Prepared Remarks for Secretary of Housing and Urban Development Shaun Donovan at the New York Housing Conference, 36th Annual Awards Luncheon

Hilton New York Hotel
New York, New York
Thursday, December 10th, 2009

Thank you, Alan - for that introduction and for your leadership. Let me also thank my friends Bob, Judith, and Conrad for making this luncheon a success year after year. I also want to thank conference co-chairs, John Kelly and Carol Lamberg, and acknowledge my good friend, Rafael Cestero.

Let me also congratulate our honorees this afternoon. I particularly want to say a word about the winner of the Clara Fox Award for Outstanding Achievement, my friend Felice Michetti.

Felice has been more than a friend - she's been a mentor and counsel. Her commitment to affordable housing and the City of New York is unmatched.

And so we congratulate all our honorees - Felice, Adam Weinstein, BFC Partners, Priscilla Almodovar, who we thank for her outstanding three years of service and wish her well, and Deborah Van Amerongen.

Indeed, whether you are from the public, private or non-profit sector, the role each of you play in ensuring the success of housing in our communities has never been more important.

A Year Unlike Any Other

It's hard to believe that it's been a year since I spoke with you all. It was just one day before being nominated by President Obama as our nation's fifteenth HUD Secretary.

At that time, we were hemorrhaging 700,000 jobs a month—equivalent to the population of Vermont—our financial system was on the brink of collapse and credit was frozen solid.

As Paul Krugman wrote in The New York Times, "Let's not mince words: This looks an awful lot like the beginning of the second Great Depression" - caused, of course, by a crisis in our housing markets.

So, when President Obama asked me to be Housing Secretary, help solve the foreclosure crisis and set a new course for HUD, how could I say no?

What other challenges could there possibly be?

Well, I was about to find out.

Within hours of my confirmation, we learned that the end of a federal program meant tens of thousands of families along the Gulf Coast were days away from losing their housing.

In a matter of days, HUD not only mobilized nearly 350 public housing agencies from all over the country to provide temporary housing to over 30,000 displaced families. And together, we began to reach out to every single family, sitting down with some 21,000 families that expressed interest in housing assistance.

Today, I'm proud to say that housing agencies have finalized processing for every family transitioning to permanent assistance.

At the same time, HUD was charged with investing nearly $14 billion under the Recovery Act in our communities - three quarters of which we allocated in eight days after the President signed the bill in February. We have now obligated over $11 billion - making good on our commitment to not just provide more resources to our partners, but to provide them faster.

All told, nearly 85 percent of HUD's total Recovery funds are now available to communities across the country - creating jobs, making homes more energy efficient and stabilizing neighborhoods, while laying a new foundation to make America competitive in the 21st century economy.

Last week, we saw the clearest sign yet that the Recovery Act is working, as the unemployment rate dropped to 10 percent and employers cut only 11,000 jobs - still too many, but nowhere near the tidal wave we saw at the beginning of the year.

And of course, we have taken on the foreclosure crisis as well. Obviously, foreclosures have proven very difficult to tackle - where they were first driven by subprime mortgages, now job losses are the primary cause. As the housing counselors in the room know, reaching borrowers in these situations is extremely difficult - one reason we have asked for a 50 percent increase in housing counseling funds in HUD's budget for next year. And while some servicers have stepped up their efforts, others clearly have not.

Still, RealtyTrac is releasing data today showing early results of our efforts, with foreclosure activity in November having decreased by nearly 8 percent - the fourth straight monthly decline and the lowest level since February.

Our challenge now is to keep the pressure on - to ensure the servicers assist the first 375,000 borrowers whose trial modifications are due to permanently convert by the end of the year.

The Federal Housing Administration is providing another critical bridge to economic stability. Indeed, by the end of 2009, we expect another half million families will be protected from foreclosure through benefits provided by FHA insurance. And with nearly half of first-time buyers using FHA loans, it is clear that the FHA has been central to recovery.

