It's by no means a federal bailout, but $731 million in new federal money began flowing last week to local communities to acquire and redevelop areas with high numbers of foreclosures and abandoned houses.

For sharp-eyed real estate investors and developers, the new funds -- plus another $2 billion scheduled for later this spring -- could mean some attractive opportunities.

It's all part of what's called the Neigbborhood Stabilization Program. Roughly four billion dollars in special funding was authorized by Congress in 2008 and another two billion in the 2009 economic stimulus package.

The $731 million sent out last week went to dozens of cities, towns and counties spread among 48 states. Among the recipients were some very large communities: Los Angeles, Detroit, Dallas, Houston, and Washington D.C and much smaller ones such as Kissimmee, Florida, and the U.S. Virgin Islands.

Under the program, local and state governments submit property acquisition and redevelopment proposals to the federal department of Housing and Urban Development. HUD then awards funds in a competitive process.

In announcing the $731 million in grants, HUD said the winners intend to undertake a wide range of activities, from purchases of blocks of distressed properties to creation of "land banks" for future redevelopment.

So how do private real estate investors and entrepreneurs fit into the equation? There are a number of ways: Under the guidelines, local governments are expected to contract with for-profit companies and nonprofit groups to rehabilitate houses acquired with federal funds, appraise properties and evaluate alternative land uses, build new housing and sell renovated units, among other potential services.

Private investors can also work jointly with nonprofits to assemble and prepare real estate for government purchase. Local developers and builders who've been sidelined by the recession may also be able to help reconstruct damaged houses and manage them until they're ready for resale.

How do you position yourself or your firm to take part? Number one: You've absolutely got to be in touch with local housing and community development agencies. They're the ones making the proposals to the feds under the stabilization program, and they can give you immediate feedback on whether you might have a role.

As an alternative, if you find that your local officials aren't up to speed on the Neighborhood Stabilization program and haven't prepared proposals for HUD, you might approach them with ideas aimed at turning around blighted streets, neighborhoods or individual abandoned properties, and making them available for affordable housing, either for rental or purchase.

Information on the program and the $731 million in new awards can be found at hud.gov.

Published: March 27, 2009

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.