PrintPrintAbout 100 homes in the Charleston area now under bank ownership as a result of foreclosure will become affordable housing stock through a federal program directing $7.4 million here. The money comes through the new Neighborhood Stabilization Program, created to prevent home values from plummeting in neighborhoods where clusters of homes in foreclosure sit vacant.
By Ashley Fletcher Frampton
aframpton@scbiznews.com
Published April 13, 2009
About 100 homes in the Charleston area now under bank ownership as a result of foreclosure will become affordable housing stock through a federal program directing $7.4 million here.
The money comes through the new Neighborhood Stabilization Program, created to prevent home values from plummeting in neighborhoods where clusters of homes in foreclosure sit vacant. The homes will be purchased, then offered for sale or rent at prices that are affordable for residents earning up to 120% of the Lowcountry’s median income.
The Lowcountry Housing Trust is overseeing the program locally. The nonprofit organization’s executive director, Tammie Hoy, said the initiative differs from what many people think of as affordable housing. The homes are not older, dilapidated, inner-city dwellings; they are suburban homes built mostly within the past decade. They are in largely middle-class neighborhoods where risky home financing practices, coupled with unforeseen job losses from the fallout, have resulted in the most concentrated areas of foreclosures.
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Bidders gather outside the Charleston County courthouse during a recent foreclosure sale. (Photo/Ashley Fletcher Frampton/Staff) |
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Market impact
One hundred homes equates to nearly half of the 194 bank-owned homes now on the local real estate market, though some in the real estate industry suggest that many more homes could be in the foreclosure pipeline and headed to the market soon. As of February, 705 homes in the tri-country area were in some stage of foreclosure.
The program directs money to areas with many homes in foreclosure, not just two or three homes. But Hoy said few neighborhoods in the Lowcountry have reached a severe stage of blight and vacancy because of foreclosures.
“I don’t think that we’re seeing it hit as hard as some other states,” Hoy said.
Based on an analysis that the Lowcountry Housing Trust completed a few months ago, the geographic region with the highest number of foreclosures was the “urban core,” which includes parts of Charleston and North Charleston. The next-highest concentration was near S.C. 165 in Dorchester County.
How it works
The Lowcountry Housing Trust found out in late March it would receive $7.4 million of the $44 million in federal stimulus money sent to South Carolina for the Neighborhood Stabilization Program.
Additional money for the program was included in this year’s federal stimulus plan but will be allocated through a separate process.
The trust, which had asked the state for about $20 million, now is working to finalize plans based on the $7.4 million amount, which Hoy estimates will purchase about 100 homes.
That requires an update to the initial geographic analysis of foreclosures. The update will add homes that have more recently entered foreclosure and eliminate those that have since found buyers.
“Which is a good thing,” Hoy said. “We are glad they are being sold.”
The federal money likely will flow to local housing officials by the summer, once state officials give local plans the final OK, Hoy said.
The Lowcountry Housing Trust will allocate the $7.4 million among its partners — about half nonprofit housing groups and half for-profit companies, including builders. Those partners will buy homes, town homes or condos in seven target areas where foreclosures are clustered, repair them if necessary and resell or rent them.
Buying from the bank
Because the homes are meant to be affordable, the group and its partners cannot pay more than $228,000 for them, an amount based on the cost of living in the Charleston area, Hoy said. Another stipulation is that banks selling the homes must accept a purchase price 15% lower than appraised value.
Though sales for market value would be preferable, the program is still attractive from a bank’s perspective, said John Stokes, vice president and community development specialist for BB&T. The bank is one of several the Lowcountry Housing Trust has had initial talks with about home purchases.
The federal program brings ready buyers for bank-owned homes, an advantage in a market that has too much inventory, Stokes said. In some cases, participating housing agencies would buy several homes at once, removing them from the bank’s books, he said. He noted, however, that BB&T now owns only two houses in the Charleston metro area.
In some markets, a price 15% below appraised values might be a deal worth taking, no matter who the buyer, Stokes said. But that depends on the market and the house.
“Each property and situation is different,” Stokes said.
Affordability
About half of the $7.4 million is to be spent making rental homes available to people earning 50% of the area median income, Hoy said. The rest is for affordable housing opportunities for people earning up to 120% of the median income.
Based on 2008 data, 120% of the area median income translates to individuals earning up to $49,000 and families of four earning up to $79,000.
In some cases, families or individuals seeking to buy the homes might still require some form of down payment assistance, Hoy said. Based on the income limitations of the program, affordable home prices for participants would be roughly $150,000 to $210,000.
Hoy said the $7.4 million could ultimately go further than the estimated 100 homes because proceeds from home sales will be reinvested in more affordable housing ventures.
“We want to try to revolve the money as many times as possible,” she said.
Reach Ashley Fletcher Frampton at 843-849-3129.
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