#081 May/Jun 1995

Thirty Years of HUD

HUD: Who Needs It?   During the Newark riots in the summer of 1967, the melee spilled over into Plainfield and other outlying areas. When the National Guard was called […]

HUD: Who Needs It?


During the Newark riots in the summer of 1967, the melee spilled over into Plainfield and other outlying areas. When the National Guard was called in to quell the riots, New Jersey’s first Commissioner of the Department of Community Affairs, Paul Ylvisaker, stood in the street with his arms in the air and halted a column of the guard moving into Plainfield. Ylvisaker subsequently sought to head-off further violence by mobilizing state resources to assist urban communities with street academies, job training, health centers, and new and rehabilitated housing.

The following year, by contrast, I was part of the effort to move the HUD regional office into a hermetically sealed suite 30-odd floors above the street at New York City’s Federal Plaza. Rarely did we ever leave our capsule. HUD served as an abstraction, rather than a visible and working instrument of a caring government.

Twenty-eight years later, HUD is too often seen as the epitome of bureaucratic lethargy, to the dismay and discomfort of some advocates for urban revitalization and housing affordable to low-income families. Wide publicity has been given to HUD’s critics, while little has been said of its achievements as we approach its thirtieth anniversary.

We’ve missed some earlier anniversaries as well. Over a century ago (103 years, to be precise) the federal government, in its first such inquiry, investigated slum conditions in four cities of 200,000 or more. Sixty-one years ago the Federal Housing Administration was born, followed three years later in 1937 by the nation’s first public housing program. The resounding call to attend to domestic tasks, however, came after World War II in 1949, when Congress acknowledged that “the general welfare and security of the nation and the health and living standards of the people require…the realization as soon as feasible of the goal of a decent home and suitable living environment for every American family.”

Expanding Housing Goals

It wasn’t until 1965, however, that the importance of housing and urban development was formally acknowledged with the creation of HUD and its elevation to cabinet-level status. During the intervening 30 years, Congress broadened HUD’s role.

In 1969, Congress enacted new methods of financing for homeownership and rental housing through interest reduction subsidies. Community development and planning for improving housing was the subject of Congress’s attention in the Housing and Community Development Act of 1974. The Community Development Block Grant program was inaugurated with the requirement that communities draw up Housing Assistance Plans (HAPs). Other block grant programs, such as UDAG for economic development and jobs and HODAG for housing, followed in 1977 and 1983 but were narrower in scope. The requirement that financial institutions reinvest in communities in which they bank was prescribed in the Community Reinvestment Act of 1977. Congress invited private investment in low-income housing in 1986 (after abolishing the main incentive in the 1986 Tax Reform Act) when it enacted provisions authorizing income tax credits for investors in affordable housing.

By 1987, Congress was preoccupied with the mounting problems of the homeless and enacted the Stewart B. McKinney Homeless Assistance Act. A second concern was the expiration of controls assuring affordability in many projects housing low-income residents where the mortgages were approaching the time when they could be prepaid. Congress authorized HUD to work out agreements with owners to extend the controls in exchange for subsidies and revised mortgage terms. The preservation program, as it was called, was revamped as part of the Cranston-Gonzalez Affordable Housing Act of 1990. In addition, Cranston-Gonzalez required states and communities seeking housing assistance to hold public hearings to devise their own five-year Comprehensive Housing Affordability Strategies, which would include their priorities along with annual plans for implementation.

1992 saw a new block grant program enacted under the designation HOME, which included a set-aside for community housing development organizations (CHDOs). In 1993, in what might be the watershed of federal creativity, Congress authorized assistance for 95 designated enterprise communities and authorized even more sweeping aid for Empowerment Zones in nine other communities.

A review of the evolution of the federal programs indicates that Congress has long been committed to encouraging states and communities to take the initiative with federal assistance and to fashion their own housing strategies. It also shows that block grants have been an integral part of the federal-state-local relationship for 20 years.

