Why HUD?

by Secretary Cisneros
June 1995

The Federal Government has a vital role to play in housing and community development. For more than 60 years Congress and the President, under both political parties, have reaffirmed this role by enacting a series of laws that declare the housing of America's families and the health of America's communities are integral to our national well-being. Senator Robert A. Taft, President Franklin D. Roosevelt, Harry S Truman, Lyndon B. Johnson, and Gerald R. Ford are the great names associated with landmark housing legislation of the modern era. In the measure that became law in 1965, Congress created the Department of Housing and Urban Development and entrusted to it the responsibility for this mission, citing the need for coordination of Federal activities, and calling for Federal leadership to encourage the active involvement of State and local governments and the private sector in these efforts. HUD (and its predecessor Federal agencies) have an impressive record of accomplishment:

Home mortgages have been insured for 23 million families, many of whom thereby became homeowners for the first time. 4.5 million units of rental housing have benefited from insured financing, as well as more than 312,000 beds in community hospitals, nursing homes and other assisted living facilities. More than 7 million families have lived in public housing supported by HUD subsidies. Nearly 12.5 million families and individuals -- including many senior citizens and persons with disabilities -- have found affordable housing in privately owned, HUD assisted rental housing. Hundreds of communities and thousands of neighborhoods have benefited from HUD's community development programs over the past three decades.

But today the 30-year consensus about HUD's role and responsibilities is under sharp scrutiny. Some are calling for its dismantling or even outright abolition. Either course would constitute the abandonment or dilution of the basic Federal commitment to housing and cities. A Department of Housing and Urban Development is still needed to supply national leadership, and to serve as coordinator and facilitator of multifaceted efforts to correct the many urban problems that persist in our society.

The Problems That HUD Addresses

The problems that HUD addresses are vitally important to the well-being of our society. They are national in scope and interrelated.

Few things in life are more basic than decent and affordable housing. Good housing is essential to security, privacy, and the nurturing of family life. It is the starting place for development of individual and family stability and self-sufficiency. Yet despite progress toward these goals, many serious housing needs remain unmet.

Affordable rental housing is unavailable today for too many poor families. This problem is increasing and is particularly pronounced among very-low-income renters, 43 percent of whom pay more than half of their income for housing.

Homeownership is the American dream. It is key to economic advancement for families and strengthens the fabric of society. But the homeownership rate in America, after rising for decades, fell from 1980 to 1990, especially for young families and for those with modest incomes, and is still below the 1980 peak. Also, the homeownership rate remains much lower for minority families than for white households.

Especially desperate is the plight of those in our society who have no home at all. Homelessness has become all too common in many major cities across America. By one estimate, 600,000 people are homeless on any given night. Many homeless individuals have substance abuse or related problems, but homelessness also seems to be increasing for families with children.

America is proud of its cities where so many of its people live and work and where families engage in the daily activities of their neighborhoods and communities. Yet today many cities are weakened by economic change and neighborhood decline. Increasingly, people are concentrated in distressed urban neighborhoods characterized by lack of job opportunities and high crime. The percentage of people in the 100 largest cities living in extreme-poverty-neighborhoods more than doubled over the past two decades. Urban distress not only undermines the quality of life. It also saps the entire U.S. economy and threatens our international competitiveness, both of which are inextricably linked to the health of our cities.

Americans prize the values of fairness and equal treatment. Discrimination in housing by virtue of race, creed, or color has been outlawed by Federal statute since 1968 -- a reflection of this commitment to fairness. But the reality is that discrimination in housing against minority groups continues to be a serious problem. Independent studies demonstrate that African Americans and Hispanics receive unequal treatment compared to whites more than half the time when they visit a real estate agency in response to a newspaper ad.

Lack of affordable rental housing for low-income families ... lagging homeownership rates ... homelessness in our cities ... urban poverty and the changing economies of cities ... and persistent housing discrimination ... these are the serious problems that HUD exists to address.

