HUD rule needs to change
The road of good intentions is often paved with government bureaucracy and nonsensical regulations.
So it should come as no surprise that the city of Schenectady hit a major pothole in its application for federal money to fund a downtown revitalization project.
Late last year, U.S. Sen. Charles Schumer pushed for, then celebrated, the award to the city of a $3 million loan through the Department of Housing and Urban Development (HUD). A significant portion of the loan would be used to remove run-down buildings, which would make room for redevelopment, improve the city's visual image and boost neighbors' property values.
If you read the fact sheet for HUD's Section 108 loan program, it says the loan can be used for "rehabilitation of publicly owned property." But somewhere in the fine print, city leaders learned recently, it says the money can only be used to demolish buildings on property the city acquires after it gets the loan. Any property already owned by the city, such as property taken through foreclosure, would not be eligible for the grant money.
That makes no sense. The logic is backward.
The reason the city applied for the loan in the first place was because it had a list of properties, 78 to be exact, that it had identified and prioritized for clean-up. How could the city justify the need for the loan — and how could HUD agree to issue it — without first identifying eligible properties?
If this policy stands, the city will have to target and acquire new buildings in need of demolition. That's fine. There are plenty in the city, unfortunately.
But since the city already owns 65 of the 79 properties on its priorities list, the HUD money could have been dedicated to demolition costs.
Now the city will have to find separate funding for work on the existing properties and use some of the HUD loan to pay for aquisition of the new properties.
To get around the regulation, city leaders are holding back on some planned foreclosures in order to make those new properties eligible for the HUD loan.
Fortunately for the city, a mistake in notifying property owners last year about how long they had to pay their back taxes forced it to delay some foreclosures. Those properties could now be eligible for the HUD grant.
Other HUD rules that apparently surprised city leaders aren't so off-the-wall, such as requiring that the reconditioned properties be sold to low- or moderate-income people or used for other purposes (parks, community gardens) to serve that population.
That makes sense. HUD money isn't for regentrification or to help wealthy developers get wealthier; it's for those who need it.
Someone in city government should have flagged these rules before the city went after the loan. But they didn't. So the city is stuck with a list of projects it still needs to fund, a new task of identifying additional buildings to demolish, and extra expenses associated with both.
It's possible, city officials said, that HUD could reconsider the rule regarding the ownership status of properties targeted for demolition. It should. And if Sen. Schumer needs to give them a nudge, he should.
The city has many needs, and this loan is vital.
One nonsensical regulation shouldn't stand in the way.