Dr. Ben Carson
Secretary of Housing and Urban Development
FHLBanks Annual Directors Conference Remarks
Washington, D.C., Mandarin Oriental, May 22, 2019

As prepared for delivery. The speaker may add or subtract comments during his presentation.

Thank you. And thank you all for inviting me to join you this morning. On behalf of HUD, it is a privilege to share my vision for addressing America's housing finance challenges with the distinguished leaders here today.

While this Administration is proud to be presiding over an incredible period of historic highs in employment, job creation, and financial growth, we are also committed to making sure that every American shares in this "Great Economic Revival."

Fulfilling this mission means addressing our nation's critical shortage of affordable homes. There are now millions of hard-working Americans who seek affordable rents or sustainable homeownership, but they simply cannot get their foot in the door.

HUD's housing finance initiatives are a vital part of our prescription to restore pathways to financial self-sufficiency for these "forgotten men and women," who President Trump pledged would be "forgotten no more."

Housing is indeed the most significant sector of our national economy - not only by GDP, but by many other measures. Among them, responsible homeownership is the number one builder of financial capital for most American families. For instance, the average net worth of a renter is $5,000, while the average net worth of a homeowner is $200,000. That's an extraordinary 40-fold difference.

But most importantly, homes are not simply physical structures - they are social, cultural, and economic engines. They're where families are raised, and communities are interconnected. Through HUD's programs, we strive to empower local housing finance institutions, so you can pass that power on to your own communities.

For many decades, the Federal Home Loan Banks have been the largest single supplier of the capital local lenders need to serve in their communities. With this in mind, I would like to discuss three topics this morning that illustrate HUD's efforts and priorities to improve our policies on housing finance:

(1) First, our work with the Administration to implement housing finance reform;

(2) Second, the broad spectrum of community reinvestment programs underway at HUD to promote self-sufficiency and increase the supply of affordable homes; and

(3) Third, the powerful revitalization and finance opportunities unleashed through Opportunity Zones.

Housing Finance Reform

Nearly two months ago, President Trump signed a Presidential memorandum initiating a long-overdue reform of our nation's housing finance system.

In the decade since the financial crisis, there has been no comprehensive reform of this system - despite the growing need for it - leaving taxpayers exposed to future bailouts, and housing programs exposed to unnecessarily high levels of risk.

The broad goals set forth in the White House memo directive are to:

  • First, end the conservatorship of Fannie Mae and Freddie Mac and improve regulatory oversight over them; and
  • Second, promote competition in the housing finance market and create a system that encourages sustainable homeownership and protects taxpayers against bailouts.

In particular, the White House has instructed FHA and Ginnie Mae to assume primary responsibility for supporting homeownership for low- and moderate-income families. These activities must be accomplished while reducing taxpayer exposure through improved risk management, program and product design, and modernizing the operations and technology of FHA and Ginnie Mae.

At HUD, we welcome the invitation to continue to build upon the meaningful reforms we have already been actively implementing. These changes include:

  • HUD's innovative and holistic reforms to the FHA's Home Equity Conversion Mortgage Program, including addressing appraisal bias;
  • Enhancing risk management at Ginnie Mae;
  • Addressing "churning" of loans serving our Veterans;
  • Addressing rising risk trends in the FHA's forward mortgage program; and
  • Ensuring that the Mutual Mortgage Insurance - or "MMI" - Fund that supports the FHA's vital operations remains strong, with a margin of safety above the 2% requirement.

There are positive signs that show bipartisan support for implementing the White House's plan. Congressmen such as Virginia Democratic Senator Mark Warner has said that he shares "98 percent of the same goals" as Republicans on reform.

Indeed, common sense housing finance reform is not an agenda item for Republicans or for Democrats - it's for just plain Americans, fixing our system together.

Community Reinvestment

HUD is also advancing a wide range of programs that promote self-sufficiency, strong families, and job training - which are essential building blocks for sustainable homeownership. These programs also help communities both directly and indirectly access affordable housing finance.

For example, in February, as part of HUD's Family Self-Sufficiency Program, we announced an investment in the future of HUD-assisted residents by awarding $74 million to hundreds of public housing authorities across the country, so residents can increase their earned income, save for the future, and reduce their dependency on government assistance.

At the same time, HUD is doing more to ensure that low-income individuals have an opportunity to move toward self-sufficiency and achieve economic upward mobility. These efforts include putting renewed energy behind Section 3 of the Housing and Urban Development Act of 1968 - the program that increases access to jobs for low- and very low-income individuals, and contracting opportunities for the businesses that hire them. This program has become even more critical in recent years, as President Trump has made a commitment to putting Americans back to work, and we've made it a top priority to help residents of HUD-subsidized housing become more self-sufficient.

In just the last year, expenditures of covered HUD funding generated more than 29,000 jobs, almost 12,000 of which were Section 3 hires. Also, of the more than $5 billion in construction contracts that were awarded during that period, almost half a billion dollars in contracts were awarded to just over 2,500 Section 3 businesses.

