Thursday, August 28, 2008

Windfall federal housing funds headed to Milwaukee

What happens when a large pot of one-time federal funding becomes available to local governments? In the case of Milwaukee County and emergency flood aid, it was the unfortunate incident outside the Coggs Human Services Center. In the case of New Orleans and federal disaster assistance, it was a slow rebuilding effort which is only now beginning to improve.

Now, the City of Milwaukee enters the fray. In the coming weeks, the City will find out just how much of the $3.97 billion allocation it stands to receive from the recent passage of H.R. 3221 - The Housing and Economic Recovery Act of 2008. The funds are to be used for the redevelopment of abandoned and foreclosed homes.

Although the allocation formula has not yet been set by the U.S. Department of Housing and Urban Development (HUD), the Enterprise Community Partners estimates that Wisconsin stands to gain $57.2 million under this provision. The City of Milwaukee can expect to receive a significant portion of that allocation.

One key stipulation on the expenditure of these funds is that "Community Development Block Grant (CDBG) regulations will govern the administration of the funds." Of course, CDBG regulations are notoriously flexible. In an ideal situation, this would be just fine because localities would be given the flexibility to craft an appropriate response to local housing conditions. However, this one-time allocation brings up a host of questions as the City of Milwaukee decides how it is going to spend its allocation:

  • Capacity - The legislation stipulates that state and local governments must use the funds within 18 months after receipt of the allocation from HUD. This begs the question: can the city come up with an effective and accountable housing program in just a few months time? If not, there is a risk of the funds not being spent or being susceptible to misuse.
  • Parochialism - Will the planning process for these funds resemble the "battle" that surrounds annual CDBG appropriations in municipalities and counties throughout the state? Or, will community-based organizations join forces with the city to jointly craft a policy that is both focused and accountable? Will outside technical assistance be needed to craft an effective policy?
  • Equity - How will this money get to the right people? How can one tell who is suffering from the crisis and who is just suffering - is there a difference? Should the program focus on rehabilitation or demolition? Should the program focus on the renovation of abandoned properties for rental or homeownership? Can policy be crafted that will not be perceived as a bailout for the banks which own many of the foreclosed properties?
  • Accountability - What will be the metrics for success? This may have to be a local requirement because CDBG regulations require minimal accountability.
  • Leveraging - Can these one-time program funds be leveraged with other public and private dollars to maximize impact? Can the funds be used to capitalize a revolving loan pool to fund the redevelopment of foreclosed homes? Can the funds be matched with dollars from area banks (after all, banks will partially benefit from this infusion of resources)?
Public policy often works best when it is implemented to prevent fires, not to put them out. The intent of this piece of legislation is laudable, but the implementation of the Title III funds will be challenging, to say the least. A collaborative and depoliticized process to plan for the expenditure of the tens of millions of CDBG dollars will be a critical factor in crafting a sound policy to deal with the fallout from the foreclosure crisis.

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