Federal stimulus to local cities to aid only a few homes

In an attempt to help neighborhoods hit hardest by foreclosure, three South Hampton Roads cities will receive more than $4.5 million in federal money to buy and rehabilitate vacant houses.

But because of constraints that the state placed on the money, several local leaders said Monday that the help may not reach the region's most distressed neighborhoods or save that many houses.

They said they are happy to receive the money, but it will help them turn around only a handful of foreclosed houses because the state placed a $25,000 cap on how much can be spent on renovations to each property.

"Really, the model is more geared toward a new suburban home where all you have to do is change the carpet and paint the walls," said Ron Williams, special assistant to Norfolk's city manager. "The more we got into the application, the more we saw that it was a very narrow focus on the type of property we could do here. We chose where we thought we could have some impact."

Gov. Timothy M. Kaine announced the state's plans Monday to distribute about $17.5 million in neighborhood stabilization money. There are about 16,000 foreclosed and vacant houses across Virginia, according to his office.

Nearly 3,800 homes in Norfolk, Portsmouth, Suffolk, Chesapeake and Virginia Beach are in foreclosure, according to RealtyTrac, an online foreclosure-monitoring service based in Irvine, Calif.

Virginia received the federal funds - a total of about $38 million - to address vacant and foreclosed housing last year. At the time, state leaders were told they could devise their own plans for how best to dole out the money to communities in need. So far, Virginia has distributed about two-thirds of the federal money. The state plans to accept another round of proposals from localities next month before it dispenses additional dollars.

While Norfolk's Olde Huntersville, Lindenwood and Park Place all met resident income and foreclosure criteria, the older homes there would have cost far more to rehabilitate than the $25,000 per house limit the state allows, Williams said. He said the average cost of renovations needed in those neighborhoods ranges from $40,000 to $60,000.

So instead, city officials decided to concentrate Norfolk's nearly $1.8 million share on rehabilitating and selling a dozen houses in Fairmount Park and Ballentine Place because they had a better chance of success there, according to a report presented to the City Council earlier this year.

Suffolk leaders said they plan to spend their $971,000 to purchase foreclosed properties along Oak and Wilson streets downtown.

Portsmouth will receive $2 million for similar work in Prentis Park, Cradock and Westhaven Park.

Westhaven Park - a quiet, stable neighborhood that rarely gets the redevelopment attention devoted to other areas - surprised officials when a section of it met guidelines that required a foreclosure rate of 10 percent, said Kathy Warren, development director for the Portsmouth Redevelopment and Housing Authority.

The city in February identified a handful of vacant homes there that it will now try to purchase and sell to new homeowners.

"When you have these properties sit vacant, it just adds to the decline of a neighborhood," Warren said. "If we can get people back in the home, where they're taking a stake in the community, we've achieved our goal."

The empty houses, most of which are owned by banks, will be purchased at a sales price lower than the assessed value, fixed up and sold to low- and moderate-income families in accordance with the federal program.

Chesapeake and Virginia Beach have not yet applied for neighborhood stabilization funding, but officials in both cities said they plan to ask for money during the next round of funding July 1.

Chesapeake plans to ask for $2 million to focus on areas of South Norfolk and the upper Western Branch, said Alisa Winston, the city's housing program coordinator.

The Virginia Beach Community Development Corporation, a nonprofit agency that works to provide low- to moderate-income housing, plans to apply for $1.5 million in aid in July, executive director Mary Kay Horoszewski said. She said she hopes the money will help with the rehab and sale of at least a half-dozen houses.

"That's not a lot, but it's better than nothing," she said.

Kaine also announced Monday that $2 million will go to the city of Hampton and $700,000 to Newport News.

Meghan Hoyer, (757) 446-2293, meghan.hoyer@pilotonline.com