NSP Termination Act

This bill would have rescinded the third round of funding for the Neighborhood Stabilization Program (NSP) and terminated the program.[1] NSP, a Department of Housing and Urban Development program, was created to stabilize communities that have suffered from foreclosures and abandonment.[2] The program seeks to achieve this goal by providing grants to purchase and redevelop foreclosed and abandoned homes and residential properties.[3]

NSP grantees include state and local governments, as well as nonprofit developers.[4] These grantees develop their own programs and funding priorities, but at least 25 percent of the funds appropriated for the purchase and redevelopment of abandoned or foreclosed properties must be used to house individuals or families whose incomes do not exceed 50 percent of area median income.[5] Additionally, NSP grantees activities must benefit low- and moderate-income individuals whose income does not exceed 120 percent of the area median income.[6]

The types of activities that NSP funds may be used for include: the establishment of financing mechanisms for the purchase and redevelopment of foreclosed homes and residential properties; the purchase and rehabilitation of abandoned or foreclosed homes and residential properties; the establishment of land banks for foreclosed homes; the demolition of blighted structures; and the redevelopment of demolished or vacant properties.[7]

Rescission of the third round of funding for NSP would have amounted to a cut of $1 billion.[8] The first two rounds of NSP funding impacted an estimated 80,000 foreclosed, abandoned, or vacant properties.[9] Cutting the third round of funding would have impacted tens of thousands more.[10] At the time the bill was proposed, it was estimated that this third round of funding also would have benefitted at least 6,000 households through purchase, rehabilitation, or new construction; and approximately 3,000 households would have benefitted from direct homeownership assistance.[11] Terminating the program in the middle of the 2011 foreclosure crisis would have harmed low-income neighborhoods already in distress and further slowed the recovery of the housing market.[12]

The House passed the bill, but the Senate did not vote on it.[13]

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