Remarks of Secretary Shaun Donovan at AHF Live: The 2013 Affordable Housing Developers Summit

Chicago, Illinois
Wednesday, November 20, 2013

As prepared for delivery

Thank you very much, Jerry (Ascierto) for that kind introduction and for all your great work to highlight stories and issues important to the housing community.

I'd also like to thank everyone involved in organizing AHF Live. This event represents an important opportunity to exchange ideas and solutions, and I deeply appreciate the chance to be here.

And of course, I'd like to thank all of you in the audience for the work you do every day. As I look out over this room, I see so many friends and partners who I've been proud to work with over the years.

I see innovators who are doing extraordinary things in difficult circumstances. I see leaders who are making a difference for others and for our nation. I thank you all for your lasting contributions.

And I'm thrilled we could come together at this 2013 Summit.

Affordability Equals Opportunity

We gather here today, many of us traveling from long distance, because we all share a common cause: to give every American access to quality, affordable housing. We are passionate about this work because, as every person here understands, developing affordable housing is about opportunity.

Giving struggling families the opportunity to secure a better future for their children. Giving young adults the opportunity to get the best possible start in their lives. Giving veterans returning from overseas the opportunity to get settled back home. Giving seniors the opportunity to live with comfort and dignity.

In short, giving communities access to quality, affordable housing is about fulfilling that basic American promise: that you can make it here if you try. And while your work has always been important, it's been especially critical in recent years, as our nation fights its way back from the worst economic crisis in generations.

When President Obama took office, our economy was losing 800,000 jobs a month. Credit had stopped flowing to families and small businesses. The auto industry was on the verge of collapse.

It was a once-in-a-lifetime crisis that caused incredible pain across the nation. Lost jobs. Lost homes. Lost savings. So as soon as the President and I took office, we took action to stabilize the market and help those in need.

We helped over 7 million responsible families modify their mortgages. We allocated $7 billion to communities in all 50 states through our Neighborhood Stabilization Program to address foreclosed and abandoned properties.

And through the Recovery Act, HUD's Tax Credit and other efforts, we saved the Low Income Housing Tax Credit market, keeping affordable homes in the pipeline and construction workers on the job.

As a result of these and other efforts, the market is healing. But make no mistake, there is still a long way to go because so many Americans are still hurting.

According to a HUD report released earlier this year, the number of renters with "worst case housing needs" grew to roughly 8.5 million in 2011, a record high. This is an increase of 43 percent since 2007.

So the need for your work is, arguably, as great as ever. And HUD is committed to doing all we can to help the multifamily community succeed for the people it serves.

HUD's Work with the Multifamily Community

The first step in this effort is to remove the unnecessary obstacles and headaches that stand in the way of your success. This may come as a shock to you but government isn't always the most efficient partner to deal with.

Too often it is slow to respond to needs, and that's simply unacceptable because delays to your work results in delays in development on the ground. That's why I've made it a priority to make it easier to do business with HUD.

Case in point is our Low Income Housing Tax Credit Pilot Program. As you all know, in the past, investors using the Low Income Housing Tax Credit who wanted to access FHA financing had to follow an approval process that sometimes took a year or more.

Not only did that stall important affordable housing projects, it scared off other potential partners from trying in the first place. To address this challenge, we launched the pilot program last year and are seeing tremendous results.

Deals are taking an average of only 86 days from receipt of the complete application to closing. With these faster turnaround times, we have closed on 13 projects including nearly 1500 units. In the pipeline, we have an additional 66 projects that represent nearly 7000 units. And we are proud to be seeing these kinds of gains with a number of our efforts.

With our "Breaking Ground - Delivering Results" program, processing times have decreased 50 percent in two of our most commonly used programs: 223(f) and 223(a)(7).

And thanks to the new centralized processing model we launched in July in the Office of Affordable Housing Preservation, we've been able to cut processing times for complex deals such as 236 de-couplings. Even though this effort is in its infancy, we are already seeing results, so far completing transactions that used to take six months in six weeks.

Naturally, we are proud of this work to both preserve and create critical affordable housing. But we aren't content. That's why we are reorganizing FHA's Multifamily Housing Office. Since the beginning of the financial crisis, demand for its services has never been higher.

In fact, the Office's firm commitments in Fiscal Year 2013 are roughly eight times what they were just five years earlier. This increasing activity exposed what we already knew: that the old model was just too complex to give you the service you deserve.

For example, when an employee needs approval to waive regulations, they should get that answer right away. But under current conditions, they can wait weeks for an answer. So we've initiated this reorganization simply because we can do better.

Right now, we are in the middle of this process, and I look forward to updating you as things progress. But know this: when it's done, you will have a more nimble, efficient and effective office.

In fact, we've been testing our single underwriter model in the Atlanta HUB. And one of our project managers told us, with no prompting, "this is the best thing we've done so far to improve our processing. It's good for the lenders, gets deals out in a timely manner and is a better way for us to process applications. It really does work - increasing our productivity, while keeping lenders happy."

This means a lot less aspirin for both you and us. Most importantly, this means better results for the people we serve. That's why we are constantly looking inward for common sense measures that will generate results.

