WASHINGTON, D.C. – August 6, 2015 – (RealEstateRama) — THDA is launching a new $6 million program to combat blight by transforming eligible homes into green spaces.
At a media conference Wednesday morning, August 5, 2015, THDA Executive Director Ralph M. Perrey and Memphis Mayor A C Wharton jointly announced the Blight Elimination Program (BEP). Under the program, qualified nonprofits will receive forgivable loans to acquire abandoned homes out of foreclosure, demolish them, and transform the property into a community park, affordable housing, or other beneficial public function.
“The scars of the housing crisis are deep and clear to see in neighborhoods all across the state,” said Perrey. “We have families with children living beside empty, dangerous, uncared-for homes. It’s a health and safety issue, and a quality of life issue, and an economic issue for everyone in the community.”
“These properties are more than just an eyesore. They hurt entire neighborhoods by bringing down property values, scaring off new development, attracting criminal activity, and creating breeding grounds of rodents and other pests,” said Mayor Wharton.
Nonprofit organizations with a history of successful construction and housing development activities can apply for BEP loans up to $25,000 starting November 1, 2015. Applications must demonstrate a clear, specific plan for the acquisition, demolition, and transformation of an eligible property, including all expenses and a list of licensed, bonded, and insured contractors and subcontractors.
To ensure the program serves those areas hardest hit with blight and will in turn help to stabilize home values, homes must meet specific criteria. Following U.S. Treasury guidelines, the funds will be invested in targeted areas that are identified by high vacancy, a minimum percentage of owner-occupied single family homes, and other factors.
“On the rare opportunities we get to initiate new programs, we make sure every dollar is being used for a specific purpose that will benefit not only individual families and neighborhoods but also the Tennessee economy as a whole,” said Perrey. “We anticipate much of the funding to be put to work in Memphis. This is something we’ve been discussing with Mayor Wharton and his office for a couple of years, and we know it’s been a priority for them.”
Perrey and Wharton announced the program in front of a home on Lounette Street in the Fairlawn neighborhood near Lamar Avenue and I-240, one of several areas throughout Tennessee that will be eligible for BEP funds.
Funding for BEP loans is a two-phase process.
First, THDA will issue a short-term “Phase 1” loan with a zero percent interest rate to the nonprofit to provide immediate cash-on-hand to acquire, demolish, and transform the property. THDA has set aside $1 million for these loans.
Once transformation of the property is complete and verified, the U.S. Department of Treasury will authorize THDA to issue a “Phase 2” loan. These loans allow the nonprofit to immediately pay off the “Phase 1” loan so that THDA can reissue its funds to other nonprofits for other properties under the BEP plan.
Funding for “Phase 2” loans will come from the foreclosure prevention program, the Hardest Hit Fund. THDA assisted Tennessee homeowners with more than $193 million in federally funded loans to prevent foreclosures. As households’ circumstances improved or changed, that money was “recaptured.” These recaptured funds are earmarked for this program.
Nonprofits are required to maintain the transformed property for three years, at which point the “Phase 2” loan will be completely forgiven (at 33.3 percent per year), or it may be forgiven earlier if affordable housing is built on the lot.
The U.S. Department of Treasury anticipates all of the $6 million in recaptured federal funds will be invested in “Phase 2” loans by December 31, 2017. Therefore, THDA anticipates full repayment of its $1 million investment by the end of the first quarter of 2018. THDA is an independently funded state agency, and therefore no state tax dollars are required for the blight elimination program.
