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Neighborhood Stabilization Program

Program Description

The United States Department of Housing and Urban Development’s (HUD) new Neighborhood Stabilization Program (NSP) provides grants to every state and certain local communities to purchase foreclosed or abandoned homes and to rehabilitate, resell, or redevelop these homes in an effort to stabilize neighborhoods and stem the decline of house values of neighboring homes. The program is authorized under Title III of the Housing and Economic Recovery Act of 2008.

NSP Allocation of funds:

  • $3.92 billion nationally
  • $5,439,644 Franklin County (funding is provided through HUD’s Community Development Block Grant (CDBG) program.)

Funds can be used to:

  • acquire land and property;
  • demolish or rehabilitate abandoned properties; and/or
  • offer downpayment and closing cost assistance to low- to moderate-income homebuyers (household incomes not exceed 120 percent of area median income).

In addition, these grantees can create “land banks” to assemble, temporarily manage, and dispose of vacant land for the purpose of stabilizing neighborhoods and encouraging re-use or redevelopment of urban property.

The NSP also seeks to prevent future foreclosures by requiring housing counseling for families receiving homebuyer assistance and to protect future homebuyers by requiring states and local grantees to ensure that new homebuyers under this program obtain a mortgage loan from a lender who agrees to comply with sound lending practices.

Requirements for the use of NSP funds:

  1. All of the funds made available under this section are to be used with respect to individuals and families whose incomes do not exceed 120% of area median income.
  2. Not less than 25% of these funds are to be used for the purchase and redevelopment of abandoned or foreclosed homes or residential properties that will be used to house individuals or families whose incomes do not exceed 50% of area median income.

Note: NSP redefines and supersedes the definition of “low- and moderate-income” of the CDBG program by allowing households whose incomes exceed 80% but are no greater than 120% of area median income to qualify for NSP funds. HUD will refer to this new income group as “middle income,” but continue to use the CDBG definitions of “low-income” and “moderate-income.” HUD will use the term “low-, moderate- and middle-income” (LMMI) to refer to the national objective of the program.

Find more information on the 120% of area median income requirement and the NSP grant program.