Prepared Remarks for Secretary of Housing and Urban Development Shaun Donovan at the 12th Annual Michigan Conference on Affordable Housing

Lansing Center
Lansing, Michigan
Wednesday, April 28th

Thank you, Governor Granholm, for that very generous introduction -- and for your remarkable leadership through these very difficult times.

When it comes to her commitment to Michigan families, no one is more effective, no one works harder to produce results than Governor Granholm. She is a key partner -- as are my good friends, Senators Levin and Stabenow.

It's a pleasure to be with so many municipal officials, local housing providers and advocates, developers from all areas of the housing sector, property managers, directors of homeless shelters.

Today, I want to talk with you about what the Obama Administration is doing to help Michigan not only recover from this economic crisis -- but to help this state position itself to meet the challenges of today's interconnected, export-oriented global economy.

I want to talk about the challenges this state faces, the role housing and community development plays in helping us solve them -- and how the Administration intends to help you turn those challenges into opportunities.

And above all, I want to talk about our commitment to helping rebuild the cities that built America -- by harnessing the remarkable resources this state has to ensure Michigan can play a central role in America's new economic future.

Rebuilding the Cities that Built America

Everyone here recognizes what Michigan has meant to America -- this state was a symbol of what made America great in the 20th century.

That famous Charles Erwin Wilson line--"What's good for General Motors is good for the country"--may have turned out to be a bit of a misquote--but the point is clear:

Michigan represented the embodiment of the great American Middle Class.

It was central to the very American idea that, no matter who you were, if you were willing to work hard for a living, you could earn a decent wage, retire with dignity and pass on a better life to your children.

Of course, while that story may have begun in cities like Detroit, Flint and Lansing, it didn't end here. It was repeated in cities across the Midwest -- in steel mills in Pittsburgh, in Cleveland, in Gary, Indiana.

And make no mistake: it was here in Michigan's auto plants that we saw the promise of America -- and some of the first desegregated workplaces in America, creating good jobs for tens of thousands of African Americans.

Indeed, for many, getting your first job at the Big Three was "getting baptized" -- that first step up the economic ladder toward the American Dream.

But of course, we all know how that Dream was eroded these last several years. For the country as a whole, the housing and economic crisis was a wakeup call.

This is a crowd that understands that for a half century, housing policy debates have often been about homeownership versus rental, public versus private, supply versus demand, and people versus place.

This economic and housing crisis has brought these abstract arguments into sharp focus for every family and neighborhood in America.

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 -- the extraordinary distances so many families have to travel simply to get to work or school.

And for places like Michigan, it rolled back 15 years of gains in communities across the state.

Indeed, while the economic crisis has hit Michiganders particularly hard, resulting in the highest unemployment rate in the nation, this crisis reminds us that the problems facing your communities didn't simply appear overnight.

I don't need to tell you that the challenge of developing new industries that respond to new global markets isn't unique to Michigan. Communities from North Carolina to Pennsylvania to Alabama that depended on manufacturing for decades have found themselves in recent years struggling in different ways to replace industrial bases that have moved offshore.

But given the size of the auto industry, the automakers' increasing reliance in tough times on their ability to access credit and the sheer number of jobs it provided throughout this region, when the bottom fell out of the national housing market and our financial system in 2008, no one felt the pain more than Michigan.

Stabilizing Our Economy

That was the reality we faced upon taking office.

As a result, in President Obama's first months, we acted to save two of the big three automakers from liquidation bankruptcy and complete collapse. It wasn't a popular decision. Many felt that if you're in a business and you make a bad decision, you ought to reap the consequences.

The problem was, the economic security of hundreds of thousands of Americans was at stake in these companies -- not just at those companies themselves, but at auto suppliers and other companies and dealers in this region and across this country.

And combined with passage of the Recovery Act soon after, it's clear today that the Federal government prevented a Second Great Depression.

When President Obama signed the Recovery Act into law, it was designed to do three things: create jobs, help those harmed by the economic crisis, and lay a new foundation to make America competitive in the 21st century economy.

For Michigan, help couldn't have arrived soon enough. Almost $10.6 billion in Recovery funds have been made available to Michigan.

The Recovery Act extended and increased unemployment insurance for more than 920,000 people here in this state. It's helped Michigan communities avoid having to lay off 9,000 teachers. Indeed, perhaps most importantly, it has created or saved nearly 70,000 jobs to date.

HUD alone has invested more than a half-billion dollars in Michigan through the Recovery Act, including nearly $60 million in public housing capital investments to make sure families have a roof over their heads during these difficult times.

We've provided more than $53 million in Homelessness Prevention and Rapid Re-housing funds to ensure we are helping people before they fall into homelessness -- something Michigan has been doing under Governor Granholm's leadership for a long time.

We have also provided more than $63 million in Tax Credit Assistance Program funds -- to jumpstart construction on more than 2,100 affordable homes in Michigan stalled by the collapse of the Low-Income Housing Tax Credit.

And today, I'm proud to announce that 2,000 units of affordable housing in Michigan will be renovated using $25 million in Green Retrofit funds -- part of a quarter-billion dollar Recovery Act program to green HUD-assisted multifamily housing. The first Michigan awardee will be Cleveland Manor senior housing in Midland -- and we project these funds will cut utility costs in half.

