County rejects Housing Recovery Act
The recently passed Housing and Economic Recovery Act appropriates more than $3.9 billion in emergency assistance for the redevelopment of abandoned and foreclosed homes and residential properties.
And while Dakota County will receive about $2.7 million in funds referred to as the Neighborhood Stabilization Program, it is not happy about two aspects: a restriction that requires home appreciation to be considered program income rather than additional equity to the homeowner; and that the county will not receive a fair distribution of the funds allocated to the state ($38.8 million) to be distributed throughout the metropolitan counties. The county will receive none of the additional funds.
At its regular meeting this week, the Dakota County Board of Commissioners adopted two resolutions which will be forwarded to HUD, the Minnesota State Legislature and the governor's office.
Dakota County Community Development Agency Director Mark Ulfers said while the CDA would like to use $1 million of the NSP funding to help buyers of foreclosed homes, there is an obstacle: any foreclosed home that is purchased using NSP funding must return some or all of any future value appreciation as program income to the United States Treasury.
For example, a qualified buyer uses NSP financial assistance ($15,000 at 0 percent) to buy a foreclosed home for $150,000, using $5,000 of their own money as a down payment. Ten years later, they sell it for $180,00 and the increase in equity of $30,000 would be split 25 percent to the homeowner and 75 percent to the Treasury. The owner will also repay the $15,000 loan at the tine of the sale.
"This would appear to be a significant disincentive for a buyer to use NSP funding to assist with the purchase of a foreclosed home," said Ulfers.
Plus, he added, the state's direct amount is being allocated to "areas of greatest need" based on zip code level (number of foreclosure sales) data. The Minnesota Housing Finance Agency developed a formula that uses data similar to what HUD used for its determination, but it used different sources of the data. It also added age of housing and incomes to its database. The MHFA analysis resulted in a different conclusion than HUD.
"Clearly, we are not getting our fair share," said commissioner Joe Harris.
"The goal is to get the property back on the tax rolls" said commissioner Michael Turner. "It doesn't accomplish it. Where is the incentive? I don't understand the state."
The question is why Dakota County apparently was the only metropolitan county singled out not to receive a portion of the state's amount, said commissioner Thomas Egan.
The state used a formula which was not friendly to Dakota County, said Ulfers. It used the "Top 100" zip codes for foreclosure sales, and the county was not included. However, he said he preferred not speculate as to why the state used the formula it did. He also stressed the amount of money being discussed was a modest one.