Atlanta Foreclosure Homes Worsening as Federal Funds Dry Up
Atlanta Foreclosure Homes Worsening as Federal Funds Dry Up
The number of Atlanta foreclosure homes is expected to rise in the coming months as numerous low-cost apartment projects were stalled or completely stopped due to lack of funding.
According to industry experts, the slash in federal funds will severely affect low-income renters in small cities and rural towns in Georgia. Nationwide, the funds to build affordable apartments have declined by over 50 percent to $4 billion in the span of two years.
Experts said that hundreds of construction projects failed to push through because the tax credits provided by the federal government to help in the development costs are not benefitting traditional investors.
In Georgia, the funds helped an average of 30 projects per year. These projects use federal tax credits amounting to about $20 million. So far, nine deals were completed last year and none in 2009.
Industry experts said that since the recession and the subsequent collapse of the housing market, everything has been totally upside down. And they feared that if the rising unemployment could not be contained soon, more Atlanta foreclosure homes would be put on the market.
Meanwhile, for almost 20 years, the federal government has been subsidizing low-income apartment developments by utilizing a special tax credit. Each year, the government divides these tax credits and distributes them to states.
Upon receipt of funds, local housing authorities will then review applications from various developers and distribute the credits. The credits will then be sold to investors in order to raise funds for construction.
The banking industry and government-sponsored enterprises, Federal Home Loan Mortgage Corp. and Federal National Mortgage Association were the largest investors. But the problem is, billions of money were lost by these companies.
When the federal government seized control of the two government-sponsored enterprises, they exited the market, taking away about 40 percent of funds entitled for the development of low-income housing.
Meanwhile, national banks have reduced their funding and focused their investments on areas required for compliance under the community reinvestment laws, such as Los Angeles, California and New York.
Regions located in the Midwest and South lack incentives resulting to stalled and failed projects. Georgia plans to use the federal funds to finance projects to help alleviate the foreclosure problem in the state, such as redeveloping foreclosed condominium and hotel projects and converting them to houses that are affordable.