Housing department to funnel $1 billion to hard-hit areas

With housing starts rising in April, HUD Secretary Shaun Donovan says his department will reallocate up to $1 billion to help areas where the housing industry has not recovered.

By , Staff writer

On a day when the government announced that construction of new homes rose sharply last month, Housing and Urban Development Secretary Shaun Donovan said his department would reallocate up to $1 billion in funds to help areas of the country where the housing industry had not recovered.

The Neighborhood Stabilization Program (NSP) helps communities demolish or rehabilitate abandoned buildings and offer down payment or closing cost assistance to low and middle income homebuyers.

“We will be reallocating what we expect to be as much as $1 billion of funding to places that have been the hardest hit by this crisis. The original allocations in this funding were spread quite broadly across the country,” Secretary Donovan told a Monitor-sponsored breakfast for reporters. The department will recapture the funds from communities that have not spent their original allocation of NSP funds.

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The secretary also said his department would ask Congress for new money for the program. “We will be working with Congress to try to make sure that – as part of whether it is a further jobs bill or other vehicles – that we increase funding targeted again at those hardest-hit places,” the secretary said.

“The biggest benefit will be in places like Nevada, California, Arizona, Florida that have been the very hardest hit by this crisis,” Donovan said. “We believe fundamentally that with the broader recovery we should be focusing resources on the places that are hardest hit.”

The HUD secretary spoke as the government released figures on housing starts in April, saying they rose to a 672,000 annual rate last month, the highest level since October 2008 and up 5.8 percent from March. “In the broad majority of places around the country, we have actually seen substantial improvement,” in the housing picture, Donovan said.

In what he called the hardest hit places, Donovan said “what we are seeing is the early signs of recovery. But the neighborhood stabilization fund is a key tool in focusing on those communities where there are these vacant properties, being able to renovate and reuse them, and often times one of the barriers is a lack of funding or tools to take those vacant homes and turn them back into productive use.”

Donovan said he expected the neighborhood stabilization effort to reach 80,000 housing units in the affected communities.

President Obama’s fiscal 2011 budget proposed a 5 percent cut in HUD outlays to $41.6 billion. Donovan was asked whether he expected HUD to be hit with additional budget cuts as a result of the nation’s financial challenges.

“We are going to have to make difficult choices and given the fiscal environment that is the only responsible thing to do. I think the president has made that clear,” he said. The secretary noted, however, that more efficient operating methods could help HUD offset the effect of some budget cuts.

The secretary’s visit with the breakfast group came on a day when he had an especially keen interest in housing. Donovan’s wife was coming to Washington Tuesday to sign papers on a house the Donovans have purchased here. Donovan’s wife and two young sons had been staying in their New York City home while he commuted to Washington. The family will move into their new home in the nation’s capital at the end of the school year.

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