October 19, 2010

HUD has released its Notice of Formula Allocations and Program Requirements for Neighborhood Stabilization Program (NSP) Formula Grants. This Notice provides information on state and local allocations and program requirements for the additional $1 billion Congress provided for NSP this July in the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Funds are allocated to states and units of local government based on funding formulas established by the HUD Secretary in accordance with the Housing and Economic Recovery Act of 2008 (HERA); which created NSP. HUD is generally treating NSP 3 funds as a special allocation of FY 2010 Community Development Block Grant (CDBG) funding. States will receive a minimum allocation of $5 million.

Applications for the allocation amounts are due to HUD by March 1, 2011. HUD is treating state grantees’ use of its NSP grant as a substantial amendment to its current consolidated plan and 2010 annual action plan. Jurisdictions may cooperate to carry out their grant programs through a joint request to HUD.

NSP 3 grantees must expend 50 percent of their grants within two years and 100 percent of their grants within three years. HUD will consider allocations granted upon HUD signing the NSP grant agreement.

The Notice specifies that only NSP 1 funds may be used to redevelop acquired property for nonresidential uses. NSP 2 and NSP 3 funds used for redevelopment must be used for housing. No NSP 2 or NSP 3 funds may be used to demolish public housing. No more than 10 percent of a grant may be used for demolition activities without a waiver from HUD.

For NSP 3, HUD is requiring that all gut rehabilitation or new construction of residential buildings up to three stories be designed to meet the standard for Energy Star Qualified New Homes. All gut rehabilitation or new construction of mid- or high-rise multifamily housing must meet the Energy Star standard for multifamily buildings piloted by the Environmental Protection Agency and the Department of Energy.

The Dodd-Frank Act requires that NSP 3 grantees establish procedures to create preferences for the development of affordable rental housing for properties assisted with NSP 3 funds. It also requires grantees, to the maximum extent feasible, provide for the hiring of employees who reside in the vicinity of projects funded by NSP 3 or contract with small businesses owned and operated by persons residing in the vicinity of such projects.

NSP 3 grantees will be required to comply with Federal Funding Accountability and Transparency Act (FFATA) requirements. HUD will issue additional guidance on complying with FFATA.