Sudden drops in home prices have community-wide ramifications and widespread human costs that boast large and lasting ripple effects—unlike a purely financial market correction where some sophisticated investors make educated bets and lose while others have an offsetting gains. These properties attract vandalism, arson, and crime as they sit vacant, and they drag down local property values, making it very difficult for local real estate markets to operate normally.
We propose to establish a Great American Dream Neighborhood Stabilization, or GARDNS Fund to provide money quickly and efficiently to local non-profit organizations or municipalities to purchase foreclosed properties and offer them for sale to qualified low- and moderate-income families on affordable terms. Proceeds from the sale would be used to purchase additional properties, thus multiplying the purchasing power provided by this new fund.
Funding would come through a special appropriation of block grant money under HUD’s HOME or Community Development Block Grants programs, with some relaxation of otherwise applicable restrictions such as the local match requirements. Use of these funds would be primarily for acquisition of foreclosed homes by a local community land trust, community development corporations, other non-profit groups, or a governmental agency. These types of local organizations would become so-called local stabilization buyers. They would purchase foreclosed or vacant absentee-owned homes in low- and moderate-income neighborhoods with high concentrations of foreclosures or high rates of loan defaults.
Once purchased, these homes would be promptly resold to a low- or moderate-income homeowner who would receive appropriate home buying counseling. This new buyer would purchase the property with a fixed-rate mortgage product that is affordable to the family’s particular situation, based on standard guidelines established by the state or local participating jurisdiction. If the house is then resold, then the homeowner and the local stabilization buyer would enter into some form of shared equity affordability arrangement. The arrangement would be monitored by a local organization with some expertise in affordability arrangements such as a community land trust.
Our GARDNS Fund provides one targeted way of accomplishing multiple important goals: housing price stability, community preservation, and an increase in the stock of housing within reach of average American working families. The costs of inaction are far too high to await the outcome of a slow-moving market correction. Sensible action now can restore confidence to markets and stability to neighborhoods, and merits swift action.
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