Prepared Remarks for Secretary of Housing and Urban Development Shaun Donovan at the National League of Cities Congressional City Conference

Washington, D.C.
Tuesday, March 16th, 2010

Thank you, Mayor Loveridge -- for that generous introduction -- and for your leadership with the National League of Cities.

For more than eight decades, the National League of Cities has provided cities of all sizes with leadership that recognizes our cities are centers of opportunity. And I'm happy to join you this morning representing an Administration that shares that belief -- to reflect on what has been a remarkable thirteen months.

To discuss some of the challenges we've faced and those we continue to face.

To describe how President Obama's leadership--the experiences that have shaped his values and priorities--has impacted HUD, our nation's cities and the way we work together to tackle our toughest challenges.

Stabilizing the Housing Market

To be sure, no challenge has posed a more serious threat to our communities than our housing crisis.A year ago, the economy was hemorrhaging over 700,000 jobs each month, housing prices were in freefall, residential investment had dropped over forty percent in just eighteen months, and credit was frozen nearly solid.

Respected economic observers warned that a second Great Depression was a real possibility, sparked of course by a crisis in the housing market.

Communities across the country--from central cities to newly built suburbs--struggled to cope with neighborhoods devastated by foreclosure, even as their soaring jobless rates and eroding tax base crippled their ability to respond.

One year later, though there is clearly a long way to go, it is clear that the nation's housing market has made significant progress toward stability. Through the combination of coordinated efforts by Treasury, HUD, and the Federal Reserve to stabilize the housing market, we are seeing real signs of optimism.

Home prices have been rising more or less steadily since last April. As recently as January of last year, house prices had been projected to decline by as much as 5 percent in 2009 by leading major macro-economic forecasters. This improvement is particularly surprising since, as you'll remember, most forecasters had underestimated the rise in unemployment you saw over the past year.

Let me explain what halting the slide in home prices and housing wealth has meant to our nation's cities at this moment.

First, security. As a result of stabilizing home prices and lower financing costs nationwide, home owner equity started to grow again in the second quarter of 2009 and by the end of September home equity had increased by over $900 billion, $12,000 on average for the nation's nearly 78 million homeowners, increasingly property values in communities across the country.

Second, confidence. Homeowner equity is key to consumer confidence and is now helping bring new borrowers back into the market. And we all know the important role confidence plays in helping our economy grow -- which it did in the last quarter of 2009 at 5.7 percent, the fastest rate in six years.

Third, money in families' pockets. Mortgage rates which have been at or near historic lows over the past ten months have spurred a refinancing boom that over the past year that has helped nearly 4 million borrowers to save an average of $1,500 per year on housing costs -- pumping an additional $7 billion annually into local economies and businesses, generating additional revenues for our nation's cities, suburbs, and rural communities.

At the same time we have taken steps to reverse falling home prices, we have also worked to help families keep their homes. In partnership with the White House, the Department of Treasury, and other Federal regulatory agencies, HUD has helped develop the Making Home Affordable plan which has helped to preserve homeownership for more than 1 million families.

More than a million households in participating trial modifications currently are saving an average of over $500 per month in mortgage payments. To date, program participants have saved more than $2.2 billion.

And the Federal Housing Administration has stepped up to fulfill its historic role -- to temporarily provide necessary liquidity while also working to bring private capital back to credit markets.

Indeed, the FHA has in the past year alone helped more than 800,000 homeowners refinance into stable, affordable fixed-rate mortgages and deployed its loss mitigation tools to assist an additional half million families at risk of foreclosure.

Of course, just as this crisis has touched different communities in different ways, so, too, have they rebounded at different paces. As a result, some regions continue to face difficulty, even as others are moving toward recovery.

That is one reason why the President recently announced $1.5 billion in funding to help families in states that have suffered an average home price drop of over 20 percent from the peak -- including an innovation fund that will expand the capacity of housing finance and similar agencies in the areas hardest-hit in the wake of the housing crisis.

Meanwhile, two Recovery Act programs--the Housing Tax Credit Exchange Program and Tax Credit Assistance Program--are working together to jumpstart affordable housing developments stalled by the collapse of the Low-Income Housing Tax Credit. And as we build and preserve multifamily rental housing, we are working to ensure families can afford that housing by providing full funding of Section 8 contracts through the Recovery Act.

And we are confronting the housing crisis on the ground through the Neighborhood Stabilization Program. Through NSP, communities across the country have been using $4 billion in HUD-administered funds to reclaim foreclosed homes and place them back into productive use, stabilizing neighborhoods and property values alike.