At the same time we are greening HUD housing, we've acted to prevent foreclosures -- taking special action for markets like Michigan where home prices have fallen 20 percent from their peak. Michigan was among the first states included in the Administration's new Hardest Hit Markets initiative, providing the state with more than $154 million to bolster the capacity of its housing finance agency to provide innovative, locally-driven solutions.

Already, over 33,000 homeowners in Michigan have averted foreclosure through the Home Affordable Modification Program. With the plan Governor Granholm recently submitted to the federal government, we could almost double that number, helping as many as 17,000 homeowners avoid foreclosure, including 11,000 households currently drawing unemployment benefits and struggling to make monthly mortgage payments.

A Moment for Transformation

Indeed, Michigan reminds us that we can't have a once-size-fits-all approach. Some neighborhoods do need more rental housing -- some need more homeownership. And where some cities need more units of affordable housing, supply in many Michigan cities far outweighs the demand -- depressing property values and causing disinvestment.

Thankfully, Michigan has leadership that recognizes this. Michigan did a lot of work in advance of receiving HUD Recovery dollars -- using vehicles like the New Michigan Urban Neighborhood Plan to overlay and blend these dollars to be more catalytic and impactful.

Indeed, having met with leaders across the state, it's clear Michigan recognized early on that this economic crisis presented a unique opportunity for transformation.

So did HUD -- and nowhere is that clearer than the second round of competitively-awarded Neighborhood Stabilization funding that we have provided through President Obama's Recovery Act. From a total of $2 billion in all, the $223 million that the State of Michigan has received constitutes the single-largest statewide grant we made in the program.

• NSP 2 was designed to reward and nurture the best ideas for tackling the housing crisis.
• Under the innovative plan Michigan submitted, the state will be able to use this funding to acquire nearly 5,000 properties -- rehabilitating and building more than 1,200 new affordable homes, providing counseling and homebuyer loan assistance to some 2,000 families and allowing for the state to land bank some 3,500 properties that are currently vacant.
• It won't only be homes that are being rehabilitated -- but neighborhood property values as well.
• Putting another thousand Michiganders back to work, NSP 2 funding will also leverage related federal investments, such as CDBG grants -- and, with Michigan's innovative Cities of Promise program bringing together a wide variety of partners, local investments as well.
• But the impact of NSP 2 won't be measured in dollars alone.

It's no secret that Michigan's communities have some very difficult, very emotional decisions to make about which neighborhoods are viable and need to come back, and which ones need to be redeveloped for other purposes.

At HUD, we want to help you make those hard decisions -- with resources, but also with best practices from communities around the country who struggle with similar problems.

With NSP 2, we'll be able to do that -- making catalytic, game-changing interventions in the neighborhoods that need them most.

Reimagining the Future of our Communities

Innovative Recovery Act tools like NSP 2 remind us that at the same time we are working to stabilize the economy of states like Michigan, we also need to seize this moment to reorient our industrial communities for the challenges of the 21st century.

That requires the Federal government to work with communities to address local challenges rooted in local vision.

With the HOPE VI public housing revitalization program, the Federal government made game-changing investments in distressed public housing across the country.

Our Choice Neighborhoods program will ensure all housing in a neighborhood can benefit from the HOPE VI toolkit -- making the non-profits and private sector actors that have helped make HOPE VI a success in communities across Michigan full partners in this transformation.

The $150 million Catalytic Investment Fund that we've proposed in our FY 2011 budget is motivated by a similar principle: that only with competitive, game - changing interventions that leverage public dollars can we help distressed communities transform into the export-oriented hotbeds of innovation we need for the 21st century.

Instead of providing a small amount of formula funds, the Catalytic Fund, like HOPE VI, is designed to provide substantial funding to communities or neighborhoods with large-scale property vacancy and abandonment due to long-term employment and population loss.

Like NSP 2, the Catalytic Fund will encourage collaboration across sectors -- with MPOs, COGs and State governments, to non-profit and philanthropic organizations -- requiring grantees to complement and leverage other community development and revitalization investments, such as Section 108 Loan Guarantees or other forms of local funding as part of an innovative and robust plan with measurable outcomes.

Having spoken at length with Governor Granholm, Mayor Walling and Dan Kildee from Flint, Mayor Bing from Detroit, and communities across the country, I've heard over and over again how HUD's community development programs lack a targeted, place-based tool for creating jobs. With our Catalytic Investment Fund -- communities will finally have one.

A 21st Century Agency

Of course, helping bring Michigan's economy into the 21st century requires a partner that operates in the 21st century.

While I'm excited about what these new tools mean for Michigan communities, you and I both know that we have a lot of work to do at the federal level to ensure communities can get the most out of them.

And so, I want to speak for a moment about four different ways that we're transforming HUD into a 21st century agency.

First, we're knocking down barriers.

I'm proud that, in a very difficult fiscal environment, we proposed a 2011 budget that maintains a strong commitment to our largest core rental assistance and economic development programs -- including a nearly $200 million increase in homeless assistance funding, a record number of people to be served by the Section 8 voucher program and a billion dollars to capitalize the National Housing Trust Fund.

