A bill that was discussed in Congress this morning proposes the allocation of $15 billion to states in order to allow state governments to buy, rehabilitate, at sell homes. This “housing-rescue bill” would give $7.5 billion in grants and $7.5 billion in zero-interest loans to states in addition to allowing them to partake in the buying and selling of real estate. This bill is sponsored by Rep. Maxine Walters (D-Calif.) and passed committee last week. It will probably be taken up on the House floor this week. In April, a Senate bill including a similar provision allocated $4 billion to this project.

Even if these proposals become law, the effort could be challenged in numerous ways. Cities that have attempted to buy and manage properties have found it difficult to maintain and sell them. In 2002, the city of Baltimore began its purchasing of abandoned properties, an effort they called “Project 5,000” for the number of homes they intended to purchase. The city of Baltimore now owns more than 10,000 vacant properties that it cannot unload. Their latest attempt to fix the problem – creating a nonprofit land bank to direct them – will likely cost $2.8 million.

Republicans who oppose the ideas floating around in Congress say that it would give lenders incentive to more quickly evict homeowners if they could “pawn them off” on local governments. Supporters, however, say the laws would create affordable housing while stopping vacant homes from becoming rundown and making surrounding neighborhoods unattractive.

Under the House plan, the Department of Housing and Urban Development (HUD) would dispense loans and grants according to the number of foreclosures and home prices in an area. Cities could use this money to buy and renovate foreclosed homes, make them compliant to local housing codes, and resell or rent them. The homes can’t be resold to buyers who make more than 140% of the area’s median income and some funds would be reserved for low-income homebuyers. Loans would have to be repaid within two years if used for single-family housing or within five years if used for rentals. Also, the federal government would keep 20% of any profits made by buyers who resold houses they bought from the city.

The U.S. Council of Mayors has lobbied for the bill by soliciting mayors across the country to call local congressmen and ask for their support. While the current bill will only issue funds to the country’s most populous cities, the council is attempting to widen its applicability to more cities. Nonprofit groups in many cities would help local governments manage the programs and these groups believe the funds can be used effectively. Patrick Morrissy, executive director of Housing and Neighborhood Development Services in Orange, N.J., says “there’s no question that we need this money. It’s essential if we want to mitigate the impact of foreclosures in urban neighborhoods.” This nonprofit group has bought and renovated homes for over twenty years. They usually spend $160,000 to acquire, rehab, and maintain a home, and so far the group has applied this process to roughly 130 homes that they have resold at a discount price to first-time and low-income buyers.

Many towns, such as those that have been affected by mass layoffs in the past, have experience handling vacant homes, says Jennifer Leonard, director of the National Vacant Properties group. This organization actively promotes city programs that help to rehabilitate abandoned land and homes. This type of “seasoned” program can effectively stop vacant homes from becoming eyesores in their communities, she says. It may be difficult for some inexperienced cities to buy and sell foreclosed homes, Leonard says. To that end, the campaign has asked Congress to include provisions in the bill that would allow some of the money to be put toward raising cities’ capability to manage properties and later resell them.

Some real estate analysts remain skeptical of the plan’s projected impact on the housing market. Relative to the foreclosure crisis, $15 billion is unsubstantial. According to foreclosure tracker RealtyTrac, around 650,000 foreclosure filings on properties were submitted in the first quarter. If the allocated $15 billion were used exclusively to buy homes with an average price of $100,000, states could purchase 150,000 homes. Also, the bill is geared toward the low-end of the housing market. This could be a problem for some sing the bill would only allow the purchase of single-family homes with a purchase price no greater than 90% of an area’s average. In addition to these issues, some analysts worry that cities would be in too deep. “I don’t buy that it’s going to work. If cities were good at buying, selling, and developing things, we wouldn’t need private developers,” says Vincent Valvo, group publisher of The Warren Group, a Boston real estate analyst.