One of the emerging issues about the Neighborhood Stabilization Grants is their focus on helping urban areas.

In North Carolina, the list of community development block grant entitlement areas (CDBG EA’s) are exclusively limited to urban areas.  Most are in the Interstate 85 corridor that runs from Charlotte to Raleigh.  Winston-Salem, outside of that area but still nearby, is also included.

North Carolina is largely a rural state.  The Rural Center holds that 85 of the state’s 100 counties are rural.  Rural and urban divide the state.  While the urban areas are the home to our state’s banking, biotech, and research industries, the rural areas are where the legacy of furniture, tobacco, and textile economies can be most keenly felt.

The logic of some of the NSP grants is that groups will be able to find pockets of foreclosures.  In these pockets, concerted action to improve properties will allow investment to capture its own externalities.  That’s possibly true, but it makes things harder in rural areas.

Strategies that would focus on flipping are also less suitable for rural areas.  Remember that rural areas are places with economies are a distinctly less optimistic trajectory.  Accordingly, housing prices are depressed.  There was not a lot of new housing construction in rural areas, even before the foreclosure crisis, because housing prices could not match replacement costs.

The North Carolina Division of Community Assistance held a meeting yesterday in Greensboro to help cities, counties, and non-profits with their NSP applications.  The NSP is a federal program, administered through HUD, that enjoins these groups to fight the foreclosure crisis in their communities.  HUD has allocated $3.92 billion.  Approximately $57 million will go to North Carolina, including $12 million for non-profits.

What is emerging is that in North Carolina, the NSP will be designed in such a way that only a narrow set of strategies can qualify.

The criteria are especially daunting for non-profits.  There will be no land banking, for example.  This is one of the ideas supported by one of North Carolina’s largest non-profit housing developers and credit unions, Self-Help.

[polldaddy poll=1062393]  Moreover, all funds must be recaptured.  What does that mean?  Well, if DCA grants a county $200,000 to do infill redevelopment of blighted property, the following scenario would emerge:  The county might partner with a non-profit on redevelopment.  Say the property was made into a multifamily rental and resold for $225,000.  The non-profit would be able to take its costs of management out, but it would have to return what was left of the $225,000 after those costs.

Last, non-profits have to meet more stringent tests for population served.  The HUD regs are written to require that at least half of all residents served by any grant are at incomes at or below 50 percent of area median income.  That is a tough test, all by itself.  It pretty much guarantees that most projects are going to be for rental housing.

Non-profits in North Carolina will have to go one more step.  100 percent of residents in non-profit projects must have incomes at or below 50 percent of AMI.

Last, although anyone is eligible, it looks like only twelve counties are “competitive.”  All twelve are east of Winston-Salem.  Folks from Buncombe County were not happy when they heard about that at yesterday’s meeting.

It seems likely that the NSP in North Carolina is going to be have requirements that make it most amenable for supportive housing.