Prepared Remarks for Secretary of Housing and Urban Development Shaun Donovan at the Tenth Annual John T. Dunlop Lecture

Celebrating the 50th Anniversary of the Joint Center for Housing Studies

Toward a More Sustainable Future: Housing, Place, and the New Federalism

Cambridge, Massachusetts
Monday, October 26th, 2009

Thank you, Nic. It's special to be here at Harvard, where it all began for me, in many ways.

Nic continues in a long line of brilliant minds leading the Joint Center. And I want to say a special word about John Meyer who recently passed away, having not only made enormous contributions to the field of urban economics but also a leading role in creating this series.

As we celebrate the 50th anniversary of the Joint Center, it's clear the students and faculty here have a unique appreciation for the value and importance of unconventional interdisciplinary thinking and policy innovation.

Indeed, my own perspective on housing policy was fundamentally shaped by my education here at the Kennedy and Design Schools.

Some of you may know that I served as Bill Apgar's teaching assistant when he was at the Joint Center. It was John Updike who said, "Four years was enough of Harvard. I still had a lot to learn, but had been given the liberating notion that now I could teach myself."

Well, obviously, I didn't read enough Updike, because it took me eight-and-a-half years to have enough of Harvard.

But for Bill, I think it was precisely the length of my graduate studies between a masters degree in architecture and a masters degree in public administration that appealed to him when it came to picking his TA's, because as a first-year graduate student I could achieve a certain level of indentured servitude.

In truth, it was my education here that allowed me to travel the path I have - not only to the public sector, but so many other places - beginning as an architect, moving into the non-profit world-at the Community Preservation Corporation-to the private sector where I led Prudential's affordable housing group. And then on to academia at the Furman Center for Real Estate and Urban Policy as a visiting scholar.

At every stage, inside of government and out, it was the bridge between the policy-based thinking of the Kennedy School and the place-based thinking of the Graduate School of Design-a bridge central to the Joint Center-that enabled me to see the broader picture.

What hooked me on housing in particular when I took Bill Apgar's class was the way that housing connected to everything else in a family's life - this idea that when you choose a home, you don't just choose a home.

You also choose transportation to work - schools for your children, public safety.

You choose a community - and the choices available in that community.

In housing, I saw the place-based connection between the built environment and access to opportunity, health and well-being.

Tonight, I want to outline how this sense of place-based thinking nurtured by the Joint Center needs to take center stage in our federal housing policy.

As we speak, this is an extraordinary moment for housing in this nation.

Millions of foreclosures have sent America's economy into a tailspin-the likes of which we hadn't seen in nearly 80 years-and from which we are only now beginning to recover.

As a consequence, the Federal government has had to intervene on a scope and scale not seen since the Great Depression.

First, there has been an aggressive effort by the Federal Reserve and Treasury to drive down interest rates through monetary policy and by buying up mortgage-backed securities. As a result, interest rates have hovered at or below 5 percent for six months - allowing first-time homebuyers to enter the market and helping some 3 million homeowners refinance, putting as much as $10 billion of purchasing power in the hands of American households every year.

There was the dramatic decision to take Fannie Mae and Freddie Mac into conservatorship. Combined with the countercyclical role played by the Federal Housing Administration offering access to credit, these institutions are responsible for 95 percent of mortgages today.

Together, Treasury and HUD unveiled the comprehensive foreclosure prevention program, Making Home Affordable, as neighborhood stabilization funds flowed to communities suffering from the effects of concentrated foreclosures.

And finally, the Recovery Act. An unprecedented fiscal stimulus, the Recovery Act is pumping $787 billion into communities around the country to keep our economy going and create jobs.

As important as it was to pull us back from a crisis caused by reckless lending and regulatory abdication, the nature of this crisis has also revealed the need for a new direction.

It revealed the dramatic gap between wages and housing prices, which easy credit through so-called "financial innovation" failed to close.

It pulled back the curtain on the unsustainable nature of our growth - how supposedly "affordable" homes built in new neighborhoods turned out not to be affordable at all, because of the distended nature of our metro areas and the mismatch between where people live and where jobs are located.