We are also looking outward, outside the box, for new and innovative solutions that will preserve and enhance affordability in our communities. That's what the Rental Assistance Demonstration is all about.

As all of you know, RAD is helping public housing authorities-and owners of assisted housing-tap the private market to make physical improvements to their units, enabling the kinds of investments and uses we know are essential to a healthy neighborhood.

We launched this effort last fall for a simple reason: the need. There is a backlog of over $25 billion in capital needs for public housing.

In addition, the nation continues to lose approximately 10,000 units of public housing units annually, primarily due to disrepair. And another 40,000 plus units of the so-called "orphan" programs-Rent Supp, RAP, and Section 8 Mod Rehab-are at risk of losing critical subsidy and being lost from the affordable inventory.

That's what makes RAD such an important effort. We have already approved nearly 24,000 units of public housing and 8,000 units of multifamily housing in need of recapitalization. So far we have applications to convert over 90,000 units for 60,000 units under RAD's current authority for public housing conversions.

We anticipate exhausting the statutory cap of 60,000 converted units in early 2014. That's why we asked to increase the cap to 150,000 units in our FY2014 budget request. We want to continue to address that $25 billion capital backlog.

Projections show an average of $45,000 per unit of construction costs being addressed in RAD applications thus far. At just 60,000 units, that's roughly $2.7 billion of new capital investment likely to be generated for public housing, after being open for business for just over a year.

Based on what we've seen so far, roughly 40% of Public Housing Authorities are accessing tax credits-both 4% tax-exempt bonds and 9% low-income housing tax credits-generally what we see in affordable housing financing.

But of those using tax credits, nearly three-quarters are accessing 4% tax exempt bonds, which is often a form of available subsidy because, in most states, private activity volume cap goes unused.

Given this, we have been aggressive in promoting the use of this tool because it's a smart thing for PHAs to do. Meanwhile 9% credits have been allocated to worthwhile projects, mostly involving new construction, or approximately 25% of projects proposing to use LIHTCs.

This is leading to more housing choices for families. Plus, there will be thousands of new constructions jobs in communities across the country preserving these valuable assets. So we are seeing tremendous progress.

In just a year's time-without any additional operating subsidy from Congress, and by tapping unused volume cap-we should be able to preserve and enhance 60,000 units of much needed affordable housing across the country, generating positive economic activity.

Clearly, RAD represents more than just a new way of preserving and improving affordable housing for future generations. It represents a sea change in how the Federal government partners with communities and the private sector to make progress possible in areas that have been historically overlooked.

And while RAD is providing the ability to go wide, we are still very much committed to going deep with Choice Neighborhoods.

In our FY2014 budget, the President proposed tripling the budget for this important program. The Senate responded with a mark providing for $250 million in new funding. I remain absolutely committed to seeking an appropriate level of funding for Choice, a cornerstone of an effort that is a top priority for us at HUD and for the President.

It's called Promise Zones, which aims to turnaround our nation's most distressed neighborhoods. As the President has said: "the journey of upward mobility has become harder. In too many communities across the country, the shadow of poverty continues to cast a pall over our citizens."

In fact, research has shown that no matter how hard a child or her parents work-the life chances of that child, even her lifespan, is determined by the area she grows up in. And it simply isn't right that we can put a child's address into Google Maps and tell them what their future is.

That's why the President has launched this unprecedented effort to address poverty through a comprehensive approach to development. Obviously, all of us here value the importance of housing in a community. But we know that housing alone cannot lead to success.

Its residents also need access to safe streets, quality schools, good jobs and so many other assets. Recognizing this reality, President Obama has refused to address these problems in isolation.

Through Promise Zones, HUD will work with the Departments of Transportation, Education, Justice and local leaders to turn around the hardest-hit areas. We believe that work will turn neighborhoods of despair into neighborhoods of hope, which is good for our entire nation.

We have asked for increased funding for this effort. And we ask for your partnership, your input and your support of this work.

Empowering Low-Income Families

We also ask for your support of the President's broader agenda to provide ladders of opportunity for all Americans. As budget talks evolve in Washington, we've got to stand up and speak out for a balanced approach that doesn't attack the most vulnerable communities.

We've got to join the President's fight for investments that will grow our economy and create economic opportunities for all families. While doing so, we've got to support other efforts that relieve the financial pressures facing the American people.

Literally just a few thousand dollars can make a huge difference in helping families secure sustainable housing. That's what makes the Affordable Care Act so important.

I've been talking about the ACA across the country, and some wonder why the HUD Secretary is talking about health care. I know that no such questions are being asked here.

That's because you know that health and housing are closely linked. Those who are already insured will see their health care costs drop, giving them more resources to secure quality housing.

For those who aren't insured, they can now gain access to affordable, quality coverage and protect themselves from the unexpected medical costs that can force them to miss payments and lose their homes.

So the Affordable Care Act is good news for all of our work and people are already benefiting. Because of the ACA, a person can now be on their parents plan until they are 26. Seniors can now save hundreds of dollars on prescription drugs because of deeper discounts. Families can now stop worrying about the lifetime limits that forced people to lose coverage in the past.

