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National Multi Housing Council
Meeting of The Board of Directors

Remarks as prepared for delivery by
Secretary Mel Martinez

Tuesday, May 20, 2003

Thank you, Doug, for your very kind introduction.

I appreciate the leadership that you and Doug Bibby have brought to the National Multi Housing Council, and your commitment to working with local communities to create more affordable housing opportunities for America's renters.

For more than a quarter century, the Council has been helping this nation meet its housing needs. I am glad to have the opportunity to share my thoughts with you this morning about what lies ahead for the multifamily housing industry - if not for the next 25 years, at least for the next two or three.

Your industry is critical to the strength of the American economy. Where many sectors have performed below expectations over the past two years, the housing market has remained extremely strong. Housing was key to bolstering our economy in the months following the terrorist attacks of September 11, 2001. Housing has helped to cushion many areas of the country from recession.

Still, I know this is a trying time for the multifamily industry. When the economy is weak and job growth slows, so does the demand for apartments. This is one of the many reasons why the President's plan for stimulating economic growth - with its focus on creating and securing jobs, accelerating and sustaining our recovery, and increasing the standard of living for workers - is one of our top priorities.

As the President said just last week, "This is a country where if you've got a dream and are willing to work for it, you can achieve that dream. And we've got to keep that entrepreneurial spirit strong in this great country."

The United States Congress needs to pass the President's Jobs and Growth plan so that people can get back to work.

Since my appointment to HUD, I have spoken passionately about the importance of increasing homeownership, especially among minorities - and I make no apologies for it. Expanding the ranks of the nation's homeowners will continue to be a priority for this Administration because the economic benefits of homeownership to families, communities, and to the nation as a whole are too profound to ignore.

Having said that, I know that we cannot meet today's housing challenges through homeownership alone. A great - and growing - need exists for affordable rental housing, too. We are dedicated to meeting this need; while our rental housing efforts may not generate the kind of headlines some of our homeownership initiatives do, it remains a critical part of HUD's mission.

Not only do we need rental housing, but a growing number of Americans want it. As lifestyles have gotten busier, young professionals and empty-nesters who could afford to buy are choosing to rent instead. They want the conveniences, amenities, shorter commutes, and financial freedom it gives them.

Communities as a whole benefit when renters are part of the housing mix. Apartments help to create pedestrian-friendly neighborhoods. Apartments can provide teachers, police officers, and fire fighters with housing they can afford in the towns where they work. Apartments make economic contributions by creating jobs and supporting local businesses.

To build more successful communities, I have stressed that we must balance our nation's housing policy to recognize the importance of apartments. HUD is committed to achieving this.

In fact, we have already taken steps that are dramatically boosting the supply of affordable multifamily housing.

Last year, FHA lowered the annual mortgage insurance premiums on its largest new apartment construction program. We believed this would provide the industry with stable financing at a much lower cost, while encouraging thousands of new rental opportunities across the country.

It worked.

This year, FHA will reduce the basis points even further - from 57 to 50. With this reduction, we estimate that the program will insure $3 billion in apartment development loans, spurring the annual production of an additional 42,000 rental units. Most of these will be affordable to moderate-income families, and most will be located in underserved areas.

This move follows the 25 percent increase in the loan limits for FHA multifamily insurance the Administration initiated in 2001. The increase was the first in a decade. Soon after it took effect, we began to see an increase in affordable housing development throughout the nation, especially in high-cost areas where related programs had not been used for several years.

So far this fiscal year, HUD has insured $1.2 billion - and 100 projects - through the primary program supporting new construction and substantial rehabilitation. Overall, we are on pace to match last year's record level of multifamily insurance commitments of almost $8 billion.

Our commitment to affordable housing production continues in the Fiscal Year 2004 budget, in which we have proposed a five percent - or $113 million - increase in funding for the HOME Investment Partnerships program. HOME is one of HUD's major tools for helping communities to meet housing-affordability needs. The program is popular because of the flexibility it provides to ensure local decision-making.

