A federal grant designed to stabilize neighborhoods ravaged by foreclosures could change two Lorain County cities scarred by blighted and abandoned properties.On Friday, the U.S. Department of Housing and Urban Development announced it is funneling billions of federal dollars to states and cities hard-hit by foreclosures.

Ohio will receive more than $258 million, with Elyria’s share totaling more than $2.4 million. Lorain will get upwards of $3 million from the program.

“This is the single biggest piece of good news I’ve heard all year,” Mayor Bill Grace said. “It will make a dramatic impact on the city and generally improve our neighborhoods in a substantial way.”

The money comes from the newly created Neighborhood Stabilization Program, which is designed to help local governments acquire and redevelop foreclosed properties.

“These critical funds will rebuild Ohio neighborhoods,” U.S. Sen. Sherrod Brown said. “Ohio has been hard-hit by the housing crisis, but our cities are prepared to rebuild and revitalize.”

Early estimates suggested Elyria would only receive between $600,000 and $700,000. However, Grace learned late Friday the city’s windfall would be much larger.

“This will allow us to rehabilitate a large number of homes and acquire and demolish properties that are beyond repair to help erase the negative impact foreclosures have had on our neighborhoods,” Grace said. “We are in the middle of a $20 million reconstruction program of state Route 57. Elyria Schools is building a $68 million new high school. Elyria is on a roll right now, and this is almost icing on the cake to help our neighborhoods.

”Currently, city officials are doing a study to determine how many blighted and vacant properties are in the city and how many additional properties are in the foreclosure process. Once a report is completed, a plan on how the city plans to use the funds to help affected neighborhoods will be submitted to HUD.

HUD has calculated that Elyria’s foreclosure rate for the last 18 moths is at roughly 10 percent, significantly higher than the state’s foreclosure rate of 6.7 percent.

Meanwhile, Lorain has about a third of the county’s foreclosures, Mayor Tony Krasienko said, estimating there are 1,000 vacant residences in his city.

Krasienko said Lorain is guaranteed a $3 million chunk of the HUD money, about three times the amount he’d expected, and he’s hoping to net another $1 million to
$1.5 million of the state’s share.

“You see more houses up for sale, and they’re not moving. We’re seeing job loss with companies like National Gypsum closing their doors,” he said. “We’ve got to turn this around, and redeveloping vacant, blighted and foreclosed buildings is a good start.”

The vast majority of the HUD grant will be used to buy run-down properties across the city, with target areas along the Pearl Avenue corridor and up and down Broadway, Krasienko said.

He said demolition is likely to begin this spring, but it might take one or two years for the housing market to rebound enough for developers to take interest in building new homes.

Still, getting rid of empty buildings around the city is likely to cut into the crime rate, Krasienko said.

“Right now, these foreclosed and vacant homes are targets for scrappers looking for copper, and they become havens for a bad element,” he said. “It becomes a danger for the children in our area and a concern for our police.”

The number of foreclosure filings in the county has settled some, although court judgments are on the rise, Lorain County Clerk of Courts Ron Nabakowski said. Foreclosure filings dropped 20 percent in August compared with the same month last year. In all, 1,532 foreclosures have been filed in the first eight months of 2008, just 41 more than in 2007.

“In the midst of a financial crisis which originally stemmed from a crashing housing market, I can’t think of a better place to invest funds than to help redevelop foreclosed property in Ohio,” U.S. Sen. George V. Voinovich said.

Both Krasienko and Elyria Planning Director Angie Byington said they are confident that with such a substantial grant, some sort of land banking program will be possible.

Byington said residents have suggested the city look into land banking — the practice of buying and holding onto vacant property until such a time that it can be redeveloped smartly — as a solution to the foreclosure problem for months. However, a lack of funds has kept the city from actively starting such a program, she said.

The grant will be distributed through HUD’s Community Development Block Grant (CDBG) program and will be given to the city in addition to the city’s normal CDBG allocation.

Grace said the city will have to put up no matching funds to receive the money, which has to be spent within the next four years.

“The program goal is to have as quick an impact nationally as possible,” he said. “We’re hoping to use the money in a catalytic way. We are hoping to leverage this money to acquire millions more from the private sector.”

Staff writer Jason Hawk contributed to this report.
Contact Lisa Roberson at 329-7121 or lroberson@chronicle.com.

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