And it highlighted the fragility of many communities, as foreclosures in urban cores of older industrial cities rolled back 15 years of gains in neighborhood revitalization. The disparate impact of subprime mortgages on people of color has resulted in a dramatic drop in homeownership rates for African Americans and Latinos.

It's clear from all this that we must forge a new direction for housing.

That requires the Federal government to set a new course that is focused on place. For fifty years, housing policy debates have often been about people versus neighborhoods, supply versus demand, public versus private, homeownership versus rental.

But once we begin to see all these debates through the lens of place, these abstract arguments begin to come into focus.

Traditional ideologies lose their edge. We see the interactions more clearly between housing and other policy domains, from health to education to energy. And we see the need to create a flexible set of policy tools that recognize one-size doesn't fit all - that some places need more homeownership and others need more rental, that some need more supply and others need more demand. And so on and so forth.

So, tonight I want to talk about what the Administration has done to begin constructing a 21st century housing policy that focuses on place.

A Changing Nation

But in order to build this new policy, we need to understand where we've come from.

Given the recent withering of federal urban policy it may seem hard to believe today, but when HUD was created in 1965, its charter recognized that the agency ought to not only be about housing but also about the cities and the neighborhoods and communities where that housing was located.

This was due in part to the time in which HUD was founded - a moment when America's cities were literally burning, rendering the connection between the state of housing and the urban neighborhoods around this housing impossible to dismiss.

But for a variety of reasons-some of which will become evident as I continue-this broader mission has been rarely pursued and little fulfilled.

Today, HUD must recapture that dedication to place it had at the time of its founding - but in a 21st century context, rooted in what place means today, at this moment in our history.

Indeed, I want to argue here tonight, on the 50th anniversary of the Joint Center, that there have been three fundamental changes in the years since that must be factored into a 21st century housing policy.

First, the fundamentally changing role of government and the emergence of new actors in housing policy from the private and third sectors.

Second, the changing nature of our cities and broader metropolitan areas.

And third, the emerging importance of data, performance-based management and evidence-based policymaking.

Allow me to start with the role of government - in particular, the retreat of the Federal government that began as skepticism about Great Society programs took hold.

As a native New Yorker, I witnessed this. I wasn't reading newspapers yet in 1975 when the Daily News published its famous headline during the city's financial crisis that read "Ford to City: Drop Dead."

But I was actually sitting in Yankee Stadium during Game Two of the 1977 World Series when Howard Cosell broadcast his famous words to millions of viewers across the nation:

"Ladies and gentleman, the Bronx is burning."

Even as an 11 year-old, I remember the sense of chaos that bubbled close to the surface as near-bankruptcy slashed police and other services. The civic bonds that hold communities together frayed to the point of breaking.

Arson consumed thousands of buildings, and neighborhoods lost 75 percent of their populations in just 10 years. Within weeks of the World Series, President Carter visited nearby Charlotte Street and compared the wreckage to Dresden after World War II.

What virtually everyone foresaw at that time-the looming death of American cities-is contradicted by the obvious conclusion drawn from the now-vibrant neighborhoods surrounding the new Yankee stadium:

The failure of the Federal government to act did not doom these cities to failure.

As Ingrid Gould Ellen from the Furman Center writes, it was New York City's investment through Mayor Koch's Ten Year Housing Plan that not only revitalized many of the Bronx's burned out and vacant buildings - it also increased property values and tax revenues.

This signaled an emerging federalism in which states and cities reasserted their authority and primacy over the federal role.

As state and local government emerged as a major driver of the production and preservation of affordable housing across the country, the private sector took a lead role as well.

Whereas at HUD's founding, affordable housing was largely built, owned and managed by government, with the emergence of Section 8 in the 1970's, the private role began to expand - first to ownership of federally-assisted housing then, with the passage of the Low-Income Housing Tax Credit in 1986, to financing its production.

These were the tools that rebuilt the South Bronx and communities across the country.