Of course, FHA has hardly been immune to the hard times for the housing sector. And so, with our new FHA Commissioner Dave Stevens who comes to us with decades of private sector mortgage experience, we've steeply increased enforcement efforts, strengthened credit and risk controls, and are taking steps to ensure FHA borrowers have more "skin in the game" so that the agency remains a key source of safe mortgage financing at this critical moment in our country's history.

All told, with home sales having rebounded to levels not seen since early 2007 and with home prices having risen for two quarters in a row, though we are by no means out of the woods, we may be seeing the light at the end of the tunnel.

A New Direction for Housing

So, it's been quite a year - and has shown me two things about this job right out of the gate.

One, that for all challenges it may face, HUD is fully capable of mobilizing its network of affiliates and partners in the midst of a crisis.

And two, in crisis comes enormous opportunity for change - as Rahm Emanuel says, "a crisis is a terrible thing to waste."

Ensuring we don't starts with getting the government back into the business of building and preserving affordable housing.

Homeownership is incredibly important. But if this crisis has taught us anything, it's that it is long past time we had a balanced, comprehensive national housing policy - one that supports homeownership, but also provides affordable rental opportunities, and ensures nobody falls through the cracks.

And with $10 billion in the Recovery Act for rental assistance, an increase of over $3 billion more in our FY 2010 budget request, and with $1 billion to capitalize the National Affordable Housing Trust Fund, let there be no doubt:

The Federal government is back in the business of rental housing.

But preventing a crisis of this magnitude from happening again is not just about HUD providing more federal resources or providing them more quickly.

It's also about HUD being a resource - it's about being a better partner.

When I was first at HUD a decade ago, I was always surprised no one from New York City came to see me. It was only when I took the job at HPD that I found out why.

For as long as I can remember, the way HUD has built and preserved public and other federally-assisted housing has existed in a parallel universe to the rest of the housing world.

It was here in New York City, with Mayor Bloomberg's "New Housing Marketplace," that I learned about the innovations and better outcomes that result from breaking down the barriers between the public, private and non-profit sectors.

The time has come to draw upon those lessons and move HUD's rental housing programs into the housing market mainstream - bringing the way we deliver rental assistance into the 21st century.

The first principle guiding our work starts with making our rental assistance funding streams reliable. Without reliable funding, private partners won't come to the table. It's that simple.

I'm committed to this through full funding of Project-based Section 8. And the Section 8 Voucher Reform Act is an important first step in that process by providing greater reliability for the voucher funding formula.

The second principle is to streamline and simplify our programs so that they're easier to use at the local level. Indeed, with 11 deep rental assistance programs run by 3 operating divisions with nearly 6,000 employees that oversee 4,200 public housing authorities and 14,000 owners, it's clear that the complexity of HUD's programs is part of the problem.

And that doesn't include our capital programs or the Low-Income Housing Tax Credit.
For those of you who've been in the HUD building, you know what a time warp it feels like walking its halls. I get a similar feeling when our capital programs have rules that operate as if the Tax Credit was never invented. And that was nearly a quarter-century ago.

I try not to make this joke when I'm not with "housers" - but you all know the brain damage that comes with piecing together a deal that has more sources of funds with conflicting rules than apartments in the building.

Now, I've got nothing against lawyers - in fact my mother is one. But I think we can all agree that there's a better way to spend precious housing resources.

Third, to encourage resident choice and mobility, we need to find ways of combining the best features of our tenant-based and project-based programs.

This means recognizing that in a world where the old city/suburb stereotypes are breaking down, and our metropolitan areas are emerging as engines of innovation and economic growth, our rental assistance programs need to keep up.

And we also have to get past the old ideological debate about whether place-based or people-based strategies should reign. Real choice is the option to move - or to stay, in decent, strong, well-maintained housing in your current neighborhood.

Fourth, bringing market investment and discipline to all of our rental programs will also drive fundamental reforms.

Until our programs are truly open to private capital, we'll never be able to attract the mix of incomes and uses and stakeholders we need.

