In the next several months, billions of dollars will start flowing into communities hard hit by foreclosures.

Neighborhood Stabilization Program (NSP) funds will be used to purchase and rehabilitate foreclosed or abandoned properties, redevelop sites, demolish blighted structures, and provide homebuyer financing.

A good bulk of NSP activities could begin in the next three to six months, said Amanda Sheldon, research and policy analyst at Enterprise Community Partners, Inc.

Shaun Donovan, secretary of the Department of Housing and Urban Development, was in Los Angeles on Wednesday to tour some of the first foreclosed homes the city is buying under the NSP. Other cities are also doing their rescue efforts using the federal aid.

Enterprise has undertaken one of the first studies of the new program that is funded with $3.9 billion from the Housing and Economic Recovery Act of 2008. The 306 state and local governments that received a direct NSP allocation were required to write action plans detailing how they would use the funds to stabilize struggling communities.

Enterprise looked at 87 of those plans to see how the funds will be used and to identify promising strategies. The plans reviewed account for $2.3 billion, of 58 percent of the national allocation.

Sheldon and others discussed their findings during an online discussion Thursday. Approximately 350 people joined the meeting, demonstrating the depth of interest in the program.

Researchers found that the majority of funds, 56 percent, are going toward purchasing and rehabilitating foreclosed or abandoned properties. NSP will also pay for homebuyer finance, 21 percent; property redevelopment, 13 percent; blight structure demolition, 6 percent; and land banks, 4 percent.

Enterprise estimates that the first round of NSP will serve 77,509 total units across its five eligible uses, and that’s a conservative calculation.

It’s important to note that all housing units assisted with NSP funds must benefit households earning no more than 120 percent of the area median income (AMI). At least 25 percent of each jurisdiction’s allocation must be used to create housing for very low-income households, with incomes no more than 50 percent of the AMI.

Eighty-one percent of the grantees plan to leverage their NSP dollars with other sources. While 41 percent said they plan to leverage private investments, 14 percent cited plans to seek low-income housing tax credits (LIHTCs). The credits have been a key source of financing for affordable housing over the past 20 years, but the LIHTC market has stalled in the past year amid the overall economic troubles.

The study identifies a number of promising strategies that will be deployed by states and local governments to aid their struggling neighborhoods. Many communities are looking to put NSP funds into LIHTC projects in order to increase the ability of these projects to attract private dollars and move forward, said the report, noting that NSP is one source to fill the financing gaps. For example, Detroit is considering using NSP money to help ready-to-go LIHTC projects that have a financing gap as a result of lower tax credit prices.

 Because homeownership will not be realistic for many families, many action plans call for creating rental housing, especially to meet the NSP’s 25 percent low-income requirement. Ohio is looking at using NSP funds for rental housing, including acquisitions in rural communities. New York City is also looking at buying abandoned rental properties that have tenants living in them.

The efforts that will be supported by NSP are seen as the first steps in addressing declining neighborhoods.

The report, The Challenge of Foreclosed Properties: An Analysis of State and Local Plans to use the Neighborhood Stabilization Program, can be found at