President Obama made headlines with his jobs plan – totaling over $400 billion worth of programs, initiatives, and legislation designed to stimulate a down economy and spur employment. Not much was included in the way of housing, but one of the programs that was placed in the plan sparked some interest in the real estate industry.
A program currently titled “Project Rebuild” will spend roughly $15 billion to hire construction workers to rehabilitate vacant and abandoned foreclosed homes across the nation, especially in hard-hit areas, as a way to both bring up property values and put more people to work.
If it passes, Project Rebuild will be markedly similar to a current Obama administration initiative – the Neighborhood Stabilization Program – that already gives grants to communities to restore neglected housing.
A noticeable difference between the two is that for-profit entities will be eligible for funds with Project Rebuild, instead of only nonprofit organizations with NSP. That is a good sign for investor groups and entrepreneurs eager to receive federal money to rehab and renovate tons of properties and sell them later for a significant profit.
Assuming it passes the Republican-controlled House of Representatives – far from a sure thing in today’s political climate – will Project Rebuild actually have any meaningful impact on the housing market?
It’s hard to tell – $15 billion doesn’t seem like a lot of money in light of a foreclosure crisis that has impacted a housing market worth $22 trillion as of December, 2010. But if it is used in a cluster approach to impact specific, hard-hit areas of problem cities, like Detroit, Las Vegas, and other metropolitan areas, it could have an impact. If one assumes that the average cost to renovate a neglected home is $50,000, $15 billion could cover 300,000 homes – or a city bigger than Las Vegas.
There is also the upside potential for higher home values for non-foreclosed homes in a city or area. Such an increase could shore up local and state budgets that have been heavily in the red due to lower property tax receipts, and provide a stimulating effect on the economy.
Of course, nearly 11% of American housing was vacant as of the beginning of this year, so renovating 300,000 homes on average will not have a dramatic, game-changing impact. But, for all involved – communities, homeowners, investors, and homebuyers – the initiative seems like a step in the right direction.