We probably knew this is the way the $700 billion bailout would work, but I haven’t seen it explained this graphically.
As part of the bailout, HUD’s doling out $4 billion for what’s being called the Neighborhood Stabilization Program. North Carolina is getting $57 million, with the bulk of it going to the state while Charlotte gets $5 million. Surely some fed money will make its way to the Triad.
Note the program is described by the ultra-liberal AJC as “local governments getting ready to jump into the house-flipping business.” Note also that local leaders down in Atlanta–at least those who know about the program- aren’t sure what to expect:
Atlanta Councilman Howard Shook said what little he’s learned makes him wonder whether it won’t be a spectacular failure. He compared it to the city’s $100 million empowerment zone program —- a Clinton administration initiative —- that failed to transform blighted areas of Atlanta in the 1990s.
“For a government that struggles to provide meat-and-potato services,” Shook said, “I’ve got a hard time seeing this as anything other than a disaster for the ages.”
HUD is restricting what can be bought, allowing only bank-owned foreclosures. It will limit governments to paying no more than 85 percent of a current appraisal.
And it will set income limits on who can buy any house the government repairs. No buyers can earn more than 120 percent of the area’s median income, about $85,000 for a family of four. Some must be reserved for families living on as little as $35,000 a year. Governments will also be prohibited from making a profit on any flips.
Restrictions aside, HUD gives local governments wide latitude.
They can run the program through their own staff, leaving them decisions on what properties to buy and what repairs to make. Or they can use contractors, professional flippers or local housing nonprofits.
In my view, the fact that a government housing industry like Atlanta is expressing concern about a HUD program speaks volumes.
