What Does HUD Do?

The purpose of the U.S. Department of Housing and Urban Development (HUD) is to provide housing and community development assistance and to make sure everyone has access to “fair and equal” housing. To achieve these goals, it runs or participates in many programs intended to support homeownership, increase safe and affordable rental housing, reduce homelessness and fight housing discrimination. This article provides a general overview of what HUD does and how it has succeeded and failed in achieving its goals over the years.Who Runs HUD? What Does the Agency Do?HUD was established in 1965. It is a cabinet-level government agency, meaning that the agency’s head, called the secretary, is appointed by the president and approved by a simple majority vote in the Senate, then holds that position until a new president takes office. In the event of a major catastrophe, the HUD secretary is 11th in line to succeed the president, after higher-level cabinet executives such as the secretary of state and secretary of the treasury. The POTUS is the HUD secretary’s boss. HUD’s predecessor was the Housing and Home Finance Agency, formed in 1947. The federal government’s involvement in housing stretches back much further than the creation of either agency, however. In 1918, for example, the government-financed homes built for workers in industries contributing to World War I efforts. HUD’s mandate is to oversee various federal housing programs in the name of promoting fair and equal housing. Under HUD’s fiscal year 2014–2018 strategic plan, the department’s overarching goal is “expanding opportunity for all Americans.” To accomplish this goal, HUD intends to strengthen the U.S. housing market; make sure there is enough quality, affordable rental housing; improve people’s quality of life by improving their housing, and strengthen communities. Since the housing crisis, HUD has tried to help struggling homeowners get back on their feet through foreclosure prevention, affordable housing, and community revitalization efforts. HUD also oversees the Federal Housing Administration (FHA), which Congress created in 1934. The FHA is primarily known for its mortgage insurance program, which enables homebuyers to get an FHA home loan when they might not qualify for a conventional mortgage because of a low credit score, low down payment or history of bankruptcy or foreclosure. (L14) HUD oversees several programs and rules that you might have heard of. The Fair Housing Act, passed in 1968, governs most of the housing market and prohibits discrimination based on race, color, national origin, religion, sex, familial status or handicap when housing is rented or sold or when a homebuyer applies for a mortgage. (L10) The Community Development Block Grant program provides grants to neighborhoods that agree to use the funds in ways that will primarily benefit low- and moderate-income residents, that will prevent or eliminate slums or blight, or that will address urgent community problems, such as natural disaster recovery, that threaten residents’ health and welfare. (L15) There’s also the Housing Choice Voucher Program, commonly called Section 8, which helps very low-income families, the elderly and the disabled pay for rental housing that meets or exceeds minimum health and safety standards. (L9) Rentals do not have to be located in subsidized housing projects, and local public housing agencies are responsible for distributing the vouchers. (L9)How HUD Helps CommunitiesHUD says it has reduced veteran homelessness by 24% since 2010, helped 3.9 million families buy homes in the last five years and helped more than 450,000 families avoid foreclosure in 2013. HUD has also developed a number of case studies to highlight programs it considers successes. In Portland, Oregon, HUD contributed $3.3 million toward financing Bud Clark Commons, an eight-story, LEED Platinum-certified development that provides both transitional and permanent housing for the homeless. The complex also houses case-management services to help the homeless overcome problems like mental illness, chemical addictions and unemployment. Since its opening in 2011, the commons has served more than 7,000 homeless people, connected 3,600 with social services and placed 350 in permanent housing. Most of the development’s funding came from tax-increment financing and low-income tax credits from the city of Portland, but HUD’s financing filled in the gaps. HUD also helped finance an Anchorage, Alaska, revitalization program started in 2004 in an older neighborhood called Mountain View. HUD provided $1.7 million in loan guarantees and $1.5 million in economic development grants for the Mountain View Service Center, part of a commercial corridor restoration project. The neighborhood’s population has increased and resident turnover has decreased in the 10 years since the project’s inception. Median household income has increased by about 33%, and high school graduation rates have improved. A third success story comes from El Paso, Texas, where about $11 million of the $14 million used to create a 73-unit affordable housing development for very low-income seniors came from HUD. The Paisano Green Community boasts zero net energy consumption, LEED Platinum certification, and average monthly energy costs of $18.30 per apartment unit and $21.11 per townhouse unit despite El Paso’s desert climate, where summer highs are in the mid-90s and winter lows are in the 30s.Criticisms of HUDA primary criticism of HUD comes from organizations and individuals that support limited government. They say government programs often don’t work as intended (L5) and that HUD’s activities are best left to local governments and the private sector. They also criticize the amount of taxpayer resources HUD uses. (L4) According to the Cato Institute, a free market and limited-government oriented public policy research organization based in Washington, D.C., (L12) HUD “will spend $42 billion in 2014, or about $341 for every U.S. household.” For fiscal year 2015, HUD’s budget request is $46.66 billion, 84% of which the department expects to spend on rental assistance, public housing and homeless assistance. In addition to broad criticisms of the agency, there are also criticisms of individual HUD programs. In some locations, Section 8 vouchers are in such high demand that there are long waiting lists; waiting lists can even be closed in areas of very high demand. And while the program allows participants to rent any available housing, in practice their choices are often severely restricted and the options are undesirable. Critics add that Section 8 vouchers tend to concentrate low-income families in impoverished neighborhoods. Also, because HUD sometimes sets the value of its vouchers too low for local housing market conditions, few landlords are willing to accept the vouchers. Some of those that do abuse the system. The program also imposes annual housing safety inspections on landlords who rent to Section 8 tenants and has a reputation for paying landlords several months late. According to the Cato Institute, HUD has also provided grant funds that have been abused, has given unneeded subsidies to developers at taxpayer’s expense and has experienced a number of incidents involving mismanagement, political manipulation, corruption and fraud. The Cato Institute also says that pressure by HUD on Fannie Mae and Freddie Mac to facilitate lending to risky borrowers contributed to the recent housing crisis.The Bottom LineAs with all government departments, HUD has supporters who think that its resources are being well spent and its programs are effective, and it has detractors who think its resources are misallocated and its programs are unnecessary at best and harmful at worst. There are real-life examples of people who have been helped and people who have been harmed by its rules and programs. Ultimately, it is difficult to assign blame or praise to just one entity when so many factors affect housing in the United States.   – Amy Fontinelle