I've asked my new team to help us realize this new direction for housing - led by my Assistant Secretary for Public and Indian Housing, Sandi Henriquez, and Mercedes Marquez, who is my Assistant Secretary for Community Preservation and Development. Coming to HUD from Boston and Los Angeles and joined by Deputy Assistant Secretary for Multifamily programs Carol Galante, they bring a host of experience working in the public, private and non-profit development world.

A 21st Century Housing Policy Focused on Place

To understand how important that broad mix of experiences and disciplines is to tailoring solutions to the local level, we only need look at the South Bronx where we saw how our cities could be not only be "saved" at a time when so many doubted it was possible - but also be successes.

It was in the South Bronx where we saw the extent to which the private sector became a major driver of the production and preservation of affordable housing in America. The preservation and redevelopment of the In Rem stock never would have happened without the Low-Income Housing Tax Credit and other programs that could be tailored to local strategies.

With the Koch housing plan, implemented by Felice, we saw the difference local leadership could make and how the strategic deployment of public resources could increase property values and tax revenues.

But perhaps most important of all, it was in developments like Charlotte Gardens that we saw a new era of partnership emerge - a "third sector" of non-profits and community development corporations that could not only help solve problems at the local level, but actually become key civic institutions in neighborhoods across the country.

Just as the private and third sectors have unlocked a remarkable era of local innovation, I believe the time has come to restore federal leadership that nurtures and encourages those innovations - and takes them to scale.

This crisis has illustrated that only the Federal government has the scale and mechanisms to deal effectively with some of the forces that caused it.

But as clear as the need for this new federal role is, just as clear is that it can't be about returning to the old way of doing business - the one-size-fits-all approach we saw in the development of public housing or urban renewal.

Rather, as we've seen with foreclosure mitigation in combination with counseling, the technical assistance we've provided to cities with neighborhood stabilization funds through the Recovery Act, we must use new tools that help us partner with local governments in ways that recognize the variations of communities - and neighborhoods within those communities.

So many of you here today have shown us that if you want to make a difference at the local level, whether it's housing, schools or anything else, you have to look at the broader community and the other needs in that community.

It's time the Federal government understood that as well.

The Federal government can be a key partner in helping communities foster the kinds of synergies between housing, education, public safety, and health you've helped nurture at the neighborhood level.

That's why we made non-profits eligible for the second round of Neighborhood Stabilization funds included in the Recovery Act - to develop new and innovative ways to improve affordable housing, rebuild communities, and increase energy efficiency.

With our $250 million Choice Neighborhoods proposal, the non-profits and the private sector will be full partners, bringing to bear private capital and mixed-use, mixed income tools and expanding the range of activities currently eligible for funding in the HOPE VI program beyond public housing to include all housing in a neighborhood.

New York City knows that public housing isn't the central housing problem for every community that needs dramatic intervention - that what's needed is a comprehensive response.
With Choice Neighborhoods, we'll finally have one.

Choice Neighborhoods would also link housing interventions more closely with intensive school reform and early childhood innovations. Critically, the Department of Education is standing shoulder-to-shoulder with us in this effort with their new Promise Neighborhoods initiative.

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 in neighborhoods across the country.

Investing in People and Places

Let me conclude my remarks where it all began for me - here, in New York City.

It was through projects like the Harlem Children's Zone—a model for Choice Neighborhoods—that I saw how that change comes not from a policy or an agency, but from the community level and through partnership - mutual partnership with mutual commitment and mutual responsibilities.

From the South Bronx to Harlem to East New York, I've seen for myself our communities' remarkable capacity for change - how neighborhoods and cities that were once emblematic of America's problems can become symbols of some of our nation's most enduring aspirations.

I'm not suggesting we replicate what happened here in every city - even if we could.

But for all their differences, one thing that every community needs—every region, every city, every neighborhood—is a partner.

A partner who not only provides resources, but also the support and the flexibility they need to make the biggest possible difference at the local level.

That's what partnership is.

That's what leadership is.

And in the weeks and months to come, that's the kind of change we're committed to providing at HUD.

Thank you.

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