Another tool that housing finance institutions will benefit from is HUD's expansion of the Low-Income Housing Tax Credit Pilot Program, also known as LIHTC. The LIHTC program gives state and local governments the equivalent of nearly $8 billion in annual budget authority to issue tax credits for the acquisition, rehabilitation, or new construction of rental housing targeted to lower-income households.

This past February, HUD announced our Office of Multifamily Housing Programs will extend its LITHC Pilot Program into "New Construction" and "Substantial Rehabilitation" loan products for multifamily home development.

This expansion will encourage affordable multifamily home development - especially in Opportunity Zones - by making it easier for builders to use FHA-insured loans on LITHC properties. By reducing the average processing time for LITHC deals from the current 90 days to as little as 30 days, more deals can get done.

More deals means more loan volume, and that means more affordable housing.

Community Revitalization

The final topic I'll address this morning is HUD's efforts to support housing finance through broad-based community revitalization - in the form of Opportunity Zones.

Few programs in modern American history have the potential to touch the lives of so many people as powerfully as Opportunity Zones, which are now home to nearly 35 million Americans - including 2.4 million HUD-assisted individuals - in all 50 states and five U.S. territories.

The purpose of Opportunity Zones is to spur private investments in economically distressed communities, using powerful tax incentives. These incentives allow a new investment vehicle, called "Qualified Opportunity Funds," to invest capital gains into projects situated in those neighborhoods which are often overlooked or forgotten. Investors can defer and reduce their tax liability on capital gains by investing their realized gains into new construction, rehabilitation, or businesses expanding in these areas. In some cases, the capital gains tax can be reduced all the way down to zero.

Opportunity Zones are also designed to serve local communities for the long-term. Only investors who commit capital for five, seven, and ten years receive the benefits of this tax incentive. So, for distressed neighborhoods infused with new business, new growth becomes consistent growth, and new jobs become steady jobs.

The impact of Opportunity Zones is just not a future theoretical - it's already here.

The fund directory maintained by the National Council of State Housing Agencies released data last month that Qualified Opportunity Funds have committed more than $24 billion in anticipated investments. Nearly 60 percent of these funds plan to invest directly in affordable and workforce housing or community revitalization.

As these numbers suggest, satisfying strong demand for new home construction and development will strengthen local housing finance institutions at their very foundations.

As for direct impact, growth in acquisitions of developable sites in Opportunity Zones surged in 2018 compared to the rest of the country. According to Zillow, property sale prices in Opportunity Zones have appreciated at a rate of more than 20 percent, double the appreciation rate for eligible but not selected areas.

Recently, I was in an Opportunity Zone in St. Louis, and an abandoned factory was serving at the nidus for an amazing, comprehensive revitalization. They are building entertainment, grocery stores, workforce housing, and training facilities. Even better: the governor was there, who was a Republican; the mayor was there, who was a Democrat, and people were actually working together.

To ensure Opportunity Zones reach their full potential, last December, President Trump established the White House Opportunity and Revitalization Council, which I have the privilege to chair. The Revitalization Council consists of members across 16 federal agencies and federal-state partnerships, where we have the mission to make better use of public funds in the revitalization of economically distressed communities.

As of now, the Council has identified more than 160 programs that could increase targeting to Opportunity Zones through grant preference points, loan qualifications, reduced fees, and eligibility criteria modifications. We have already implemented 50 of these actions across agencies.

One such action at HUD involved our announcement last week that our Federal Housing Administration, or "FHA", is unveiling a new package of incentives to encourage multifamily property owners to invest in developments located in Opportunity Zones. These new incentives involved tens of thousands of dollars in reduced application fees for FHA mortgage insurance in Opportunity Zones, and the appointment of a dedicated team of underwriters to ensure expert and efficient processing of such applications in Opportunity Zones.

The Revitalization Council is also conducting a listening tour of Opportunity Zones throughout the nation to incorporate input from community leaders, entrepreneurs, and investors.

Finally, just weeks ago on April 17, HUD announced a "Request for Information," seeking public comment on how we could best maximize the beneficial impact of Opportunity Zones for people and their communities. That comment period closes June 17 - so I would welcome and encourage interested leaders to submit your recommendations, to make sure your voice is fully heard.


Together, these initiatives deliver much-needed relief to millions of people and families across the country. We are lifting up forgotten communities, creating exciting new opportunities, and helping every American find their path to the American Dream - the dream of a great job, a safe home, and a better life for their children.

I am grateful to the Council for Federal Home Loan Banks for your leadership and look forward to your input and insights as we work to sustain the economic vitality of all American citizens who call this great nation home. On behalf of HUD, I look forward to serving with you, and for you, in the months ahead.

Thank you - I am happy to discuss questions in the Q&A.


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