#163 Fall 2010 — Neighborhood Stabilization

NSP at Halftime

The federal Neighborhood Stabilization Program is a welcome source of funds in struggling communities, and it has had a massive effect on the nature of the response to the problem of vacant foreclosed property. As NSP3 gets underway and the NSP1 obligation period comes to a close, Shelterforce looks back at NSP so far.

David Schalliol

To date, the federal government has made almost $7 billion available to shore up neighborhoods in decline through the Neighborhood Stabilization Program (NSP).

The first round of NSP funding, known as NSP1, was enacted during the Bush administration as part of the Housing and Economic Recovery Act of 2008. It allocated $4 billion to 309 grantees in 55 states and territories and 254 selected local jurisdictions using a formula that directed larger amounts to communities facing greater risk. State and local government agencies began receiving NSP1 funding in March 2009, and were under a requirement to obligate it all in an 18-month time frame. Although last Spring many looked as though they would not make it, over 99 percent of grantees did in fact hit that timeframe.

A second round of NSP funding, authorized under the American Recovery and Reinvestment Act of 2009, was awarded on a competitive basis to 56 grantees in February 2010. NSP2 awarded $2 billion in total. An additional $1 billion in Congressionally authorized and appropriated funding, known as NSP3, was announced in early fall 2010. NSP3 funding will again be distributed on a formula basis to governments, using more current measures of foreclosure and other factors.

NSP1 was hard fought for, and seen by many as a crucial, if far too small, step toward rescuing struggling communities. But while NSP is small compared to the scale of the crisis, the funding has been large enough and unprecedented enough to have a significant effect on the landscape of housing and neighborhood stabilization activities. And yet, while well intended and welcomed, the development of the first Neighborhood Stabilization Program was driven more by a sense of urgency than by a thoughtful sorting through of how to have the greatest effect. Many of those limits have been addressed through regulation changes and adjustments in the statutes of NSP2 and NSP3, but some remain.