Overall, HOME will make $2.2 billion in funds available to HUD's state and local partners to help finance the costs of land acquisition, new construction, rehabilitation, down payments, and rental assistance.

The mainstay of HUD's community and economic development programs is the Community Development Block Grant. Communities can take advantage of its flexibility by using their CDBG funds to create and support rental housing. Next year, we are funding the program at $4.4 billion.

I know the Council is concerned about the underutilization of Section 8 Housing Choice vouchers - and so am I. The solution the Administration has proposed for the coming fiscal year would reform the voucher program by converting it to a state-run block grant called Housing Assistance for Needy Families, or HANF.

There are a number of advantages to providing voucher funds directly to the states.

For the families who rely on vouchers, turning over administration of the program to the states will lead to improved service. Communities will have new flexibility to meet local needs and begin addressing the underutilization problems that have occurred in certain local markets. HUD will manage fewer than 60 grantees versus the 2,600 we manage today, which means the administration of the program will run more smoothly.

The states proved up to the challenge when the 1996 welfare reform law shifted funding to the states through a block grant approach. We believe that the states are ready to take on this challenge, too. In the meantime, I have heard your concerns and want you to know that we are committed to making the voucher process as effective as possible for everyone involved: the housing industry, government on the state and federal level, and those whom the program serves.

I am a strong advocate for letting state and local governments do their work with a minimum of federal interference. But one of HUD's greatest challenges is educating communities that their housing affordability problems are often rooted in local housing codes and other municipal regulations. These barriers can add thousands of dollars to the cost of land and construction.

I know the regulatory issue is a great frustration to your industry.

It is no accident that many of the cities facing affordable housing shortages also have the tightest restrictions on growth. Boston, for example, is the third most expensive housing market in the nation. According to a report published by the Rappaport Institute for Greater Boston, a major cause of the city's affordable housing shortage is what the report calls "the almost impenetrable thicket of barriers formed by Massachusetts state and local regulations."

HUD is working to help communities understand that if they erect barriers to apartments, whether intentionally or not, they put their own economic prosperity at risk.

As some of you might know, I began my government service at the county level, as the elected Chairman of Orange County, Florida. I came to HUD with an appreciation of the burdens that regulatory barriers place on the availability of affordable housing. On my watch, HUD is committed to working with states and local communities to break down these barriers.

We have already unveiled new tools they can use.

The Regulatory Barriers Clearinghouse we rolled out last fall gives builders and developers a place to share ideas and solutions for overcoming state and local regulatory roadblocks. HUD is also creating a new Office of Regulatory Reform. Through it, we will spend an additional $2 million next year on research efforts to learn more about the nature and extent of the regulatory problem.

Our Administration is committed to asking how we can encourage - not discourage - market forces to create affordable housing.

As you know, since 9/11, some lenders have been requiring multifamily properties to secure terrorism insurance as a condition of the mortgage. But the high cost of coverage has put a financial strain on existing properties and discouraged the construction of new properties.

In response, HUD is preparing to publish a proposed rule for public comment that says FHA will not require insurance against acts of terrorism for new multifamily projects with mortgage amounts under $50 million. Most importantly, the proposed rule will help reduce costs for existing and future FHA-insured multifamily properties, encourage new construction, and stimulate local economic activity.

We will soon be taking another step to help you work better with HUD� and help us reduce errors in the administration of HUD rental assistance funds. For the first time in 20 years, we have rewritten and updated the Occupancy Requirements Handbook to incorporate new legislation, policies, and procedures. I know this is something the multifamily industry has been waiting for - and after two years of work on it, we are eager to release it next month and get it into your hands.

In closing, let me say that the federal government, consumers, and the housing industry are linked by our mutual goal of creating housing opportunities for more Americans. We should be proud of our accomplishments over the past two years, but we cannot rest on them. We have much more to achieve together, and our best hope of being successful is to work in close concert with each other� guided by the same high standards and principles, and motivated by the same goals.

In that way, we will continue to open up our communities to new opportunities for growth and prosperity.

Thank you.

Content Archived: March 16, 2010

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