Will This Work?
President Barack Obama’s prime-time address on jobs didn’t focus much on
housing, to the concern of some economists. Most of the housing-related
attention focused on his call for more refinancing.
But the president’s job-creation bill actually includes some aid for housing:
It would create a $15 billion fund to get construction workers to rehab vacant
and foreclosed homes and businesses. Construction hiring has been weak, of
course, because competition from foreclosures has held new home building at
abysmally low levels.
Dubbed “Project Rebuild,” the White House initiative
follows on the work of the administration’s Neighborhood Stabilization Plan,
which gave grants to nonprofits in communities hard hit by foreclosures.
The goal of the program is twofold: Beyond creating jobs, it tries to chip
away at problems in the housing market by “attacking the overhang of
properties,” said Housing Secretary Shaun Donovan in an interview.
The concern is that foreclosed properties tend to be less well-kept than
traditional homes, and the properties sell at a discount out of foreclosure.
“If you live next door to a house that is foreclosed or vacant, research
shows that your house—even if you’re current and making your monthly
payment—your houses loses $10,000 on average,” said Mr. Donovan. “This is an
opportunity to stabilize everyone’s property values in those neighborhoods.”
Unlike the NSP, the new campaign would target commercial buildings in
additional to residential. It also would make funding available to for-profit
entities. The program, which needs to be passed by Congress, could
ultimately be used in conjunction with the administration’s related push to rent out some foreclosed and vacant
Mr. Donovan said that two-thirds of communities that have participated in the
Neighborhood Stabilization Program have seen their property values stabilize
relative to surrounding areas.
Article courtesy of Wall Street Journal