With a thicket of foreclosed houses threatening property values and neighborhood ties, federal officials in 2008 unveiled a sweeping housing program worth $70 million in local assistance.
The plan was to purchase foreclosed homes, fix them up, then put them back on the market. Streets dotted with vacant homes would be restored. Neighbors could feel confident again.
Instead, the unprecedented stimulus program has been mired by confusion, complications and competition. Homes are still empty. Governments are having trouble closing sales. Federal officials continue to tweak the grant guidelines. All the while, time is running out.
Governments have until September to earmark the grant dollars or return any unspent funding. As much as $40 million is at stake in the Tampa Bay area.
Critics say the program is too narrowly structured, making it difficult for local governments to restore battered neighborhoods. Proponents, however, suggest local housing officials simply were not prepared to dole out the aid.
"There is a lot of legitimate fretting about, 'can we spend the money?' " said Craig Nickerson, president of the National Community Stabilization Trust, a nonprofit helping local governments purchase homes.
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Governments had five months between when the grants were announced in September 2008 and when the dollars were distributed. But the program guidelines began to take shape only around May, after a series of revisions.
The rules say recipients must have contracts signed or, at a minimum, have made written offers for properties within 18 months. They can use up to 10 percent of their award to cover administrative and planning costs. Purchases made through real estate auctions are acceptable. Short sales, which are typically used to prevent a foreclosure, are not.
The homes must be purchased from banks at a discounted price. First, the federal urban and housing development department required local governments to purchase the homes at 15 percent less than their appraised values. The requirement was recently changed to 1 percent below the appraised value.
The new rule still puts local governments at a disadvantage, critics said.
"Appraisals are already coming in 42 percent less than the asking price," said Cyndy Miller, director of Tampa's growth management and development services. "That makes it difficult to compete with investors."
For example, before Tampa officials could close on a handful of homes in Sulphur Springs, a private investor swooped in and bought 25 parcels, Miller said.
Tampa has contracted out most of its grant-related work. Those private contractors have until May to buy most of the city's properties, leaving the city with a short window to rebound if their efforts fail. Miller hopes Congress will grant a six-month deadline extension.
Area housing inventories also are lower than expected, partly because of foreclosure moratoriums. For example, Bank of America currently owns only 58 homes in Pasco, Hillsborough and Pinellas counties.
The sluggish pace of decisionmaking in government, where sales often must be approved in committee votes, also puts the governments behind private investors, who can close at will.
In Pinellas County, officials spent months establishing a relationship with local lenders.
"It was a challenging program from the start," said Bruce Bussey, a county development official. "The banks really had to adjust to this procedure. It was a new process for them. They have never been in the homeownership process."
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Nonprofits are sprouting across the country, determined to help local governments spend the federal housing dollars before the September deadline.
Private lenders also have offered their assistance.
Bank of America allows grant recipients to review bank-owned properties before they are listed on public sites, said spokeswoman Christina Beyer.
Pasco County has taken advantage of such priority buying programs. It is one of a few governments nationwide to have already worked its way through most of its grant dollars. Locally, Pasco is also the only government to have sold purchased property back to the public, with 28 sales under its belt.
"I don't think it's a hard program," said George Romagnoli, the county's community development manager. "I hate when people say that."
The county tapped six nonprofit agencies and reached out to real estate agents to help them find houses, most of which were built before 1975. The county staff rehabilitate the homes.
Governments have to come up with a plan if they want to be successful, Romagnoli said.
"You have to think people in housing or community development departments, they are accountants or planners," he said. "None of them are real estate agents."
At a recent St. Petersburg City Council meeting, city staffers begged off comparisons to Pasco. Purchasing homes is not easy, housing director Joshua Johnson said.
Council member Wengay Newton suggested his staff broaden its search.
"I don't know why we couldn't acquire enough properties," he said. "There sure are enough of them boarded up in my district."
Cristina Silva can be reached at (727) 893-8846 or [email protected]