In January, HUD awarded an additional $2 billion in competitive neighborhood stabilization funds provided through the Recovery Act, rewarding the best ideas for tackling the foreclosure crisis while building on the first round of NSP grants that have flowed to communities across the country. More than three-quarters of these funds--over $1.4 billion--went directly to local governments or consortia including at least one local government.

The Recovery Act: A New Way of Doing Business

Indeed, as so many of these efforts show, at the same time the Recovery Act is helping address the housing crisis, it's also helping our nation's communities recover more broadly from its effects -- creating 2.4 million jobs according to the non-partisan Congressional Budget Office, extending and increasing unemployment insurance for 12 million Americans, making COBRA available so people who had lost their jobs could keep their health care, and helping cities avoid having to lay off police officers, teachers and firefighters.

Just eight days after the President signed the Recovery Act, HUD allocated all $13.6 billion in Recovery funds to all fifty states. Within six months, every dollar of HUD Recovery funds was available to be spent, creating jobs and supporting local innovations -- from the greening of public housing to local responses to homelessness.

We announced $600 million in funding for a Capital Fund competitive grant program, to encourage public housing authorities to increase energy efficiency in their properties -- saving money and energy, and creating jobs in communities across the country.

Over the past two months we have been awarding the first grants for our Assisted Housing Green Retrofit program -- a $250 million program to make energy efficiency and green retrofit investments in our multifamily affordable housing stock.

All told, nearly a third of HUD's Recovery Act funds can be used to put people to work "greening" America's public and assisted housing stock.

Responding to homelessness is another good example. With the Homeless Prevention and Rapid Re-Housing Program in the Recovery Act, we have begun reorienting the Federal government toward preventing homelessness as cities across the country have been doing for years.

No one understands better than our mayors and council-members on the front lines in the battle to prevent homelessness just how much the platform of a stable home can drive other outcomes -- like savings in the area of health. And it's time the Federal government recognized that as well.

That's why we're undertaking a comprehensive review of HUD's "mainstream" programs--public housing, Section 8, HOME, CDBG--to ensure they are working in an integrated way toward preventing homelessness.

It's why we're fully committed to helping you implement your 10-year plans to end homelessness.

And in May, as chair of the Interagency Council on Homelessness, I will be delivering to President Obama the first ever comprehensive federal strategy to end homelessness -- building on the partnerships that ICH has established with cities across the country.

Seeing Cities as a Solution

So, under the leadership of a President who understands the challenges our cities face and has done the hard work of helping solve them as a community organizer, let there be no doubt that this Administration is committed to helping our cities recover.

We're part of perhaps the first Administration that sees cities not as the source of our problems -- but a big part of the solution. And with metropolitan areas--the cities, suburbs and rural areas that surround them--generating 90 cents of every dollar in our economy and housing more than 80 percent of our population, it's clear they must be.

Indeed, when you see cities differently -- you begin to work with them differently, which we've started to do through HUD's Sustainability Partnership with the EPA and the Department of Transportation to connect housing to jobs by linking housing with transportation and land use. And you will hear more about this subject from my colleague, Administrator Jackson.

We are also seeing the success of these inter-agency partnerships with the Long-Term Disaster Recovery Working Group. HUD is working with the Department of Homeland Security to determine what cities really need to not only make the "right" choices when it comes to building codes, land use, economic development and regional threats -- but choices that work for your communities, your needs, and your residents.

The same is true of our partnerships with the Departments of Energy and Labor to connect housing to weatherization and workforce development. As part of a rule published last month to streamline and better coordinate the use of $5 billion in federal weatherization funds appropriated through the Recovery Act, DOE has made public a list of seventeen thousand public and federally-assisted rental properties that meet income eligibility requirements for weatherization assistance. In all, one-and-a-half million assisted households could benefit.

This new way of working is particularly important in the area of fair housing. As you know, the recent Westchester settlement will ensure the development of 750 units of affordable, accessible housing in neighborhoods with very low African American and Latino populations in Westchester County, New York.

It's no secret that development patterns created by government at all levels have excluded some from the promise of good neighborhoods and that many of the neighborhoods hit hardest by the foreclosure crisis are among the most segregated.

That's why we see this landmark resolution as a model for inclusive and sustainable housing not only in Westchester, but in communities across the country. And that's why we are reforming the affirmatively furthering fair housing obligations -- to ensure that our children's futures, choices and opportunities are no longer determined by the zip code they grow up in.

So that cities and suburbs around the nation can meet their fair housing obligations, HUD is committed to providing clearer expectations and guidance and more support to communities than ever before.

