States, Cities Ready to Move on Housing Aid

States, counties, and cities with high home-foreclosure rates – now poised to reap a windfall in federal aid to help them cope with the crisis – are busy laying plans for what, exactly, they will do with the money.

So far, their blueprints are as varied as the places themselves. Some plan to use the money for demolition, some for rehabbing abandoned properties. Some even envision using the one-time bonanza to try to prevent future foreclosures.

The money, $4 billion in all, is part of a larger housing rescue package that Congress approved and President Bush signed late last month. It will go to America's hardest hit communities – and even some that aren't so hard hit.

States and cities consider the funding a key to blunting the effect of foreclosures, seen in abandoned properties, inadequate rental housing, and deteriorating neighborhoods. For many locales, it will add leverage to their own efforts. Some community activists hope the money will also help to moderate home-price declines.

"For many communities impacted by homes already foreclosed on, this was viewed as the linchpin to turn the tide around," says David Berenbaum, executive vice president of the National Community Reinvestment Coalition in Washington. "It will augment state, private, and partnership funds."

Originally, the Bush administration opposed the $4 billion in block grants on grounds it would help lenders, not home-owners. Congress, however, was heavily lobbied by the US Conference of Mayors, including Miami Mayor Manny Diaz, conference president. "This piece was important to us at a time when we have declining revenues because of the economy and increasing foreclosures," Mayor Diaz said in a phone interview.

The US Department of Housing and Urban Development (HUD) is expected to unveil the rules that govern use of the money by Sept. 26. "Congress said to come up with the areas with the greatest need, to get the money where it is needed most," says Brian Sullivan, a HUD spokesman in Washington.

To determine the places most in need, Congress gave a loose definition: Look at a recipient's number and percentage of foreclosures, subprime mortgages, and defaults and delinquencies.