Neighborhood Stabilization Program

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The $7 billion federal Neighborhood Stabilization Program (NSP), administered by the U.S. Department of Housing and Urban Development (HUD), was designed to aid in the purchase of foreclosed or abandoned homes to rehabilitate, resell, or redevelop these homes in order to stabilize neighborhoods and stem the decline of house values of neighboring homes.

NSP funds can be used for:

  • Establishing financing mechanisms for purchase and redevelopment of foreclosed homes including soft-seconds, loan loss reserves, and shared-equity loans for low- and moderate-income homebuyers;
  • Purchasing and rehabilitating properties that have been abandoned or foreclosed. Rehab may include improvements to increase energy efficiency or provide a renewable energy source;
  • Establishing land banks for homes that have been foreclosed;
  • Demolishing blighted structures; and/or
  • Redeveloping demolished or vacant properties.

Funds cannot be used for the following:

  • Those activities ineligible under Community Development Block Grant (CDBG) are ineligible under NSP (generally);
  • Foreclosure prevention;
  • Demolition of non-blighted structures; and
  • Purchase of properties not abandoned or foreclosed upon.

The Neighborhood Stabilization Program has three specific targeting responsibilities for how funds may be used.

  • All funds must go towards programs that serve individuals and families whose income does not exceed 120% of area median income;
  • At least 25% of the funds must be used for the purchase and redevelopment of abandoned, foreclosed or vacant homes or residential properties that will be used to house individuals and families whose incomes are less than 50% of area median income;
  • Jurisdictions that receive NSP funds must give priority emphasis to the areas of greatest need within their states, including those:
    • Areas with the greatest percentage of foreclosures,
    • Areas with the highest percentage of homes financed by subprime mortgage related loans, and
    • Areas identified as likely to face a significant rise in the rate of home foreclosures.

In Michigan, $263.6 million was awarded in NSP 1 funds to MSHDA and twenty-one select counties and cities with MSHDA receiving $98.7 million, Detroit receiving $47.1 million, Wayne County receiving $25.9 million, Oakland County receiving $17.4 million, and the rest spread throughout the state. Find a full report of NSP 1 allocations in Michigan(.xls). For NSP 2 funds, the MSHDA and a consortium of twelve cities and eight land banks received $223.9 million – the largest single award in the country.

As of this writing, there have been three rounds of Neighborhood Stabilization Program funding. A detailed description of NSP is available on both the Stable Communities website, and HUD’s site.

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