Posted On: September 12, 2019
It was a lifeline and a ray of desperately needed hope during a time of financial calamity – a time when for many, jobs and homes were being lost to the Great Recession and hope was in short supply. But the help in the form of a massive housing and economic recovery program came with a lot of questions and even more skepticism. Would it work? Could Volusia County pull it off? And was it even a proper role for local government to get into the real estate market?
Now a decade later, Volusia County’s Neighborhood Stabilization Program succeeded beyond anyone’s expectations. In a highly unusual and unconventional undertaking for government at the time, the county bought vacant houses that had been foreclosed on by banks, got them fixed up and then resold the houses to qualified, mostly low-income buyers who met the program’s criteria and guidelines. Because of the initiative and the federal dollars that funded it, nearly 100 Volusia County families – some that were hanging by a fiscal thread and on the verge of being in the streets – instead have the pride, the comfort and the security that comes with homeownership, of having a place to call their own.
“Our program has been very successful,” said Dona Butler, Volusia’s Community Services director. To one extremely appreciative mother, the Neighborhood Stabilization Program has been nothing less than a “Godsend.”
But it wasn’t easy, not for the Volusia County Council that voted for the program despite lingering doubts and not for county staff who had the challenge of putting the multimillion dollar program into action.
One former County Council member, Josh Wagner, voted for the program, but flat out predicted failure. “I don’t think it’s going to work,” Wagner said at the time. “It’s going to be insane. Good luck to all of you.”
Another former Council Member, Pat Northey, had her doubts. “It certainly is a program that is needed to get some people back into home ownership,” said Northey just prior to the council’s unanimous vote to approve the program. “But boy, I’m not sure I like the idea of the county getting into the real estate business. I just don’t know that that’s one of our roles.”
Butler will be the first to tell you that even some on staff – herself included – weren’t sure. “We agreed with you,” Butler told the County Council a couple of years ago when the Neighborhood Stabilization Program was being discussed again. “We weren’t sure it could happen either.”
But it did. To everyone’s elation, the county proved the skeptics wrong.
It all started in 2008. Volusia County – like the rest of the nation – was in the grips of this country’s worst economic crisis since the Great Depression. The unemployment rate was swelling; people were losing their jobs and homes at an alarming rate; and the construction, housing and mortgage markets were in free-fall.
In the midst of the financial chaos, along came a program that offered millions of dollars in federal grants to help economically challenged communities that were hardest hit by the financial collapse. It promised to uplift blighted neighborhoods, spur economic growth and combat homelessness by providing homeownership opportunities to income-eligible families in areas most heavily impacted by the mortgage meltdown.
Pursuant to the federal Housing and Economic Recovery Act of 2008, Volusia County was in line to receive $5.2 million. Three years later, in 2011, the county was offered another $3.67 million to fund its Neighborhood Stabilization Program. As it turns out, because of all the economic suffering, qualifying for the grants was the easy part for the county. Numerous hurdles, though, were encountered while creating and executing the implementation plan for spending the money.
“There was a lot of pressure,” recalled Paula Szabo, housing and grants planner for Volusia County Community Assistance.
Szabo should know. She has worked for Community Assistance since before the Great Recession of 2007-09 and the subsequent inception of the Neighborhood Stabilization Program. She, along with Housing and Grants Administrator Diana Phillips, are responsible for administering the program for Community Assistance.
“Builders were impacted by the Great Recession,” said Szabo. “Communities were impacted. Families were impacted. Our goal was to utilize these federal recovery funds to target the areas of greatest need.”
A portion of the $8.9 million in federal grants the county received was earmarked for demolishing blighted, abandoned buildings and also for working with nonprofit agencies to increase the availability of low-income rental properties. These were traditional government functions and nothing new. But the portion of the program that put the county into the business of buying, rehabilitating and then reselling homes caught everyone’s attention because it was new and unfamiliar territory for local government. One feature of the program required that any proceeds generated by the program be put right back into it. As a result, the program’s budget so far has totaled about $14.3 million. And a big chunk of it – nearly $7.1 million – has gone into buying, rehabbing and reselling houses.
The goal was for the county to acquire, fix up and resell vacant, foreclosed houses to prevent them from remaining abandoned eyesores and blights on neighborhoods. In essence, the county became the realtor of last resort for low-income and moderate-income buyers. Every detail of the program was heavily scrutinized. County officials used census tracts and federal data to isolate the areas of Volusia that were most significantly impacted by the mortgage and foreclosure crisis. Then, they identified vacant, foreclosed, bank-owned houses in those target areas that they thought were worth looking at. The list was narrowed based upon several factors, such as the condition of the house, the amount of fix-up work that would be required and its potential for re-sale. Just like any buyer, the county had to do everything from conducting appraisals and inspections to researching titles and making sure the houses didn’t contain any lead-based paint.
The county commissioned contractors to do the repair and rehabilitation work and realtors to help sell the houses once they were fixed up. According to program criteria, the county was prohibited from selling the houses for any more than the total investment in the purchase and rehabilitation. And the sales price couldn’t exceed $189,000. In addition to getting a good deal, buyers who qualified for the program also received financial assistance from the county. They had to qualify for a first mortgage, but then the county utilized federal grant funds to do a soft second mortgage of up to $40,000 to make up the difference. If the new buyer resells the house within the first 15 years, they have to repay the county for the second mortgage. Otherwise, it’s forgiven.
