Evaluating the 602 Nonprofit Disposition Program

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In the 602 Nonprofit Disposition Program, authorized by the National Housing Act, HUD sells foreclosed single-family homes at a deep discount from the appraised value to nonprofit organizations or local government entities. These agencies then repair and resell the homes at below-market prices to low- and moderate-income buyers.

The nonprofit or local government that works with HUD to put these homes back into circulation must define an Asset Control Area (ACA) within which to locate the project. The ACA has to coincide with or overlap with a HUD-designated revitalization area. Revitalization areas, selected by HUD in consultation with local officials around the country, are targets for extra economic and community development resources. Such areas tend to be identified with very low median household incomes, high mortgage default or foreclosure rates, and low homeownership rates.

Homes sold under the 602 Nonprofit Disposition Program provide affordable housing and help to stabilize neighborhoods.

ACAs stand to benefit from the 602 Program, in that the rehabilitated homes are expected to revitalize and stabilize neighborhoods, while reducing the number of foreclosures in the area. Prospective homebuyers benefit by being able to obtain affordable housing near their workplaces, which means less strain on workers’ time and budgets, and the community experiences fewer problems with traffic and suburban sprawl.

The participating agency, keeping its organizational capacity to repair and sell properties in mind, negotiates with HUD to settle on the number of properties it will rehabilitate during the contract year. In preparation, it is necessary to arrange financing for acquisition and repair, have contractors readily available to make repairs, and have marketing plans in place to ensure that the purchased properties will be renovated and sold within mutually agreed-upon timeframes.

Once a property is made available by HUD, the agency details the needed repairs, projects costs, makes the purchase, and proceeds with rehab and resale. After the rehabbed property goes on the market at a discount, offers from police officers and teachers who are participating in the respective Officer Next Door and Teacher Next Door programs receive priority during the first five days it is listed. Another provision of the 602 Program mandates that purchasers of renovated homes complete homebuyer counseling.

The 602 Program opens doors to affordable homeownership for low- and moderate-income individuals and families.

Optimal Solutions Group, LLC and Abt Associates, Inc. have jointly worked on a strategy that HUD can use to evaluate the 602 Program. They visited three of seven program sites operational in June 2005 to discover how participating agencies were implementing their projects and to develop recommendations for a long-term evaluation strategy for 602 programs. These findings and the recommended evaluation strategy resulting from site visits to 602 Program projects in Salt Lake City, Utah; Baltimore, Maryland; and Rochester, New York are reported in Assessment of the 602 Nonprofit Disposition Program, which can be downloaded free of charge at www.huduser.org/ publications/commdevl/602assessment.html.

This table taken from Assessment of the 602 Nonprofit Disposition Program, p. 5, shows that the three sites visited would rehab and sell over 600 homes under existing ACA contracts.

ACA = Asset Control Area.
Source: ACA agreements and progress reports submitted by ACA Program participants