The City of Philadelphia’s Neighborhood Stabilization Program (NSP) is an innovative opportunity to turn vacant, foreclosed properties into owner occupied dwellings. The City will receive $16.8 million from The U.S. Department of Housing and Urban Development (HUD) to support this effort, which will be managed by the Redevelopment Authority of the City of Philadelphia (RDA).
Philadelphia’s NSP will focus on select neighborhoods throughout the City. These neighborhoods were identified by the City’s Office of Housing and Community Development through a comprehensive process taking into account historic foreclosure data, indications of predatory lending, and the impact of vacant foreclosed homes on the value of residences in the surrounding neighborhoods.
The NSP compliments other initiatives focused on the foreclosure crisis. The City’s first priority is to prevent foreclosure by encouraging residents to participate in the Mortgage Foreclosure Prevention Program. The NSP will work with properties that become vacant due to foreclosure. All buyers of NSP homes will also complete eight hours of mortgage counseling.
Through a series of Request for Qualifications (RFQs) the RDA will select qualified developers (both for and non-profit) who will acquire the foreclosed homes, renovate, and sell them to credit worthy owner occupants. The developer partner’s compensation will take the form of a developer fee to be paid on an incentive basis. All developer partners will be expected to have knowledge of neighborhood conditions. Community Development Corporations (CDC’s) and other non-profit organizations are encouraged to participate, as are for-profit developers and joint ventures.
Request for Developer Qualifications—Rolling Admissions Closed June 30, 2010
Property Acquisition Process:
The RDA, working with its development partners, will negotiate the price of the vacant, foreclosed properties with lenders. Properties will be purchased at a discount from the lender’s stated market value.
The RDA is working with several national lenders that hold large portfolios of foreclosed properties. RDA will help developers acquire and redevelop those properties with the highest potential for neighborhood impact.
Owners of foreclosed properties interested in participating in NSP are encouraged to contact the Director of the RDA’s Neighborhood Stabilization Program at email@example.com.
Financing and Project Economics:
In the initial phases of this program, RDA will offer financing for the acquisition, rehabilitation, and marketing using HUD’s NSP funds. With program maturity and improvement in the credit markets, developer partners will be encouraged to secure private financing and commercial lenders will be asked to participate.
The RDA expects that the cost of acquisition, renovation, marketing, and developer compensation will exceed the sales price given the need to sell quickly to owner-occupants. This shortfall will be funded through a subsidy secured by a second mortgage. This is a common feature of federal programs designed to insure the continued affordability and prohibit inappropriate profit making.
Upon sale of the home, all funds advanced through the NSP, less the subsidy, will be returned to the RDA and re-lent, furthering the program goal of investing in neighborhood stabilization. The available fund balance will decline over time as the cumulative subsidy invested in the neighborhoods increases.
Once the property is identified, the developer partner will propose a plan and cost estimate to correct code violations; lead based paint and environmental hazards; mechanical and physical deficiencies; and to provide energy star and “green” enhancements. These, as well as property upgrades and improvements, will increase value and marketability.
The RDA will review and approve the developer partner’s proposed rehab plan and check for accurate job costing. And, throughout the construction/rehab phase will monitor compliance with the pre-approved plans and advance funds based on work in place.
Once properties are renovated by RDA’s Developer Partners they will be available for purchase at the fair market value by individuals who meet the following criteria:
- Buyer must occupy the property as their principal residence;
- Buyer must complete eight hours of housing counseling;
- Buyer must qualify under certain income requirements; and,
- Buyer, and mortgagor, must agree to a second mortgage designed to preserve affordability.
Visit our list of available properties at www.phillyhomesnsp.org
and review the resources for additional information.
The RDA is seeking properties that need financial assistance and meet the requirements of the NSP. Please use the following guidance and forms to identify property that might be suitable for this program.
NSP1 Guidance for Affordable Rental Housing and Property Identification Form
Neighborhood Stabilization Program 2:
The Department of Housing and Urban Development (HUD) issued the Notice of Fund Availability (NOFA) for NSP 2 on May 4, 2009. The City of Philadelphia submitted its application for funding under this competitive program on July 15th, 2009 and was awarded $ 43.9 million. The plan is available online
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