Stabilizing neighborhoods: Update on a $7B program built to save us from blight
In September 2008, the Department of Housing and Urban Development announced it would provide $3.92 billion in relief to areas suffering from high foreclosure rates. The money would come from the newly formed Neighborhood Stabilization Program in the form of grants. State and local governments used the money to assist low- to moderate-income homebuyers with down payments and closing costs. But the biggest benefit, and the most unique, was that grantees could use the money to buy up and redevelop foreclosed properties that would have otherwise been abandoned. The blight from these vacant homes has accelerated the decline in home prices for some areas, boosting the number of underwater borrowers and eventually leading to more defaults to restart the cycle. According to Census Bureau data, the U.S. residential vacancy rate in 1979 was 4.8%. It hit 8% in 1996. But the rate went from 7.9% in the first quarter of 2000 to 11.1% in the third quarter of 2009, essentially seeing the same percentage rise in vacancy in 10 years as the previous 20.