Federal foreclosure-purchase program may fall flat in California
The $4-billion plan may hurt homeowners in the state who are trying to sell. Several county governments are unsure whether they have the staff to make use of the funding.
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.
