Program/Project Name: Neighborhood Stabilization Program 2
Funding Category: Growing Philadelphia’s Businesses, Economy & Workforce
Federal Grant Name: Neighborhood Stabilization Program 2
Programs Supported Through Funding: Affordable Housing Acquisition, Rehabilitation, Redevelopment and Re-Sale or Re-Use
Why Apply for this Grant?
HUD’s competitive round of Neighborhood Stabilization Program funding (the only one through ARRA) was a highly proscriptive, competitive application process. While a range of possible activities was allowed, HUD tightly defined eligible census tracts and eligible activities. The City’s application, a joint effort between Office of Housing & Community Development and the Redevelopment Authority (with OHCD as applicant) is a very aggressive funding request, designed to treat two kinds of areas in the City, described in this excerpt from the application:
The City recognizes that different sets of interventions will be more likely to stabilize the two kinds of areas identified: Conservation Areas and Redevelopment Areas. The Conservation neighborhoods, located in an “arc” at a distance from Center City, will be where most of the homebuyer incentives and acquisition/rehab/resale activity will take place. The homebuyer incentives will allow counseled homebuyers to purchase foreclosed home that need modest levels of attention, and the acquisition/rehab financing will help developers address the more deteriorated foreclosed homes and return them to homeowners. These interventions will address incipient blight and neighborhood decline, support value in the housing market, and stabilize these census tracts.
In the Redevelopment Areas [Point Breeze, Mantua, Nicetown/Wayne Junction], NSP 2 activities will be targeted more specifically, based on each neighborhood’s challenges and opportunities. In general, these neighborhoods need larger scale redevelopment to “jump start” the market, and selective demolition, particularly of larger, vacant, obsolete industrial structures. They will also need the full complement of homebuyer incentives and acquisition, rehab and re-sale offered in the Conservation areas.
Use of Funds: The following activities were proposed in the City’s application:
Homebuyer Incentives Coupled with Housing Counseling
The City will use NSP 2 funds to assist income-eligible first-time homebuyers to address the issue of cash required to purchase foreclosed upon homes in the targeted areas. The City will offer “soft second” loans for up to $25,000 to cover down payment and closing costs, as well as an allowance for code compliance, lead-based paint abatement, and energy efficiency improvements. The home buyer will be required to provide at least 3.5% of the purchase price and to receive pre-purchase counseling offered by a HUD-approved housing counseling agency. This activity will be available throughout the entire target area. 200 soft second loans are anticipated. $5,300,000.
Loan Loss Reserves for Construction Financing
The City proposes to work with the National Community Stabilization Trust to establish a loan loss reserve fund for financing construction loans for affordable housing development in targeted NSP 2-eligible neighborhoods. The fund will support construction financing for affordable housing development (rehabilitation or new construction) of key homeownership or rental projects of sufficient scale or importance to affect the local housing market positively. NSP 2 funds will be held as security for larger construction loans, which will be offered at zero percent or a blended, below market rate to the developer/borrower. The loan loss reserve funds will be used for projects in the three redevelopment areas (Mantua, Point Breeze, Nicetown/Wayne Junction). $1,875,000.
Acquisition and Renovation of Vacant, Foreclosed Homes
Vacant homes, either long-term vacant structures already owned by the City or foreclosed property owned by lenders, will be renovated and resold under this component of the program, under similar terms to the work already underway through NSP. Average subsidy levels will be roughly $75,000. Developers, both for-profit and nonprofit, will receive a developers’ fee for their services upon sale of the property to an income-eligible buyer. This effort is an expansion of the City’s current NSP 1 program. This activity will be made available throughout the entire target area. 100 units are anticipated. $7,500,000.
Purchase, Rehabilitation and Re-Use of Foreclosed Upon Structures as Multifamily Housing
Vacant or occupied multifamily structures that are in need of substantial rehabilitation and are facing foreclosure will be acquired and redeveloped under this component of the program. The City has identified a number of older affordable housing developments in need of substantial investment if they are to continue to operate. The activity may be used throughout the target area. 100 units are anticipated. $20,000,000.
Redevelopment of Vacant Land as Housing
In the three Redevelopment neighborhoods – Point Breeze, Mantua, and Nicetown/Wayne Junction – the City will complete the assembly of land and finance the development of up to three large-scale affordable housing developments. At least one of these developments will be for homeownership targeted to families with incomes up to 120 percent of the Area Median Income. 100 housing units are anticipated. $14,000,000.
Demolition of Blighted Structures
The City expects that most of its proposed Demolition budget will be used to demolish commercial and industrial buildings, rather than residential units. Some demolition of uninhabitable, severely deteriorated, long-term vacant residential units may be required to remove blighting influences or to assemble a larger site for redevelopment. Approximately 50 commercial and/or residential demolitions are anticipated. $5,000,000.
Administrative Costs, as allowed (up to 10% of total)
Grant Achievements for the Quarter:Below is a summary of NSP 2 expenditures and commitments for the following NSP 2 program activities:
PURCHASE, RENOVATE AND RESALE SINGLE FAMILY HOMES: The Redevelopment Authority has financed over $8.8 million to acquire and rehabilitate 50 single-family foreclosed homes. Of the 50 homes, fifteen sold to income-qualified homebuyers and the remaining 35 are under construction. Six additional properties are in the pipeline, expected to settle within the next 30-45 days, representing an additional $1.0 million in NSP2 financing.
GAP FINANCING FOR HOMEOWNERSHIP: This quarter the Philadelphia Redevelopment Authority closed on two additional homeownership properties in the Point Breeze neighborhood – Community Ventures Point Breeze Scattered Site (8 units) and Northstar (6 units). Construction continued on the 17th & Federal, Cashel and Innova projects. At the end of this quarter there are a total of 40 units under construction representing over $11.6 million in NSP 2 funding.
GAP FINANCING FOR MULTI-FAMILY RENTAL: Three of the five NSP 2 multi-family housing developments are under construction, representing $7,510,765 in NSP 2 financing and totaling 75 units. These projects are WPRE II, Shelton Court and Patriot House. The remaining two NSP 2 projects, Mt. Vernon Manor and Nicetown Court II, received awards of Low Income Housing Tax Credits in July 2011. The City closed on both projects and both are under construction, representing over $9 million in NSP 2 funds, totaling 125 units.
DEMOLITION: At the end of this quarter, the Department of Licenses and Inspections expended $962,500 bringing the total to $2,092,000.
Actual # of FTE jobs created for the quarter*:
*In the City of Philadelphia’s quarterly federal report, also know as Section 1512 reports, jobs are calculated based on hours worked, instead of the number of people at work. It also looks only at jobs funded directly by the Recovery Act, and does not include jobs created indirectly. Direct jobs are counted quarterly and are not cumulative.