Unfortunately, as you all know, the website has been a frustrating experience for many users. I'm upset about it. The President is very upset about it. And teams are working 24/7 to get it working at full capacity.

The good news is that the website is improving and will be fixed. The even better news is that, in the larger picture, families now have access to affordable health care.

So I encourage you to reach out to the health insurance navigators in the communities where you have housing, and create partnerships to help others enroll. Doing so will save lives and money, and that's good for all Americans.

Tax and Housing Finance Reform

What's also good for communities is building a rock-solid housing finance system for the future that maintains a balance between opportunity and responsibility, preventing a crisis of this magnitude from ever happening again, while ensuring that credit is available to all responsible families.

It's no secret that decisions made in the next few months could impact all of our work for many years to come. That's why the President is pushing for fairness.

I was proud to join him in Phoenix in August when he outlined his plan to build a rock-solid housing finance system for the future, with opportunity and affordability serving as key pillars.

This system is guided on four core principles:

• That private capital should be at the center of this new system.
• That we need to wind down Fannie and Freddie and put an end to their "heads we win, tails you lose" model.
• That we ensure widespread access to safe and responsible financing like the 30-year mortgage.
• And to reiterate: that affordability and access-both for home ownership and rental housing-remain unshakable tenets moving forward.

Specifically on this last point, the President's plan stressed that a new housing finance system should support the liquidly and stability of multifamily rental housing financing through both ups and downs.

As you've shown in recent years, you are so valuable during the downturns that we must ensure you have the flexibility and strength to rehab and construct properties that produce affordable housing.

To compliment this work, it is critically important that affordable housing advocates make clear that housing finance reform yield a major, multi-billion dollar fund for the production of affordable rental housing.

As you know, this is something the Administration has long fought for, and we'll continue to fight for as long as it takes. Naturally, this will require action from Congress.

I know what you are all thinking: after the recent shutdown, what makes Shaun Donovan think that there can be movement in this area? Well, when you look at the shutdown, and set your sights past all the politics: nobody won.

It's clear that wild brinksmanship does not pay. So moving forward, I am hopeful that partisanship will give way to partnership, and that there is a chance to do big things over the next few months.

Historically, housing has been a source of common ground. President Truman and Senator Taft worked together on the Housing Act of 1949. Ed Brooke and Walter Mondale worked together to produce landmark housing legislation decades later. And similar bipartisan efforts have sprung up in 2013.

Earlier this year, the Bipartisan Policy Center came out with a report that helped set the stage for a grownup conversation in Washington, DC about housing finance reform. I am also encouraged by the bipartisan progress we've seen in Congress on this issue.

So it is time for all parties to finally make reform a reality. We know that the Senate Banking Committee is working on housing finance reform. By early December they will have held right hearings on everything related to housing finance - from structure to affordability to transition.

We need work with the Committee and the Senate to keep the momentum going so that we can get a bipartisan agreement by the end of the year, and see legislative action early next year.

The time to make our voices heard is now. Let's keep up the pressure to put housing finance reform at the top of the legislative agenda.

I also urge you to make yourselves heard during the debate about tax reform. This is a system that has long been broken with the well-off utilizing loopholes that aren't available to the average family or small business.

I'm sure most Americans agree that it is time to bring some fairness back to the system. But as Congress takes on this effort, it's important that we don't throw the whole thing out - the good with the bad.

Instead, we've got to ensure that those tax tools that are working-and enhancing opportunity for all-remain cornerstones of whatever new system develops.

One of these important tools is the Low Income Housing Tax Credit. All of us here know how important the LIHTC has been in increasing the supply of affordable housing. That's why the President and I have championed it time and again, most recently, calling on Congress to continue to support this tool as part of his housing plan announced in August.

I know you have been doing the same and I urge you to keep it up. Contact your congressional delegation, particularly those Members on House Ways and Means, Appropriations and the Financial Services Committee.

Remind them how important these projects are. Get them out to the groundbreakings. Let them know that not only do we need to keep the LIHTC, we need to expand it in order to better address the needs out there and provide more flexibility for the credit.

Doing so will go a long way in advancing our cause. And I pledge to stand with you every step of the way.

Conclusion

I am committed to doing so because, as I said earlier, creating affordable housing is about opportunity.

Giving those hurt by the crisis the opportunity to get back on their feet. Giving those living in poverty the opportunity to reach the middle class if they work hard and play by the rules. Giving families the opportunity to secure a better future for their children.

That's why I'm committed to working with all of you to secure these opportunities by making it easier for you to do business with HUD, giving all families the tools they need to thrive and fighting for a future that makes affordability a pillar of tax and housing finance reform - not an afterthought.

These are goals I know we all share. I know we will all strive to make them a reality. We know this won't be easy. But, the affordable housing community isn't about doing things because they are easy.

It's about doing things because they are right and just. I look forward to working with all of you in continued partnership for many years to come.

Together, I know we will shape a fairer and more affordable future.

Thank you.

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