This shift wasn't just about who would be providing the resources, but more importantly, how they would be spent. Indeed, the discipline this emergence of the private sector has brought to the housing industry extends from the way affordable housing is financed to how properties are managed.

Despite this, and new federal programs, federal housing policy-particularly at HUD and particularly with public housing-has remained in something of a parallel universe, with substantial barriers to private participation.

Perhaps even more important than the emergence of the private sector was the emergence of a new "third" sector. In rebuilding Charlotte Gardens on the street that President Carter visited, we saw the critical role neighborhood-based Community Development Corporations played. Indeed, across the country we saw non-profits not only help solve problems at the local level - but go on to become key civic institutions in those neighborhoods as so many traditional community anchors withered away.

The second big change we've seen has occurred at the city and metropolitan level.

Perhaps to oversimplify, where cities were seen as problems at the time the Joint Center was founded, today they are seen as solutions. Cities from Boston to Salt Lake City to Seattle were losing population from the 1960's onward - but in the last decade, we've seen them growing again.

Indeed, there's a growing recognition that cities are more attractive places to live as we've begun to reach the limits of a process that began with the invention of the automobile and continued as federal transportation investment shifted away from transit and the urban core toward highway construction and the surrounding communities.

What has perhaps been most illustrative of this issue is the clear connection between development patterns that are the least "sustainable"- with poor access to transit, jobs, good schools-and communities hit hardest by the foreclosure crisis that has plunged our economy into recession.

At the same time, challenges we once associated with cities have become surburbanized - not just foreclosures, but issues like homelessness, joblessness and immigration.

In almost every respect, the distinctions between cities and suburbs-and the challenges they face-are blurring.

In fact, in many ways the most important frame for place today is the metropolitan area.

Reflecting a trend that began at least a half century ago, today there are more people living in metropolitan areas than any time in history. Ninety cents of every dollar in our economy is generated by our metropolitan areas. These same communities house more than two-thirds of America's population, radically altering development patterns in communities across the country.

At the same time, an important trend contributing to our evolving structure of metropolitan areas is the emerging awareness of the global threat of climate change.

As Harvard economist Ed Glaeser pointed out in his presentation before the Furman Center's "A Crisis Is a Terrible Thing to Waste" conference in February, the connection between housing policy, land use and climate change is profound. Suburban communities tend to produce far more carbon emissions than cities largely because homes are bigger and commutes to work are longer.

But if we've learned anything over the last half century, it's that sustainability is about more than energy. It's also about opportunity.

The groundbreaking research of scholars like William Julius Wilson has taught us about the ravages of concentrated poverty in our cities - poverty that often emerged as a result of government housing policy, not in spite of it.

Wilson and others showed the important connection between concentrated poverty and a range of outcomes such as education, earnings, and health.

At HUD, we learned from our Moving to Opportunity experiment that one of the biggest impacts of moving public housing residents to low-poverty neighborhoods is improvements in mental health - because of the sense of safety and optimism they find in their new surroundings.

The third change we've seen is the emergence of data, performance-based management and evidence-based policymaking.

The information society which my two boys probably take for granted would have been hard to imagine at the time of the Joint Center's founding. Indeed, the emergence of technology has changed every facet of our lives - including government, as hard as it sometimes may be to believe.

It was with the introduction of the COMPSTAT criminal justice system in New York in the 1990's that communities began to use data to enhance accountability in the public sector.

At the same time, there's been a broad shift at the local level toward using data to craft policy as well.

Homelessness is a good example of the kind of evidence-based policymaking I'm talking about. Tracking the homeless across a broad range of systems using their Social Security numbers and other key data, researcher Dennis Culhane was able to prove that combining housing and supportive services not only led to better outcomes for the homeless, but also saved the taxpayer money - reducing the strain on shelters, jails and emergency rooms and giving us the model we needed to "move the needle" on chronic homelessness nationally over the last decade. That never would have been possible fifty years ago.

