The number of foreclosed homes in Dakota County this year is on pace for a 555 percent increase over 2004. Meanwhile, there's not enough affordable housing and thousands are on waiting lists.

Soon, there will be cash from the federal government that could help put people into some of those foreclosed homes.

Officials with the county's Community Development Agency hope to use some of $2.77 million in new federal grant money to buy some of those foreclosed properties from banks and turn them into affordable-living homes, said Mark Ulfers, executive director of the Dakota County Community Development Agency.

The federal Neighborhood Stabilization Program is a new government initiative aimed at giving emergency help to local agencies to buy and redevelop foreclosed properties, which are devaluing neighborhoods and posing problems for local officials who want them cleaned up.

Under that program, the U.S. Department of Housing and Urban Development recently awarded $3.96 billion nationwide for communities, of which $57.78 million is coming to Minnesota.

Dakota County will get $2.76 million in a direct allocation. Hennepin and Anoka Counties and the cities of Minneapolis and St. Paul also were notified Sept. 26 that they would get funds, and another $38 million will go to the state of Minnesota for distribution.

"Everybody's doing the same thing we're doing right now, which is to try to decide what would be the best use of those resources," Ulfers said.

One is to deal with the burgeoning number of foreclosed properties. RealtyTrac, an online real estate marketer, estimates that in the third quarter, the nationwide foreclosure rate spiked 71 percent over that period a year earlier.

Dakota County is doing better than many counties, such as Hennepin, but still is buffeted in a big way, statistics show.

In 2004, 336 Dakota County homes in foreclosure were sold at sheriff's sales. Last year, there were 1,581. And through Oct. 31, there were 1,818 foreclosed homes in sheriff's sales this year. Ulfers estimated that the county is on a pace to have 2,200 by year's end.

"It's very concerning -- frightening, frankly," Ulfers said. "We're seeing it throughout the metro area."

His agency will present to county commissioners a recommendation on how to use the new emergency Community Development Block Grant funding. The entire $2.77 million won't be used to buy the foreclosed properties, but the exact amount will be up to county commissioners to decide, Ulfers said.

"That isn't going to go that far, but it's a modest amount of money that may help us," he said. "There are different things that we can do with that money. It won't be all acquiring it and rehabilitating it and using it for affordable housing. Some of it may actually be sold to first-time home buyers, or it may be actually torn down, if it's in very bad condition."

The funds could be used to buy condos, townhouses or single-family homes, he said. Conditions of each will be assessed. Some may be acquired for rehabilitation. And still others may be bought and resold, with that money used to buy another foreclosed property, he said.

From senior citizens to families, there are nearly 9,000 households on waiting lists for affordable rental housing in Dakota County, Ulfers said. It's a situation reflected in other communities throughout Minnesota and beyond.

A report released recently by the Metropolitan Council defined a unit as affordable if it is priced at or below 30 percent of gross income of a household earning 60 percent of the Twin Cities median family income, which is $48,540.

Fifty-nine percent of all first-time home buyers in the Twin Cities area helped by the Minnesota Housing Finance Agency in fiscal year 2005 had incomes at or below 60 percent of median income, according to the report.

The Housing and Economic Recovery Act, passed by Congress and signed by President Bush in July, was used in part to bail out financial lenders Fannie Mae and Freddie Mac, but it also has a provision to provide the block grant money throughout the country.

Joy Powell • 952-882-9017