Recently, the Housing and Economic and Recovery Act authorized HUD to distribute $3.92 billion to states to help fix the neighborhoods and communities infected by the wave of foreclosures. The funds were distributed based on foreclosure rates and California received the second largest amount at $529 million; Florida received $541 million. As of last week, the $529 million has been split amongst counties and cities in California.
Some counties that stood out were Sacramento and Los Angeles, each receiving $32 and $18.6 million respectively. Interestingly, Sacramento’s $32 million is larger than some 20 states entire share of the $3.92 billion. According to an interview with HUD Secretary Steve Preston, state and local governments will be able to buy foreclosed homes and offer down payment and closing cost assistance to low income buyers. Through these methods, the goal is to eventually rehabilitate some of these damaged neighborhoods and make them more attractive to potential buyers.
In Sacramento, 40 percent of the funds will be used to buy, fix, and then sell such distressed properties. Another portion will be used to hire developers who will buy multiplexes and create affordable rentals for low income tenants.
Will this work?
First of all, even with counties getting as much as $32 million, Sacramento officials agree that this will only help to rehabilitate about 400 properties. With other counties in California only receiving a fraction of that amount, these funds could dry up quite quickly. In addition, some feel that something is fundamentally wrong with state and local governments now in the business of real estate flipping. As for the neighborhoods themselves, if investors manage to attract the low income buyers and tenants as they hope, the surrounding homes will end up losing significant value anyway.
So what do you think? Some suggest, counties should choose investors and developers carefully, especially considering non profit agencies. Others suggest they should leave the rehabilitations and real state flipping to the new owners. For more information, read the full coverage at Sacramento Bee and SFGate.
(20 votes, average: 4.95 out of 5)
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Stockton-Manteca has suffered the worst in this foreclosure meltdown, but I believe the region got the short end of the stick.
California overall is receiving $529 million, far less than the $541 million that Florida is receiving. Why?
Janice: The money was based on foreclosure rates. While things seem pretty bad here in terms of foreclosures - Florida is still suffering quite badly themselves.