Another feature of the program requires people who buy a house from the county and subsequently resell it for more than they paid to share the profits with the county. About seven of the houses sold by the county have been subsequently resold. All that money, along with the money the county receives from the lender that finances the first mortgage, gets recycled back into the program and put toward the purchase of more houses.
In yet another innovative feature of the program, Community Assistance partnered on the projects with the county’s Environmental Management Division – which had received grant funds to support installation of energy-efficient housing features. Using those grant funds, many of the rehabilitation jobs on the houses the county purchased included installation of such things as energy-efficient windows and air conditioning units and added insulation. This had the dual benefit of helping the environment and making homeownership more affordable for lower-income residents by reducing their energy bills. And in addition to the program helping buyers and blight, the county’s rehab projects to get the houses ready for sale proved to be a financial pick-me-up for contractors who were hurting for business during the economic downturn.
“It was some very exciting stuff that we were doing,” said Phillips. “It has been extremely rewarding.”
But there were some significant challenges along the way. For starters, once word of the neighborhood assistance program got out, officials were flooded with calls from people who were struggling to make their mortgage payments or just beginning the foreclosure process and looking for help. The program, however, only applied to houses that were already vacant, foreclosed and owned by a bank. The next challenge was figuring out how to make deals with banks and realtors who were more accustomed to working with nimble buyers who could act quickly and make immediate decisions without having to jump through governmental hoops and added layers of approval.
In response, the county streamlined its process so every decision didn’t have to come back to the County Council for approval. But Volusia County wasn’t the only agency struggling with the challenges of competing with the open market, as other city, county and state governments throughout the country receiving the federal recovery grant funds were also learning on the fly how to navigate the process. In 2008, help arrived when a nonprofit group called the National Community Stabilization Trust sprang up to act as a middle man and assist governments in negotiating with the big banks that were holding the foreclosed properties.
With the challenges overcome and the program humming along, the county resold its first house in April 2011 – a 1,532-square-foot, three-bedroom, two-bath home on Victory Palm Drive in Edgewater that went for $91,000.
The county now has one house on Dubs Drive in Holly Hill getting ready to go to closing and another on Mango Tree Drive in Edgewater undergoing rehab work – the 95th and 96th houses purchased under the program. The majority of the houses are in Orange City, Edgewater, DeLand and Holly Hill.
Szabo, who has attended many of the closings over the years with the buyers, said each home elicits mixed emotions. Every one represents a sad story about someone losing their home to financial distress. Yet if not for the county’s involvement, the vacated houses likely would have been gobbled up by investors motivated by profit.
“Instead, it’s going to be a new home for a family,” said Szabo. “That part of it feels really good.”
Just ask Christine Miller. Several years ago, Miller had fallen on hard times, and she and her two sons were living with her mother. Her family had moved around a bit, and her boys had gone to several different schools along the way. But Miller was looking for a place to call her own and a secure, stable environment to continue raising her sons. And she was looking for help to make it happen. Her research led her to the county’s Neighborhood Stabilization Program. In January 2013, Miller’s dream became reality when she moved into one of the county’s houses – a 1,455-square-foot, three-bedroom, two-bath home in Edgewater that she bought for $89,910. An elated Miller can’t say enough good about the county program and how thankful she is that it was there to assist her and her family at a time when they needed the help.
“I was desperate,” said Miller. “I was looking for a place where my sons could finish growing up. When I found this program, I was just overwhelmed. I felt like I had won the lottery.”
In its day, the program became so popular that on a few occasions there were multiple interested buyers vying for the same house. There were no bidding wars, though. The county simply employed a sort of lottery system to decide which interested buyer would get the house.
“I remember one time flipping a coin,” said Phillips. “Both people were at the table, and we just flipped a coin.”
A decade later, the Neighborhood Stabilization Program is facing its latest challenge. And this one is a good one. With most of the funds spent and the improved economy resulting in fewer and fewer foreclosures, the county is getting ready to wind down the program. But with money coming in from recent sales, there’s still some funds left in the account to spend. So Community Assistance came up with a brand new strategy – and another first for the county. They’re now building some brand new homes on vacant, surplus lots in the county’s property inventory. Once finished, the houses will be available for purchase by income-eligible, first-time homebuyers. Just like the refurbished houses, these are also located in the program’s economically depressed target areas.
In August 2018, the County Council awarded a $668,643 contract to a DeLand builder for the design and construction of the first four new homes – three in Orange City and one in DeLand. Two of the houses have been completed and are awaiting buyers, the site work is under way for a third house, and the fourth one is in the pre-development phase.
With about $528,000 left in the account, the county plans to build three more new homes before officially closing out the program for good. When it does come to an end, Volusia’s Neighborhood Stabilization Program will leave behind a lasting legacy of helping to save neighborhoods and lives all across the county – lives just like the Millers.
“It’s been a wonderful program,” said Miller. “My sons and I wouldn’t have been able to get into a house of our own without it. It was an absolute Godsend.”