In all of these efforts--promoting fair housing, preventing homelessness and disaster, stabilizing neighborhoods--our approach at the federal level is the same:

Helping communities realize the things we all want for our communities--economies that are competitive, transportation options that mean we spend less time commuting to work, neighborhoods that are safer, more inclusive and vibrant--by providing choices that work for you, for your needs, and your marketplaces.

A Budget That Invests in Cities

But this Administration doesn't just tell you that we see cities as the solution and then leave you to do it yourself. We're committed to investing in cities to ensure their success. With HUD's FY 2010 budget, we ushered in a new era of partnership with our cities -- putting in place a historic budget that ends over a decade of slow starvation of HUD programs and allowing us to build on all that we've achieved in the past year.

That budget delivered on President Obama's campaign promise to fully fund CDBG -- an especially critical tool for all of you as you face economic hardship on your citizens, their neighborhoods, and your fiscal capacity to address them.

We put the Federal government back in the business of affordable rental housing at a time when our cities need it most, renewing all project-based rental assistance contracts, preserving 1.3 million affordable rental homes.

And with a 13 percent increase in funding for the Housing Choice Voucher Program this year, we'll be able to assist more families with vouchers than ever before as our housing market continues to return to stability.

But we know that the best ideas for building our future come from your towns and cities. That's why this year's budget launches two significant initiatives that will soon be funding some of the most innovative ideas across the country.

Firstly, our new Office of Sustainable Housing and Communities. We recently announced an Advance Notice for Comment for the office's $100 million in planning grants. And by posting this Advance Notice on our new HUD Wiki, we commit to ensuring all of you--residents, business, civic and community leaders from across the country--will be able to help shape the final product. You can see it at www.HUD.gov/sustainability.

We hope to send a signal that the Obama Administration is serious about being a partner that listens and learns.

Secondly, our innovative Choice Neighborhoods Initiative which is accompanied by an increase in HOPE VI funding to $200 million -- a 67 percent increase. Through Choice Neighborhoods, a third of these funds can be used to support demonstration projects extending neighborhood transformation efforts beyond public housing -- linking housing interventions more closely with school reform and the Department of Education's Promise Neighborhoods effort.

But we can't help transform our communities if we don't transform HUD. That's why the $239 million Congress provided for our Transformation Initiative is so important.

These funds aren't just about HUD -- but also how HUD works with our cities and helps build local capacity.

Through the Transformation Initiative, we're providing $45 million in technical assistance to help grantees better target resources and build capacity for community planning and development.

The time has come to not just look at community planning and development needs, public housing or multifamily needs in a vacuum -- but take a more holistic, cross-cutting view of community needs broadly so that it makes the most impactful difference on the ground in our communities. And with our Transformation Initiative, we'll have the tools to start doing that.

Our proposed 2011 budget is, if anything, an even bolder investment in our cities. It maintains a strong commitment to our largest core rental assistance and economic development programs -- CDBG and both Tenant- and Project-Based Section 8. And it proposes a nearly $200 million increase in homeless assistance funding to support implementation of the HEARTH Act as we prepare to release our federal strategy.

We've proposed a $150 million for a Catalytic Investment Fund to help distressed communities reorient their economies for the 21st century. As our cities know better than anyone, HUD's community development programs have long lacked a place-based, targeted tool for creating jobs. With our Catalytic Investment Fund -- communities will finally have one.

But with these investments we've also proposed long overdue reforms. We've launched a long-term Transforming Rental Assistance initiative to make HUD's rental assistance programs easier to use for localities and families, giving residents more choices and putting these programs on a more sustainable footing so that we can preserve these critical resources for years to come.

A New Era of Partnership:

So, this is a historic budget -- not only for HUD, but for the cities and grantees that rely on us, even in a tough fiscal year that required us to make some difficult choices.

But no matter how difficult the fiscal environment gets, if we've learned anything in this past year it's that change comes from the community level and often through partnership.

And if we've learned anything from our partnership, it's 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.

I know change is never easy -- that revitalizing our nation's communities won't happen overnight. And having been a city official, I more than understand the frustrations of dealing with HUD in the past.

But with the right tools, I've seen for myself what how resilient and innovative our cities can be -- how they can turn crisis into opportunity.

Different cities face vastly different challenges and require very different tools.

But the one thing that every city needs is a partner--both in the White House and the Administration--who can provide resources, but also the guidance necessary to use those resources in the best possible way, specific to the challenges they face.

That's what a partner is -- and it's why I'm thrilled to be one to all of you here at HUD.

Thank you. And with that I'd love to introduce my friend and colleague, the Administrator of the Environmental Protection Agency, a friend to our Nation's cities, and a critical partner to me in creating strong, sustainable communities, Lisa Jackson.

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