HUD releases $5 billion in foreclosure aid and workforce housing funds

WASHINGTON – May 5, 2009 – The Department of Housing and Urban Development (HUD) yesterday announced a $5 billion program, in conjunction with the Department of the Treasury, to spur the development of affordable housing units; and a separate $2 billion HUD program to combat local problems resulting from foreclosures. Funded through the American Recovery and Reinvestment Act (The Recovery Act), the programs together provide approximately $5 billion to states for the acquisition and construction of affordable housing for working families.

Low Income Housing Tax Credit (LITC)

Through the Recovery Act, the Treasury Department will, for the first time, give state housing agencies funds that they, in turn, will grant to developers of qualified affordable housing developments to fill the Low Income Housing Tax Credit (LITC) gap. The program will increase the supply of newly constructed or recently renovated affordable housing units for families that otherwise may not have come to market due under current economic conditions.

“With this new program, we are not only creating new jobs through new construction, we are ensuring the availability of affordable housing, which is good for the nation’s economic stability and the economic security of millions of American families,” says Treasury Secretary Timothy Geithner.

A by-product of the economic crisis has been a freeze of the investment in Low Income Housing Tax Credit, the federal government’s program for the development of affordable rental housing. Tax credits provide an incentive for investors to participate in the program, which in turn provides equity to developers to build multi-family rental housing for moderate and low income families. Developers depend on the equity to fill project financing gaps. In the current financial crisis, credit is tight, and as a number of traditional equity investors left the market, the value of tax credits have plummeted. Currently, up to 1,000 projects containing nearly 150,000 units across the country are on hold.

Tax Credit Assistance Program (TCAP)

In addition to Treasury’s new program, HUD will be awarding $2.25 billion in grants to state housing credit agencies through the Tax Credit Assistance Program (TCAP) so they may complete construction of qualified housing developments. The TCAP program will ultimately provide affordable housing to an estimated 35,000 low-income households.

Neighborhood Stabilization Program (NSP)

HUD Secretary Shaun Donovan also announced that HUD is soliciting grant applications under the Department’s Neighborhood Stabilization Program (NSP) to make nearly $2 billion available to states, local governments and non-profit housing developers to combat the problem of home foreclosures. Applications for NSP funds are due by July 17, 2009.

Funded under the American Recovery and Reinvestment Act of 2009, this round of NSP funding will award grants to applicants who target the areas with a lot of abandoned and foreclosed homes. HUD is also offering up to $50 million in technical assistance grants to help NSP grantees manage the inventory of foreclosed homes they purchase under the Neighborhood Stabilization Program.

© 2009 FLORIDA ASSOCIATION OF REALTORS®

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