The administration’s “reinvention” and Congress’s “cut down, package up, and ship out” each propose large block grants with few, if any, conditions attached. This leaves policy formulations largely to state and local officials with attendant risks that could jeopardize the future of tens of millions of Americans. While the final form and shape of the new paradigm is yet to be established, it seems likely that the 1949 goal of a safe and healthy home for every American will be buried or completely lost with funding cuts designed to serve the overriding goals of balancing the budget, increasing expenditures for national defense, and cutting taxes.

Block Grant Risks

Here are some of the risks of formulating national housing policy largely through block grants. There is no assurance that states and localities will be required to lay out long-term strategies and pursue annual plans to accomplish those strategies as a condition for receiving block grant funds. With the premise that each locality knows what it likes best, NIMBY may be elevated to the level of national policy as communities compete in their efforts to encourage disfavored groups to settle elsewhere. Block grants could enable localities to withhold housing assistance for needy families whose members may have AIDS, for homeless families who need to find transition and permanent housing, and for destitute young mothers with children born out-of-wedlock.

Also endangered by the new proposals is the training of community leaders and assistance to community housing and development organizations who may lose out to local promoters able to win city hall preferential treatment. Another casualty may be the large municipal projects (public-private partnerships) of the kind that have transformed the image of major cities through the creation of exciting and attractive urban redevelopment. These required large commitments of public venture capital in an era where such projects were recognized as a priority if urban America was to rebuild. Another potential casualty is privately-sponsored low-income renter projects dependent on rental subsidies. Present thinking favors portable rental housing certificates to give low-income families choice. While this is an understandable rationale, it also undermines the collateral on which securing mortgage financing depends.

The impetus to scrap past HUD policies quickly and to give its accomplishments short shrift is an outgrowth of HUD’s weaknesses and mistakes, actual and perceived. The ills of public housing in St. Louis, and now Chicago, and the scandals of political favoritism in the making of HUD grants and loans have all received wide public attention. Then there are the cumbersome procedures, the Washington-based decision making, and the handbooks and instruction manuals in suffocating detail, all of which have contributed to an image of housing policies and administration that are remote, unworkable, and too expensive. This has given rise to calls to spend less money, eliminate most restrictions and much accountability, and leave policy formulation mostly to state and local governments. With this new approach, insufficient affordable housing, substandard dwellings, urban decay, and the lack of employment in our cities would no longer be a national problem.

Accepting the need for consolidation, simplification, and decentralization, there is an overriding need to recognize that our national government cannot abdicate responsibility for problems of a national dimension. The new paradigm, at a minimum, should include:

  • accountability by receiving jurisdictions for the use of all funds with procedures that discourage political favoritism and corruption.
  • retention of the requirement that there be a long-term housing strategy setting up goals and annual programs to be implemented by states and localities.
  • allocation of funds recognizing that there be reasonable balance between ownership and rental housing as well as different types of housing to include the most vulnerable and those in greatest need. Communities should be restrained from stigmatizing certain groups as “undesirable” and seeking to export them to other communities.
  • encouragement and incentives for community groups to build leadership and secure resources for housing and social services and employment
  • provision of incentives for private investment, financial institutions, and the building industry to participate in urban development and housing
  • allocating national resources commensurate with the magnitude needed to meet national targets. Just as Congress and the president believe the budget should be balanced within seven to ten years, the transformation of housing policy should include an equally specific goal to achieve safe, decent, and sanitary housing for every American family; that is, if family values are to be recognized as a national priority.

With 30 years experience, there is good reason to look closely at what HUD has done well and what it has done poorly. We need to know more about the cost/benefit ratio of various programs and methods of financing; how greater participation can be achieved by urban residents and private financial institutions and the building industry; how to cut the volume of regulations but not dispense with the goals, standards, and accountability. The desire to dismantle, bundle up and ship the block grants out quickly could defeat what is a singular opportunity to effectively revamp the ailing national effort on behalf of affordable housing and urban communities.

Housing and community development policy has taken decades to build. Today’s task is to reconstruct and rehabilitate carefully, not to demolish recklessly and sell what is left as scrap, leaving the call of 1949 out with the trash.