So on Friday, HUD released the allocations for funding from the Housing Rescue Package, and, sadly, Oakland didn’t fare particularly well. Instead of the $30 to $60 million some were expecting, we got a kind of sad $8.2 million.
It isn’t just Oakland that got screwed, of course. The whole State of California, all put together, got $529 million (xls) out of the deal, which sounds like a lot until you see that Florida, which has, like, half as many people (seriously! half!) scored $541 million (xls). I mean, how is that fair?
There’s a couple of reasons for the discrepancy between expectations for the money and the reality of the grants. See, the bill that awarded the $4 billion was pretty general about what to do with it. It called for HUD to allocate the funds to State and local governments based on the number and percentage of foreclosures, subprime mortgages, and mortgages in default. That criteria made things look pretty promising for Oakland, right, what with us having like the eighth highest number of foreclosures in the whole country or whatever.
But then two things happened. First, HUD decided to spread the money out fairly widely. That they would go this route was always a concern. I had certainly hoped they would resist the temptation to do so. While limiting the number of cities that got the money would have obviously pissed off places that had been passed over, highly targeted concentration of the funds would have allowed for the money to make a real impact in communities that need it most.
Oh well. So then the other thing they did was incorporate not just local, but also statewide foreclosure rates and abandonment risk when assigning funds. This puts a place like Oakland at a disadvantage, since on our own, we have a high risk of abandonment and a pretty high foreclosure rate, but the State of California has neither. Of course, even when you take all that into account, it still kind of stings to see the Bakersfield, which has, like, 100,000 fewer people than we do and a similar foreclosure rate, get $9 million versus our $8.2. The State of California gets $145 million to distribute on its own, so it’s possible we’ll get a hefty chunk of that money.
Anyway, it’s lame, but what’s done is done, and it isn’t like $8.2 million is nothing. So now the question becomes: what are we going to do with it? Here’s the general parameters:
NSP grantees develop their own programs and funding priorities. However, NSP grantees must use at least 25 percent of the funds appropriated for the purchase and redevelopment of abandoned or foreclosed homes or residential properties that will be used to house individuals or families whose incomes do not exceed 50 percent of the area median income. In addition, all activities funded by NSP must benefit low- and moderate-income persons whose income does not exceed 120 percent of area median income. Activities may not qualify under NSP using the “prevent or eliminates slums and blight” or “address urgent community development needs” objectives.
NSP funds may be used for activities which include, but are not limited to:
- Establish financing mechanisms for purchase and redevelopment of foreclosed homes and residential properties;
- Purchase and rehabilitate homes and residential properties abandoned or foreclosed;
- Establish land banks for foreclosed homes;
- Demolish blighted structures;
- Redevelop demolished or vacant properties
Since the funding we got is so limited, it’s all the more important that we’re extra careful to make sure it’s spent as efficiently as possible. We certainly don’t want to end up with a situation like the one that got discussed at CED last week, where this Joint Powers Authority we were part of aimed at getting people into homes issued $98 million in bonds for a Lease-Purchase program, then once the money was all spent, only $10 million of it had gone to actually getting people into homes, and even with the $10 million, they were only able to make loans to 40 people.
Downpayment assistance loans and/or loans for repair and rehab of purchased blighted properties would seem like the way to go. The temptation again will likely be to divvy our allocation up among a number of different uses. To do so would be a mistake, as each different effort will eat up a portion of the money in program administration costs. The primary goal should be to ensure that as much of the funding as possible goes to helping actual people and as little as possible goes to bureaucracy.