Yesterday, “Open House” introduced you to seven of fourteen principles developed by Nick Autorina, managing director, Cobb County, Georgia CDBG Program Office, for helping to successfully implement a plan under the Neighborhood Stabilization Program (NSP). Today, we explore the remaining seven maxims, which are listed below.
- When developing your business model, focus on the eligible activities under the NSP that are relevant to your jurisdiction! This eliminates unnecessary risk and prevents jurisdictions from wasting valuable time on activities that are not aligned with their business model or the expertise of their staff.
- Understand the “dimension of the problem”: As a practitioner, realize that the NSP is fraught with peril because so many factors can impact the success of your program. From understanding the public policy side of the NSP, to ensuring your jurisdiction (both politically and the general public at-large) are educated on the goals and objectives of the program to understanding the underlying factors that can negatively impact your program such as: the continuing decline of the economy, lack of available credit (for potential homebuyers), competition for acquiring potential properties from private developers, or able inventory in your jurisdiction that is simply not congruent with your business model.
- Understand risk. How will your business model “insulate” your jurisdiction in the event you cannot move your “acquired properties” to potential homebuyers? Does the jurisdiction assume the risk? Can they? Considering the economic plight most local and state governments are in at this time, does the reward justify the risk?
- Have a relevant grasp of “supply and demand” as it relates to your existing housing inventory and your business model. For example, in Cobb County, we manage the “supply”-side by allowing our Asset Management Firm [AMF] to “hold” no more than five properties at anyone time. To minimize risk, we ensure the “demand”-side is always five to 10 times greater than the supply-side to allow more “potential” home-owner clients having a legitimate interest in our program and to allow those to get the requisite HUD counseling and get financially “prequalified” through a legitimate lending institution. This accomplishes two important concepts. It does not put “stress” on the AMF financially by forcing them to “carry” properties for an inordinate length of time and by “generating” a “surplus” of interest applicants, ensures that adequate qualified applicants have a portfolio of homes to choose from that understand the “value” in the program and the competitive advantage NSP has over a typical private-sector real estate transaction.
- When designing your business model, ensure each step has complete “transparency” and an “arms-length” transaction. For instance, in Cobb County, Requests for Proposals were utilized for the Asset Management Finn [AMF], Appraiser, and Real-Estate Attorney. The inspection services are being provided “in-house” by the County. Each aspect of the program reports directly to the NSP Office and by doing this, ensures adequate controls are instituted at each level of every transaction that occurs.
- Have an exit strategy. Understand that the market will dictate a large portion of the success and failure of the NSP. Have readily achievable goals and objectives that are analyzed quarterly. Be flexible in your thinking so your business model can adapt to the market! The only way to achieve this is by being proactive and responsive to the volatility that potentially exists in the current economic climate.
Nick Autorina was a guest speaker at the Solutions for Working Families: 2009 Learning Conference on State and Local Housing Policy, hosted by NHC and its research affiliate, the Center for Housing Policy, this past June, where he presented on this topic. He is also chairman of the Community Development Committee for the National Association of County and Community Economic Development.