A federal rehabilitation program meant to stabilize area home prices has cities losing thousands of dollars per project in an effort to make vacant homes “the best on the block.”
The city of Hamilton received $2.3 million and Middletown received $2.1 million in Neighborhood Stabilization Program funds from the U.S. Department of Housing and Urban Development in 2009.
Of those funds, 25 percent were used for the acquisition and rehabilitation of foreclosed properties. Another quarter of that must be used for housing with households with incomes less than 50 percent of the area median income. All other properties can only be sold to households making less than 120 percent of the median income, according to the guidelines.
This is no money-making venture for the cities. While HUD regulations mandate cities acquire the homes at a minimum of 1 percent below the market-appraised value, it specifies that a profit cannot be made upon resale.
The guidelines do not specifically indicate cities should lose money in the transaction, but HUD does encourage rehabilitation make the homes “the nicest and highest value on the block,” according to a feasibility analysis of the program made in conjunction with the Ohio Department of Development in 2009.
The funds are meant to fill the vacant housing stock and boost property values — thereby protecting existing homeowners in struggling neighborhoods, said Jim Cunningham, the Cincinnati HUD field office director
“It’s meant what it is called. It is meant to stabilize the neighborhood,” Cunningham said.
“We want them to renovate the homes with comparable amenities to the area as well as make it cost-reasonable and modest in design.”
Both cities certainly have an influx of vacant homes. There are 3,220 vacant housing units in Hamilton and 3,058 vacant housing units in Middletown, according to the 2010 U.S. Census.
Sale vs. resale
Using NSP funds, 10 homes were purchased in Middletown for a total of $444,150. Some of the homes are still under construction, but based on the city’s estimated rehab, closing costs and other miscellaneous expenses, the city will have lost $530,730 after selling the properties— more than what the homes cost.
“It’s being utilized the way HUD wants it to be utilized,” said Kyle Fuchs, HUD program administrator for MIddletown, of the money lost in the renovations. “It’s meant to stabilize the home values in the neighborhood.”
As to whether the work — and the amount of money lost in the venture — accomplished that goal has yet to be determined by Middletown or HUD.
“If there has been a significant impact to home values, I think from an economic standpoint it’s too soon to say,” Fuchs said.
It’s more difficult to calculate any loss in Hamilton because the city has left the future of the properties in the hands of Neighborhood Housing Services. That entity will be renting and selling properties — a practice allowed by HUD.
Due to internal policies, Eugene Scharf, administrator for Hamilton’s neighborhood development division, said the city will not allow a significant financial loss as a result of rehabilitating and selling NSP homes.
“We have strict guidelines from HUD for what we can and cannot do,” Scharf said. “But in the city of Hamilton, we do not rehab a house that will exceed 120 percent of the appraised value when finished.”
No homes in Hamilton have a final sale price listed on the Butler County auditor’s website. Drive-bys indicate most are still vacant or under construction.
Once completed, the homes will certainly be better than what the city started with, said Rick Karpowitz, a contractor who was working on an NSP property on South Fourth Street Thursday.
“It was a mess,” Karpowitz said of the three-story property built in 1901. It now sports new appliances, windows, HVAC and plumbing. A once unusable attic space has been remodeled into a master suite.
The homes are always repainted and usually receive new flooring and an exterior face-lift, but the end result is “more than lipstick,” said Kyle Fuchs, HUD program administrator for MIddletown.
Energy-efficiency is “encouraged” by HUD in the program’s regulations. In both Hamilton and Middletown, homes included in the project usually receive new appliances, plumbing systems, HVAC and new windows if necessary.
“These are almost brand-new houses when you get into them,” Fuchs said.
Those updates were certainly a draw for Kellie and Steve Metzger, who purchased an NSP home on Arlington Avenue in April.
“We’ll never have to think of the big item purchases,” Steve Metzger said.
The two-story home gleams from the street with its fresh paint job, new roof and professional landscaping.
“If everyone who got an NSP home is as happy as we are, then it’s a good program,” Kellie Metzger said. “We’re tickled pink.”
Their new home was vacant for three years prior to them moving in. The way Steve Metzger sees it, the city has increased area property values while offering an affordable home that will now be “getting paying taxpayers into it.”
“It’s a win-win for everybody,” he said.
Both Hamilton and Middletown received funding in the third round of NSP grants thanks to a distribution of funds received by Butler County. Neither city received funding in the second round. The cities will split about $1.3 million to be used for home rehabilitations as well as the demolition of blighted homes.
Since the national NSP program began — the first round of funding was given during the Bush administration — $258.1 million have been distributed in Ohio.
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