These are critical investments. And while the housing crisis has made the latter task tougher, together, I'm confident that working together with Congressman Levin, we will get the Fund capitalized this year. We will find a way!

But with thirteen deep rental assistance programs, each with its own rules, it's clear the complexity of HUD's programs is part of the problem.

Through our Transforming Rental Assistance initiative, HUD is proposing to streamline and simplify these programs so that they are governed by a single, coherent set of rules that better aligns with the requirements of other financing streams and social service providers.

This isn't just about streamlining bureaucracy -- it's about finally bringing HUD homes into the housing mainstream.

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" -- and Governor, please don't take this the wrong way.

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, Governor -- in fact my mother is one. But I think we can all agree that there's a better way to spend precious housing resources.

Only when all HUD-assisted housing can be financed, developed and managed in a 21st century way that can be integrated with the communities around them will we attract the mix of uses, incomes and stakeholders that HUD needs to make its rental assistance programs truly successful -- and that families need to live in sustainable vibrant communities of opportunity.

Secondly, a 21st century agency gets out of its silos and collaborates across other agencies and with new partners.

Many of you may be familiar with our Sustainability Partnership with the Department of Transportation and the Environmental Protection Agency.

While much of the media attention around that partnership has understandably focused on helping reduce the combined cost of housing and transportation to families--a major cause of the foreclosure crisis--I believe it also shows real promise in states like Michigan with polluted industrial Brownfields.

At HUD, we're already working with EPA to employ state-of-the-art environmental protection technologies to ensure that communities can "recycle" land and use it to develop safe, affordable multifamily housing.

With world-class universities and some of the most cutting-edge foundations in the country, to a burgeoning biotech and R&D sector, I expect Michigan to capitalize on these kinds of targeted interventions to revitalize its manufacturing base and find new opportunities in the export-oriented economy.

Third, a 21st century agency operates in the geography of the 21st century.

With our new Office of Sustainable Housing and Communities, we are building on the promise of efforts like NSP 2 to help communities bring these "Third Sector" partners into the fold and plan on a metropolitan basis -- so that cities and suburbs that share problems--like foreclosures, long commute times--can begin sharing solutions -- using federal dollars.

It's about time you had the ability to do that.

Lastly, a 21st century partner builds capacity to spur catalytic change. Because states like Michigan need more than just good ideas -- you need the ability to execute them.

At HUD, we're doing our part. 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.

But we need you to do the same. Clearly you've shown the initiative and collaboration around NSP 2 -- now we need you to deliver.

And as this 21st century partner, we're prepared to provide the support you need. That's why I've directed my Assistant Secretary of Community Planning and Development, Mercedes Marquez to begin engaging more directly with localities -- to not only provide technical assistance on how to best use HUD programs but also the information and best practices you need to fully leverage these resources.

But ultimately we can't do it alone. We need you to make the most of these dollars -- to measure performance, ensure community input and bring private investment to the table.

Only with a sense of shared responsibility and mutual commitment to comprehensive community development will we be able to make the game-changing impact on the ground we need to bring these efforts to scale.

A New Era of Partnership

And so, I hope it's clear that the Obama Administration is committed to helping Michigan be to 21st century America what it was to the 20th century. If we are going to compete as a nation in this global economy, it absolutely needs to be.

Some may wonder whether it's possible.

I believe it is -- because I believe my own eyes.

More than three decades ago, I sat in Yankee Stadium during Game Two of a World Series game against the Los Angeles Dodgers when Howard Cosell broadcast his famous words to millions of viewers across the nation: "Ladies and gentleman, the Bronx is burning."

Indeed, the South Bronx of the 1970s was nothing less than an urban catastrophe. Arson consumed thousands of buildings. Neighborhoods lost 75 percent of their populations in just 10 years.

Across New York, a sense of chaos bubbled close to the surface. Within weeks of the World Series, President Carter visited nearby Charlotte Street and compared the wreckage to Dresden after World War II.

Today it's hard to imagine that the now vibrant neighborhoods of the South Bronx were part of the warzone that Cosell described to the American people that October night more than three decades ago.

Why didn't it happen? In part because new tools emerged -- private sector tools like the Low-Income Housing Tax Credit.

In part, it was because new partners emerged -- non-profits and community development corporations that not only helped solve problems at the local level, but actually became key civic institutions in neighborhoods across the country.

But most important of all, it was because local leadership acted to harness the power these tools had to create change.

As serious and longstanding as Michigan's challenges are, it also has one thing in its favor that the South Bronx didn't:

A federal partner -- that's ready to help and ready to help you make the tough decisions.

Having been a city housing official, believe me: I understand the frustrations of dealing with HUD in the past.

And of course, different communities face vastly different challenges and require very different tools.

But one thing that every community needs is a partner -- 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.

It's why I'm thrilled to be one to all of you here at HUD.

And it's why I'm confident that in the weeks, months and years to come, this state will emerge from this crisis -- we will "rebuild Michigan together." And together, Michigan will help America lead again.

Thank you.

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