NSP: Where it's been, where it's going
Katie Ludwig discussing the Neighborhood Stabilization Program at a public meeting on Chicago's South Side.
Writer Bill Healy recently spoke with Katie Ludwig, an assistant commissioner dealing with foreclosure mitigation in the Chicago’s Department of Housing and Economic Development, about the impact of the Neighborhood Stabilization Program. Ludwig, who's been the city's NSP point person since the program's inception, grew up in Brighton Park until age 6 when she moved to Texas with her family. She came back to Chicago to attend college at DePaul University, where she met her husband. The Ludwigs owned a home in Pullman before moving to Mount Greenwood, where they currently live.
How much evidence is there that the Neighborhood Stabilization Program has been effective?
We haven’t done any full-blown analysis or evaluation, but I would say the assumptions we started with when we designed the program didn’t hold. We thought the market had hit bottom in 2009-2010 when we started doing all this. We thought, “We’re at the bottom and it’s only up from here.” And I don’t know if we’re even at bottom yet.
It’s such a dynamic landscape we’re in right now. Will Towns [of Mercy Portfolio Services, the city’s non-profit NSP partner] will often say, “The challenge with NSP is that it’s short-term money to solve a long-term problem.” It’s a problem that had been simmering for a while and you’ve got this money that says you have to fix this in three years.
I’ve had to temper my own expectations for the program. I want that “before” and “after” shot. And that “after” shot should show no vacant homes on the block, no garbage, and no houses in a state of disrepair.
If you took the before and after at many of our NSP homes, you’d see that some homes have been rehabbed but a couple more vacants might have popped up in the meantime and there’s still this distressed aura about it. It’s not simple and NSP isn’t going to solve everything by itself.
On a more positive note: We’ve made good relationships with communities and developers in those communities. And the equivalent of 800 full-time jobs have been supported by the NSP.
How much NSP funding has been spent so far and how long does the city have to spend the rest?
Over the three rounds of NSP funding the City of Chicago has gotten close to $170 million. The city received $55 million from the first round of NSP funding (NSP 1). Most everything that has been acquired with that money is either finished or is in the process of being rehabbed. There are a few projects that will begin rehab this year.
The $98 million from NSP 2 is also on the tail end. For NSP 3 - which at $15.9 million is significantly less money than the first two rounds of funding - things are just ramping up. This third round of NSP funding focuses on parts of five communities – Belmont-Cragin, Chatham, North Lawndale, East Garfield Park and West Pullman. NSP 3 money has to be spent completely by mid-March 2014. But the program will be operating after that with revenue coming in from home sales.
What strategies is the city pursuing in conjunction with the NSP money to help stem foreclosures?
Last year Mayor Emanuel announced the Micro Market Recovery Program (MMRP). That program is building on work that was started under NSP. We have nine target areas with the MMRP and we’re asking ourselves, “How can we layer different resources, public and private, with the goal of stabilizing the real estate there?”
One program we’re working on is “TIF Purchase Rehab.” We’re hoping to use TIF (Tax Increment Financing) funds to assist homebuyers looking to buy a vacant home within the TIF district. That could mean helping homebuyers with up to 25 percent of the total cost to acquire and rehab the property in the form of a recoverable grant with some strings attached to it.
Let’s say a house is selling for $30,000 but needs $100,000 worth of work. That’s $130,000 total costs, which in today’s climate would be hard to get financed. But if we gave them 25 percent of that amount in the form of a grant, they should be able to get the rest financed.
We need to create more tools. TIF is an abundant resource in some places, something we could be using more in this battle against foreclosures and vacancies. Right now we’re in the stage of determining which TIFs to work in and how much money to set aside in each of them. The ordinance for the big program passed but now we have to go through the process of finding money in each TIF and setting it aside. It’s possible that by April or May of this year, homeowners could get TIF assistance in purchasing NSP properties.
Is there any possibility of more money from the federal government for Chicago’s Neighborhood Stabilization Program in the future?
Last year President Obama introduced the American Jobs Act, sometimes referred to as “a second stimulus bill,” which had a lot of money set aside for different programs, many of them jobs focused. That included $15 billion for Project Rebuild – which is basically NSP 4. That would be a lot of money. To date there’s been less than $10 billion total in the first three rounds of NSP funding.
Some of that money is competitive where non-profit and for-profit partnerships could apply. But a lot of it is just guaranteed by entitlement to states, cities and counties. Chicago would be guaranteed to get a certain amount of money. It differs from NSP in that the money is more flexible in how it can be spent: some of the money can be spent on commercial buildings, for instance.
By calling it Project Rebuild instead of NSP 4, is that an indication that the Obama administration is attempting to re-brand the Neighborhood Stabilization Program?
The change in name might be to differentiate it from the NSP because Project Rebuild funding would have more flexibility. There has been pushback on the NSP from some members of Congress. Hearings were held in mid-2011 and the Department of Housing and Urban Development had to defend the program. Some of the changes address concerns that were brought up about the program.
How many people have purchased homes through the NSP in Chicago?
We’ve sold close to 20 homes. Just recently there was a closing on one of the row houses in Pullman. People who are renting in the community or living with their mom there are buying homes through NSP. They know the community and see it as a place of opportunity. More homes have been sold in Chicago Lawn than anywhere else, though not by much. The program started there and so those homes have been on the market for a while.
When we’re trying to sell a home, we have to ask ourselves what the block looks like today, because in some instances that’s changed since we acquired the house. We have to see how many other vacants have popped up since we began working on the block. If we’ve got it listed for $120,000 and we’re not getting any bites, maybe we need to adjust pricing.
A couple of NSP houses have been broken into repeatedly. We may have to sell those homes at much lower prices. We find ourselves starting to think, “Do we need to consider selling them to a community-based organization or to a local church who can get it into the hands of a grand-family, where grandparents are raising grandchildren? Or maybe make sure it gets into the hands of a veteran? Can the local hospital use it for workforce housing?” I think probably over the next couple of months, we’ll be exploring those options.
For one- to two-unit buildings, home ownership is still the first and best option. But we’re beginning to ask ourselves, for properties that are on the market for eight, nine, 10 months, should we consider an alternate disposition?
Any other ideas for what the city might do differently this year?
Right now, Mercy Portfolio Services acquires a house and transfers it to a developer. A developer spends $300,000 let’s say, to get it rehabbed and then we sell it. Costs are high in part because one of the NSP stipulations is that we have to pay State of Illinois prevailing wages to people; $40-50 an hour is not unusual. Costs can double, if not more, because of that. So we’re asking ourselves, “What can we do differently to keep costs down?” One way to do that is to skip over the developer part and go straight to homebuyers. We can work with the homebuyers to get the rehab done.
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