Rich Pedroncelli/AP
A foreclosed home for sale in Sacramento, Calif. 

Can States Bring Affordable Housing to Another Level?

October 02, 2008 08:58 AM
by Sarah Amandolare
Los Angeles plans to raise $5 billion for affordable housing, shedding light on important concerns for other states struggling to cope with foreclosed properties.

Complications of Affordable Housing

On the heels of the national financial crisis, Los Angeles Mayor Antonio Villaraigosa has announced an ambitious plan to enhance the city’s affordable housing. Over the next five years, the mayor hopes to provide 20,000 additional affordable homes, at a total price tag of $5 billion, reports the Associated Press in an article published in BusinessWeek.

The project will be funded by “a combination of philanthropists, private lenders and government grants,” and already has backing from one investor, as well as a $33 million federal grant, according to the AP.

Aside from funding, the plan raises two issues relevant to California, as well as to other states attempting to convert foreclosures into affordable housing: where the affordable housing will be built, and whether local governments are equipped to put the plan into effect.

Last August, the Los Angeles Times reported on a congressional program that will distribute $4 billion to local governments “to buy, repair and resell homes lost to foreclosure,” which was included in President Bush’s July 2008 housing market rescue bill.

According to the Times, “California communities with the most foreclosures—and therefore likely first in line for federal aid—already have a relatively ample supply of affordable housing.” Furthermore, most of the foreclosure-riddled counties told the Times they “wondered whether they even had the staff to make use of the funding.” Some also suggested that Congress was trying to show concern for the crisis, instead of “finding an effective solution.”

Connecticut faces a similar situation, according to Hartford Courant writer Erin Boggs. While the federal government’s rescue plan will help the state buy back foreclosed homes and resell them at a more affordable price, Boggs wonders whether Connecticut will focus only on buying back foreclosed properties “in struggling racially segregated urban areas and convert them into housing for the poorest of the poor.”
Connecticut’s Fair Housing Center is currently evaluating the state’s distribution of foreclosures to determine whether most are in low-income areas. The study could show that foreclosed properties are present across economic lines, allowing the state to put federal funding toward buying back and converting properties in higher-income, higher-opportunity areas.

“If done right, the real silver lining to the foreclosure crisis might not be just the creation of affordable housing, but the first step toward undoing decades of governmental and privately sponsored discrimination,” Boggs writes.

Background: Housing and Economic Recovery Act

On July 30, 2008, President Bush signed the Housing and Economic Recovery Act aimed at bolstering the housing market, and providing a boost to mortgage companies Fannie Mae and Freddie Mac, reported CNN Money.

Included in the bill are two affordable housing provisions: an affordable housing “trust fund” that will be financed by Fannie Mae and Freddie Mac, and $4 billion in grants for states to buy and rehabilitate foreclosed properties, which was initially opposed by the White House, according to CNN Money.

Related Topic: From foreclosed to affordable

Reference Material: The Los Angeles Plan


Most Recent Beyond The Headlines