A New Federalism Focused on Place

Each of these changes-the emergence of new actors outside of government, of metropolitan regions with new city/suburb dynamics and of data and evidence-based policymaking-points to the need for the Federal government to step forward in a new direction.

Even as we've seen state and local governments nurture innovation in their communities, with their tax bases decimated, the Federal government must now show the leadership necessary, as it has before in our history, to pull us back from the crisis at hand.

At the same time, as neighborhoods, communities and metropolitan regions alike struggle to manage forces beyond their control-from the global flows of capital and people and the traffic and pollution that result, to the loss of major industry-we must recognize that only the Federal government has the scale and mechanisms to deal effectively with these forces.

As clear as the need for a new federal role is, just as clear is that it must embrace the changes I've discussed.

This isn't about returning to the old way of doing business - the one-size-fits-all approach in the development of public housing or urban renewal. It's about using new tools that help us partner with local governments in ways that recognize the variations of place and the communities we all serve in one way or another.

That is the New Federalism.

To help realize this new vision, President Obama has just ordered the first place-based review of all federal policies since the Carter Administration - asking each agency to determine whether our policies enable and encourage locally-driven, integrated, and place-conscious solutions…or obstruct them.

Even before this place-based review is completed, let me use the remainder of this lecture to lay out a number of examples of what we are doing in the Obama Administration to realize this place-based approach at three different scales - and to show how they link back to the broader trends I've mentioned tonight.

At the building level, we know housing can be a platform for driving other outcomes - that housing is not just a typical market good, but a place to anchor services and where different policies central to opportunity can be overlaid.

Two articles and an editorial in the Journal of the American Medical Association within the last year have shown how so-called "housing plus services" can improve health outcomes at the same time they save money for the taxpayer. These linkages and others are only possible with today's access to greatly enhanced data.

And it was third sector actors-non-profits and foundations-who helped develop supportive housing and drive the Ten-Year Plans to End Homelessness in nearly 900 cities and counties across the country. Under the Obama Administration, our New Federalism will scale up these linkages using national mainstream medical and service programs.

Another example at the building level showing how we're using an interdisciplinary, place-based approach to achieve multiple outcomes within a single intervention is home energy retrofits.

As we've seen by retrofitting low-income housing through the Recovery Act, not only can we improve energy efficiency and reduce carbon emissions, we can also improve the economic security of families when we prove savings can exceed investment and create green jobs at a time when overbuilding has left many construction workers unemployed.

With the right effort on the part of government to leverage data and information, we believe these interventions can go even further to unlock a self-sustaining private market.

That is the idea behind our Energy Innovation Fund, which would jumpstart an Energy Efficient Mortgage product for homeowners and a municipally-driven program for single- and multi-family property owners to wrap energy improvements into property tax assessments where the up-front cost can be amortized.

With better data that proves these investments pay for themselves in the long run, we believe these tools can unlock a much broader scale of transformation - driven not by the public sector but private investment.

The second scale of place that I want to talk about is the neighborhood level.

In architectural circles, the debate over housing at the neighborhood level has often been focused on how the HOPE VI program has demolished public housing, with its "superblock" models of Le Corbusier replaced with a regular street grid, porches on the street, and shared public space. But tonight, I want to talk about place in a different sense that is less discussed:

How neighborhoods can be a platform for a new kind of sustainability.

That is the goal of our Choice Neighborhoods proposal.

HOPE VI's focus on transforming troubled public housing necessarily meant that our work was carried out with public housing authorities, which are creatures of state and local government. While the non-profits and private sector that have emerged in recent decades have participated in HOPE VI, too often the Federal government has placed barriers in their way.

With Choice Neighborhoods, they will be full partners in this transformation, bringing to bear private capital and mixed-use, mixed income tools.

Indeed, by expanding the range of activities currently eligible for funding in HOPE VI beyond public housing to include all housing in a neighborhood, Choice Neighborhoods would capitalize on the full range of stakeholders we know are needed and want to be involved and help to build truly inclusive, sustainable communities, not "islands in a sea of need."

