This section addresses the ways in which states and local communities can become actively involved – either directly, or by working with partner organizations – in the acquisition, rehab, and management of a large volume of foreclosed homes. These measures go beyond the more passive role of establishing policies that facilitate the transfer and re-use of foreclosed properties through the private market, which is addressed in a separate section.

States and localities have increased, or in some cases started, efforts at acquiring and rehabilitating vacant properties as a result of the federal Neighborhood Stabilization Program (NSP).  NSP's three rounds of funding put nearly $7 billion into the hands of states, localities, regional consortiums, and non-profit organizations to acquire, rehab, land bank, or demolish foreclosed properties.  NSP funding presents a set of opportunities and challenges that communities can understand and address using the tools in our NSP Resource Center.

The approaches described in Foreclosure-Response.org's Policy Guide provide models for state and local acquisition and rehabilitation efforts whether the efforts are funded through NSP or other sources. It is important to note at the outset that the capacity of local governments and partner organizations to carry out this more active role will vary. Communities that have previously devoted resources to addressing vacant and abandoned properties (discussed in detail on HousingPolicy.org) may be able to leverage their existing infrastructure and expertise to deal with the related challenge of foreclosures. For other communities, however, the foreclosure crisis may be the first time they have had to contend with large numbers of vacant properties. Partnerships with local community development corporations, Realtors, developers, and other stakeholders will likely be essential to ensuring the successful implementation of any publicly-administered or publicly-funded program, but the capacity of these groups also varies (Mallach 2008b). For this reason, an important first step may be to develop a realistic assessment of current capacity to handle this role.

From the Forum... Visit the Forum to learn more about acquisition strategies using NSP or other funding from John O'Callahan of the Atlanta Neighborhood Development Partnership. The HousingPolicy.org Forum is a place to pose questions, exchange ideas, and learn from the experience and expertise of others. This section of the site features interactive forums organized around policy areas, including neighborhood stabilization.

Click on the links below to learn more about the decisions that need to be made by states and localities interested in taking an active role in the acquisition and rehab of foreclosed properties: Should a special entity be set up to acquire and rehab foreclosed properties? Some communities choose to establish a special body, such as a land bank, to purchase, hold and dispose of foreclosed properties. Others designate an existing government agency to handle these tasks or partner with local nonprofits. What approach should communities use to acquire properties? To maximize the impact of their neighborhood stabilization program and achieve economies of scale, some communities may choose to pursue a bulk acquisition strategy focused on foreclosed properties owned by a single lender or servicer. Other communities may focus on acquiring individual properties on a case-by-case basis – particularly where resources are scarce or foreclosures have not been as widespread. How should foreclosed properties be re-used? When returning foreclosed properties to productive use, communities may choose to keep them as residential units or, depending on local needs and the local market, pursue other options including mixed-use development or, in some cases, demolition to increase green space.

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State Involvement in Acquisition and Rehab Under the traditional Community Development Block Grant (CDBG) program, the Department of Housing and Urban Development (HUD) allocates most funds directly to local communities, with a minority of funding provided to states for allocation to other local communities. In allocating formula-based NSP funding -- the special CDBG funds that Congress appropriated to help communities affected by foreclosures -- HUD reversed this paradigm, providing most funds to states rather than localities, and lifted restrictions on spending at the state level. This shift gave state agencies and departments greater authority to become directly involved in the use of NSP grants. In fact, HUD's notice published in the Federal Register promotes state involvement in program administration, suggesting that "direct use of funds by a state may also result in more expeditious use of NSP funds" (HUD 2008). While states have greater authority to spend directly at the state level, they will still need to determine if this is the best course of action. Among other options, states may: (a) pass through funding to local communities by formula; (b) make funding available to localities pursuant to a competition designed to target funds to where they are needed most and advance key state priorities; or (c) make funding available directly to nonprofit or for-profit actors – either through a competition or based on selections made by localities. Click here to view NSP1 Action Plans prepared by states and localities and here to access HUD's NSP Snapshot Reports of NSP1 grantees' expenditures and commitments. For more information on how to organize a foreclosure response coalition at the state level, click here. To access data prepared by the Local Initiatives Support Corporation ranking foreclosure needs within each state, click here.

Photo credits (top to bottom): Parsons Place, East St. Louis IL - Courtesy of McCormack Baron Salazar; Carlton Court, Hollywood CA - Courtesy of McCormack Baron Salazar; High Point, Seattle WA - Courtesy of Seattle Housing Authority