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Prince George's County Council members are weighing different ways to spend a $10.8 million federal grant to keep foreclosed homes from becoming a blight on their communities.

County housing officials have pushed a plan that would have the county buy, renovate and sell foreclosed homes in areas hardest hit by the national housing bubble bursting, but real estate agents are urging the county to instead use the money to give qualified homebuyers up to $5,000 to purchase homes.

Council members have scheduled a hearing Nov. 18 on how to spend the money. The plan must be approved and submitted to the U.S. Department of Housing and Urban Development by Dec. 1.

The money is Prince George's County's share of a $3.9 billion aid package approved by Congress in the summer after the collapse of the mortgage industry. The money, part of the Housing and Economic Recovery Act of 2008, is designed to go to local governments that have the highest rates of homes vacated by owners unable to afford them.

Since the market began to unravel last year, Prince George's has led the state in the number of people losing houses to foreclosure. From June to September, state reports logged 2,789 houses in the county that were either in foreclosure, behind in mortgage payments or facing foreclosure. The figures represent 35 percent of the state's foreclosure activity.

Because they are essentially abandoned by their owners, foreclosed properties pose a significant risk of blight. Abandoned properties can become an eyesore and their presence often forces neighboring sellers to lower their asking price.

The vacant homes are dragging an already devastated housing market in the county. Home values in Brentwood, Hyattsville and Mount Rainier are down by up to 33 percent, according to the Prince George's Department of Housing and Community Development.

The average price for a home in the county has dropped by $75,000 in the past two years, according to an October market report released Monday by Metropolitan Regional Information Systems, a Rockville-based real estate tracking company. Just 408 homes sold in the county last month, while 7,631 houses were posted for sale.

Back in October 2005, when the real estate market was still at its peak, more than 1,380 people bought homes in one month and just 2,220 houses were up for sale in the county. On average, it took 29 days for a house to be bought in 2005, while most properties today take an average of four months or longer to sell.

The new HUD money is designed to let local governments work on dealing with the effects of foreclosures destabilizing neighborhoods. Each locality gets to make its own plan of action.

Montgomery County officials recently announced their strategy to team up with Habitat for Humanity to renovate about 10 foreclosed homes and then rent them out for affordable housing using about $2 million from their share of the federal program. In Fairfax County, Va., officials have proposed using the money to provide additional loans to homeowners interested in purchasing foreclosed houses.

Prince George's officials are debating how to proceed.

County housing officials had proposed using the funds to purchase about 40 homes in foreclosed areas, spruce them up and then sell them to qualified buyers. Profits from the sales would go toward buying more properties and continuing the cycle.

"Few people are attracted to the communities where these [foreclosed] homes are," said Lloyd Baskin, a county housing official who presented the plan to the county last week. "Our strategy is to invest in homes that would best stabilize neighborhoods."

But the proposal was derided by several council members as not being enough. There are currently thousands of homes in the county in foreclosure.

"I'm just trying to figure out how to get out of this hole we're in," said Council Chairman Samuel Dean (D-Dist. 6) of Mitchellville. "Forty houses doesn't seem like much to me."

Real estate agents are pushing a different strategy to use the money. They would like the county to give up to $5,000 to any qualified homebuyer willing to purchase a foreclosed home in affected areas to help with down payments and closing costs.

"Why would the county want to become a developer?" asked Brian Austin, a Mitchellville broker and member of Real Estate Agents for Change, a group proposing the down payment approach. "Most agents right now are unable to find people to purchase the homes that are already out there."

Austin and supporters estimate their proposal could provide assistance to up to 2,980 residents.

"The money can go further," he said.

The objections have caused county officials to shift their strategy, said Jim Keary, spokesman for County Executive Jack B. Johnson (D).

"Based on the feedback from the council and community, we're considering significant modifications to the program," Keary said.

Keary said the county is working to develop a program that will have "the maximum impact to the greatest number of households."

County Council members are planning to hold a public hearing Tuesday to meet next month's deadline.

HUD Spokesman Brian Sullivan applauded the efforts when reached last week.

"This is the same debate that's going on right now across the country," he said. "It's healthy and exactly what they should be doing. We look forward to hearing from them Dec. 1."

If a strategy is agreed upon and passed, the new Neighborhood Stabilization Program would begin in March.

E-mail Daniel Valentine at dvalentine@gazette.net.