LEHIGH ACRES, Fla. — With a use-it-or-lose-it deadline just months away, communities have spent less than half of the $4 billion available under a federal program to redevelop abandoned and foreclosed properties.

Some city, state and county officials say they’ve been stymied by confusing and ever-changing federal rules for the money, awarded in the midst of the nation’s foreclosure crisis.

A year after the Neighborhood Stabilization Program started, about one-third of more than 300 local governments who received the help have barely made a dent in their funds, according to a recent U.S. Department of Housing and Urban Development report.

As of March 16, only 38 percent of the grant money had been “obligated,” meaning a municipality has a formal contract at a specific address in place – say, a contract to buy a foreclosed home. Governments must commit the money to projects by September or it’s gone.

Some communities have used their money to buy, renovate and resell homes to low- and moderate-income families. Others demolished eyesores or bought multifamily apartment buildings and rented them out. Some used nonprofits to manage the program.

But local officials in other areas say they’ve been stymied by the rules, overwhelmed by starting a new program and, in many cases, outbid by cash investors when trying to buy foreclosures. Under HUD rules, grant recipients must pay 1 percent less than the appraised value of any property.

“We’re competing with the marketplace for foreclosed properties,” said Kurt Bressner, the city manager of Boynton Beach, Fla., which as of mid-March had only spent $11,000 of its $3 million grant. “By the time the properties end up in the listings, they’re gone.”

Boynton Beach was one of nearly 100 municipalities that had obligated less than 25 percent of its grant money as of mid-March. The state of Florida – which received $91 million – lags behind all but three other states in using the money.

“I’m not satisfied with the progress,” said U.S. Rep. Kathy Castor, D-Tampa.

The program has been so dismal in some areas, like Las Vegas, that HUD has “embedded” its workers to help use the money. “These are people who are fluent in how to acquire property, rehabilitation, land banking and demolition,” said spokesman Brian Sullivan.

In March, dozens of officials converged on Harvard University for a forum sponsored by Living Cities, a philanthropic collaborative of foundations and financial institutions. The two-day session was all about how to spend NSP funds quickly.

“The problem is so much bigger than the effort we’ve been able to put up against it,” said Ben Hecht, the CEO of Living Cities. “It’s too early to tell whether the NSP program is going to fully achieve its promise because a lot of the work has just started.”

Indeed, the federal government issued a second wave of money in January 2010. Recipients had to prove they had a track record of handling, and spending, large amounts of cash on foreclosure relief programs. Only 56 communities received those grants, and places like Las Vegas were not among them.


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