The Case For A Federal Response

A Federal response is essential, given the importance of housing and community development to national well-being. States, localities, and the private sector are often committed to addressing the problems, but they lack the resources to go it alone. Without Federal assistance, State and local governments would have to hike their tax rates to maintain an equivalent level of effort, or slash other portions of their budgets. Cities, especially, with their high levels of distress and restricted tax bases, would be in no position to pick up the slack. Also, Federal administration of low-income housing assistance programs and anti-discrimination protections ensures that people who live in different parts of the country are treated equally.

There is also the need for Federal leadership, not in the sense of narrow mandates or prescriptions, but in the sense of highlighting the importance of urban problems, providing accurate and timely information about their nature and extent, and marshalling energies and commitment to address them. Without strong Federal initiative, it is difficult to imagine that the problem of homelessness, for example, would have received the degree of attention that it has at all levels of government and society since emerging as a public policy issue in the 1980's.

The Case For A Single Cabinet Agency

The problems HUD addresses are interrelated in several dimensions. For example, adequate housing is the cornerstone of neighborhood vitality. Homelessness is a severe manifestation of urban poverty. Homeownership stabilizes communities and home building boosts the urban economy. Discrimination thwarts progress on all fronts. There are many other interrelationships among the various aspects of housing, private investment, capital markets, and urban policy. Because of this, stewardship should be assigned to a single agency which can formulate comprehensive, coordinated policies and programs to deal with the interrelationships.

A single agency has several other virtues. It can be a point of accountability for the President, the Congress, and the taxpaying public. It can be a central point of contact for States, local governments, community groups, and private enterprises that are seeking to address urban problems in a coordinated fashion. And it can forge a network of partnerships among not only the traditional local entities concerned with housing and urban issues, but also with newer participants such as foundations, pension fund managers, universities, and other anchor institutions, because a single Federal agency cannot go it alone either.

The single agency and its leader should be part of the President's Cabinet in order to have direct access to the highest councils of government and to be an effective advocate for housing and cities with the White House and Congress as decisions are rendered on policies, programs, and budgets. Who will give voice to these issues if there is not a Cabinet member to make the case? Most other industrialized nations have recognized the validity of this argument by establishing a cabinet-level agency or ministry with responsibility for housing and urban development.

Call it HUD or call it something else, but the case for a Federal Department at the Cabinet level devoted to the interrelated issues of housing and community development is very strong. The arguments were recognized by Congress in 1965 and remain valid today. The themes of "coordination" and "leadership" in addressing the urban agenda articulated then continue to strike a responsive chord.

Some have suggested that HUD be abolished altogether. But this would be a complete abdication of the Federal role in housing and community development, and would simply throw the problems in the laps of the non-Federal participants who cannot succeed alone. Others have suggested that HUD be dismantled piece-by-piece with its responsibilities parceled out to various other Federal agencies. But this would abandon the single-agency approach, ultimately diluting effectiveness and blurring accountability. Either way, housing and cities would be the losers and millions of Americans, often those in greatest need, would suffer.

Elimination vs. Reform

Eliminating HUD would not necessarily save money, Federal or otherwise. For example, the Department now serves about 4.7 million poor and elderly households through its assisted housing programs. The millions of people in these households will still be with us even if HUD is eliminated. The buildings in which they live will still remain. The burden will simply be shifted onto the shoulders of States and localities that are already fiscally hard pressed. At a time when we are trying to relieve localities and States of unfunded mandates, we should not be piling new burdens upon them.

Dismantling HUD would not reform Federal programs or policies which most agree need restructuring. Responsibilities would be spun off to disparate Federal agencies with little experience or familiarity with housing and urban issues. This approach would hide the problems under other Federal umbrellas and stymie reform and real change at the community level where it counts most.

A bold restructuring strategy has been put forth in the Administration's Reinvention Blueprint. Consolidation of programs, devolution of responsibility to localities and States, and the creation of entrepreneurial organizations will change the way does business. Significant downsizing and streamlining is anticipated, reducing HUD's current work force of 12,000 today to fewer than 7,500 employees, and shrinking the field structure from 80 offices to roughly 60.

HUD must change with the times. But its mission endures, and the problems it addresses persist. The times call for HUD's reform, not its elimination.