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Interactive Map: Helping States Deal with Foreclosures

Increased Funding for Neighborhood Stabilization Will Create 100,000 Jobs

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CAP’s economic stimulus plan includes a call for an additional $5 billion in funding for the neighborhood stabilization program to help state and local governments stem the housing crisis by reducing downward pressure on local housing markets. We must continue to argue for stronger public and private sector efforts to prevent foreclosure, but we must also address the needs of those communities that already have a large number of foreclosed properties.

Banks put up for auction or took possession of more than 165,000 homes during November of this year alone, many of which will continue to sit vacant and attract blight. An additional $5 billion toward neighborhood stabilization would allow the federal government to provide grants to states and cities for local nonprofits to purchase these properties in bulk, then rehabilitate them and offer them for sale or rent at affordable prices. The rehabilitation process will return these properties to productive use, as well as create construction jobs in an otherwise moribund sector of the economy.

We estimate that over 125,000 properties would be purchased and rehabilitated as the federal government disburses these new neighborhood stabilization funds. The purchase and rehabilitation process would generate an additional $10.7 billion in economic activity [1] and create in excess of 100,000 new jobs [2].

What’s more, the restored properties will no longer be a drain on local resources, as municipalities must now cover rising costs ranging from trash removal, grass cutting, and boarding up vacant properties to more serious problems of vandalism, increased property and personal crime rates, and arson. Nationally, localities will save nearly $1.3 billion in such costs [3]. And these properties will pay in excess of $210 million in property taxes annually [4].

Endnotes

[1] This is based on a multiplier effect of 1.27, applied to $75,000 in rehabilitation costs applied to each property and adjusted for 2003 state median house prices relative to the national median. It also assumes the grants will be leveraged at a 1:1 rate, with 85 percent of the funds used for purchase and rehabilitation. In keeping with the affordability goals of the program, it is assumed that a soft second/shared equity component equal to the rehabilitation costs will remain in each property, with the balance of the proceeds recycled for additional acquisitions.

[2] Jobs are reported in one-year, full-time employment equivalents.

[3] This is based on a conservative estimate of municipal costs of $10,000 per property.

[4] Based on National Association of Home Builders’ reported median property taxes per state.

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