167 Prince William County, Virginia employees won incentives that could be worth several thousand dollars to buy homes in the suburban county, in an innovative lottery seeking to alleviate some of the misery caused by a wave of foreclosures.
Lottery winners – all county employees – will receive incentives worth several thousand dollars to buy homes in the county, which has been hit hard by the housing crisis, reports Associated Press. County officials believe the lottery was the first of its kind in the United States, and has twin goals of putting a dent in the county's housing glut while helping county employees – about 40 percent of whom live outside the county – afford housing in Prince William.
To avoid committing taxpayer funds, the county struck a deal with SunTrust Bank: The county put $50 million of its investment portfolio into certificates of deposit from SunTrust – something it would have done anyway – and in return the bank agreed to offer a series of financial incentives to a select number of county employees.
Under the program, a person taking out a $200 000 mortgage would receive $2 500 in credits at closing. The money could be used to reduce closing costs or to buy a lower interest rate. Participants are required to open a SunTrust banking account, but they also receive an additional $250 for doing so.
Corey Stewart, chairman of Prince William's Board of Supervisors, said the program was a perfect example of public-private partnership.
"We're going to be taking 167 homes out of inventory," Stewart said. "And we're leveraging private funds. No locality is in a position to drop tens of millions of taxpayer dollars to start buying foreclosed homes."
As the housing bubble burst and thousands of homes in the suburban Washington county have gone into foreclosure, home values have plummeted to levels where county employees like teachers and police officers – once priced out of the market – can afford to buy in the county again. Winners in the lottery can buy homes up to $300 000, foreclosed or not.
It is not entirely clear how much impact the lottery program will have in Prince William, which has suffered some of the highest foreclosure rates in Virginia and the Washington region. In December, 1 101 county properties entered foreclosure, according to Web site realtytrac.com.
Other counties are taking a more aggressive approach. Fairfax County, Prince William's larger neighbour, dedicated $6.5 million in county funds to a program called the Silver Lining Initiative, which aims to help first-time homebuyers purchase 100 foreclosed homes in the county. The county itself intends to buy 10 homes directly. Its incentives are much more generous: Approved applicants receive interest-free second mortgages worth up to $92 000.
Homeowners are not required to make payments on that mortgage while they live in the home, and if at the end of the 30-year mortgage the homeowner still lives there, the entire mortgage is forgiven.
Eight foreclosed homes have already been purchased under the program, which is filled up and no longer accepting applicants. Dozens of other approved applicants are searching for homes, said Kristina Norvell, spokeswoman for Fairfax County's housing department.
The county programs will dovetail with a federal initiative approved by Congress last year called the Neighborhood Stabilization Program, which allocates nearly $4 billion to state and local governments to buy and redevelop foreclosed homes.
None of that money has been distributed yet, said Brian Sullivan, spokesman for the U.S. Department of Housing and Urban Development. The largest amounts under the federal program have been allocated to states like California and Florida, where the housing crisis has hit hardest.