To Congress, it looked like a way to both ease blight and provide affordable housing: give local governments $4 billion to buy, repair and resell homes lost to foreclosure.
But the program -- included in the landmark housing bill signed by President Bush last month -- faces growing doubts among real estate experts and economists, who point out that the government will now be competing with lenders and private homeowners who have been struggling to sell in a depressed market.
What's more, an analysis by The Times shows that the California communities with the most foreclosures -- and therefore likely first in line for federal aid -- already have a relatively ample supply of affordable housing.
Of the top 12 counties in California with the highest foreclosure rates, only Sacramento County has a similarly high need for affordable housing, according to records from MDA DataQuick and the California Assn. of Realtors.
"I'm not sure this is the most cost-effective use of these funds," said Kerry Vandell, director of the Center for Real Estate at UC Irvine. "Sometimes an experiment like this is just that, an experiment. And you don't find out until later that it doesn't really work out too well."
Local governments, meanwhile, appear to have had little input into the program, even though they would play a central role in implementing it.
The Times contacted housing officials in the 12 California counties with the highest concentrations of foreclosed properties. Most of them said they had not lobbied for the bill, and several wondered whether they even had the staff to make use of the funding.
In Kern County, housing authority director Stephen Pelz thinks Congress may have been focused more on showing its concern with the foreclosure crisis than on finding an effective solution.
"There was a sense that they needed to put some money toward the problem and do that fairly quickly before the election," Pelz said. "That's probably why there wasn't as much of a consultative process as there might have been had they had more time to put something together and really vet it out."
The purchase program was a hotly contested provision of the housing bill. President Bush threatened a veto over the issue, claiming the $4 billion would be a bailout for banks and others who made bad lending decisions.
Bush dropped his opposition after Congress agreed to include a potential $25-billion safety net for mortgage giants Fannie Mae and Freddie Mac, which are federally chartered but investor owned. The bill also aims to stave off foreclosure for 400,000 or more homeowners by allowing them to refinance into low-cost government-backed loans.
The purchase program was first championed by U.S. Rep. Maxine Waters (D-Los Angeles). On a 2006 visit to Cleveland, Waters said, community activists drew her attention to neighborhoods dotted with vacant homes and foreclosure signs. Waters said she later talked with people in Riverside and San Bernardino who complained about the same thing.
"These empty homes are creating nesting places for criminals," Waters said. "Later I discovered that this was a result of the subprime meltdown."
Under the legislation, the Department of Housing and Urban Development must devise a plan by Sept. 28 to equitably distribute the funds to local governments. After purchasing the vacant homes, cities and counties would work with private nonprofit and for-profit groups to make any needed repairs and sell or rent them to low- and moderate-income home buyers.
These nonprofit groups, including the New Orleans-based Assn. of Community Organizations for Reform Now and Enterprise Community Partners in Columbia, Md., were among the provision's biggest supporters. An umbrella organization, the National Housing Conference, took out ads targeting members of Congress who were fighting the $4-billion aid package.
"ACORN's interest is in making sure that the cities that are developing plans to use this money put it to good use," said Austin King, the group's Financial Justice Center director.
But King also acknowledged that the dual problems of rising foreclosures and a lack of affordable housing cannot be easily fixed with one spending program.
In California, for example, most of the foreclosed homes are in areas such as the Central Valley, the Inland Empire and the Antelope Valley, locales known for their large stock of low-cost housing.
If anything, these areas are becoming more affordable because of foreclosures, and sales have picked up in large part because of the availability of these homes at discount prices.
"Those foreclosures are being purchased at a very rapid rate, and they are going to families who have been previously price-excluded out of the market," said Mark Boud, a consultant who runs Real Estate Economics in Irvine.
In Palmdale and Lancaster, among the state's cities with the highest percentages of foreclosed homes, Realtor Joe Mayol at Keller Williams said he's selling foreclosed homes at the rate of five a week.