Critically, Choice Neighborhoods would link housing interventions more closely with intensive school reform and early childhood innovations as communities are already doing - from Charlotte's First Ward Place development to Mission Main across the Charles River in Boston, which is closely tied not only to schools but to some of the best hospitals and universities in the country.

Example after example in communities across the country has shown us that the correlation between successful housing and good schools is not just theory - it's practice. And it's time to bring that practice to scale at the neighborhood level.

The third level of place I want to talk about is the city and metropolitan level.

Here, the Federal government can be a key partner.

The time has come to reorient federal policy to view cities not as the problems they were at HUD's founding, but as an asset and a solution. To see cities, suburbs and the rural areas around them as an integrated whole.

Those are the goals of our Sustainable Communities Initiative, which will provide $140 million in planning and challenge grants to communities across the country that connect our housing investments at the federal level to transportation, land use decisions and philanthropic and private investment at the local level.

Driving zoning and land use reform at the city level, this initiative will ensure we get the density we need to be environmentally sustainable but also the greater mix of uses and incomes we need to become socially and economically sustainable.

At the metropolitan level, we've seen a wave of innovative connections between transportation and land use emerging from innovative state and local government partnerships.

For example, under Mayor John Hickenlooper's leadership, the City and County of Denver are linking the city's downtown to surrounding communities with a new multi-modal transit system bolstered by a fund to acquire and preserve affordable housing.

Our Sustainable Communities Initiative will support these kinds of efforts. And to ensure they do HUD has formed a partnership with the Department of Transportation and EPA-just as cities and surrounding suburbs have around the country-to begin targeting our investments in a coordinated way.

Not only does this begin the process of helping communities manage development patterns that offer more choices at the regional and local level, it's also the first step in a broader reform of our block grant programs.

We will also be focused on ensuring institutional capacity both inside and outside of government at the metropolitan level. This will not only require significantly reforming Metropolitan Planning Organizations - it will also require HUD to encourage metropolitan-level housing organizations which can facilitate greater mobility of residents with vouchers and other tools.

But this isn't just about reforming government institutions. Just as with energy at the building level, we need to use advances in the private sector to foster greater sustainability in the connection between housing and transportation.

Today, the average low-income working family spends nearly 60 percent of their income on housing and transportation combined, their two largest expenses. And yet, because mortgages don't factor in how much it costs to drive to work or take your children to school, housing finance has continued to drive the construction of housing in the least sustainable places.

Using detailed mapping of transportation costs, we're developing a transportation-efficient mortgage that accounts for a home's proximity to jobs and schools. Using advances in data and private sector actors, this is an example of a new place-based approach that will drive much broader change than government could alone.

Toward a Sustainable Future

Of course, these are but a few examples of how we are reorienting the Federal government's work toward place and incorporating the most significant changes in factors that are affecting housing and community development over the last fifty years.

And I don't pretend to suggest that they will solve every challenge our communities face.

I've framed this discussion to be about housing, place and a New Federalism. I hope I've shown that housing is a key platform because it is so rooted in place - with the potential to overlay multiple policy goals within a single intervention.

That's always important - but particularly so at a time fraught with so many challenges, limited resources and, as I've described, a very changing world.

At this extraordinary moment in our history, we have an opportunity to build a New Federalism and do things very differently.

It's not just about government being too big or too small - it's about government being the right kind of partner that can help places arrive at the right kind of solutions, more efficiently and more effectively.

We live in an age in which technology has made information more accessible than at any time in our history.

Our charge today is to turn that information into knowledge.

That begins with the interdisciplinary thinking practiced by the faculty and alumni at the Kennedy School and Graduate School of Design whose extraordinary knowledge base has been acquired through practical experience - sitting at policymaking tables at the federal and state levels, working with non-profits and the private sector to design neighborhoods.

Indeed, this is what sparked my interest in housing as a platform for place-based policy when I first joined the Joint Center almost two decades ago.

Ultimately, it is that research and that knowledge that will allow government to play this role and for this New Federalism attuned to place to emerge.

In the days, weeks and months ahead, may we work together to ensure it does. Thank you.