable under this program, we believe it prudent to use conservative production estimates.

The NSP application requires the City to create a Housing Assistance Plan (HAP), specifying the policies and procedures that will be used to administer the program. The HAP details the acquisition procedures, rehabilitation procedures, disposition procedures, long-term affordability plan, terms of assistance, and more. The Housing Assistance Plan is included in the NSP Application as Attachment 2. The application requires a list of Community Development Block Grant policies the City follows that will also apply to the NSP. The City’s CDBG Policies, Written Rehabilitation Standards, and Land Bank Plan will be submitted as exhibits to the application (Attachments 3, 4 & 5).

CHARITABLE CONTRIBUTIONS
N/A

OPTIONS

Option 1. Approve the Neighborhood Stabilization Program application for submittal to the Department of Community Affairs before April 6.

Pro:
1. Approving the Neighborhood Stabilization Program application for submittal to the Department of Community Affairs will make Tallahassee eligible to receive over $2.94 million in NSP funds.
2. NSP funds will be used to reduce abandoned foreclosed properties in Tallahassee neighborhoods while assisting income-eligible households to have decent housing.

Con:
1. None identified.

Option 2. Do not approve the Neighborhood Stabilization Program application for submittal to the Department of Community Affairs before April 6. Give staff alternative direction.

Pro:
1. None identified.

Con:
1. Not approving the Neighborhood Stabilization Program application for submittal to the Department of Community Affairs will make Tallahassee ineligible to receive over $2.94 million in NSP funds.
2. NSP funds will not be able to reduce abandoned foreclosed properties in Tallahassee.

ATTACHMENTS/REFERENCES

1. Map of Tallahassee Foreclosure Abandonment Risk Scores by block group
2. Neighborhood Stabilization Program application
3. Community Development Block Grant policies
4. Land Banking Plan
5. Tallahassee Written Rehabilitation standards