GRAPEVINE

How to Fix HUD

BY ANDRE SHASHATY

AFFORDABLE HOUSING FINANCE • FEBRUARY 2008

There are so many serious problems at the Department of Housing and Urban Development (HUD), it’s hard to know where to focus to trigger fundamental change.

The place is like a derelict ocean liner, low on power and very hard to steer. New leadership is needed, but even the most dynamic new secretary of HUD would find it hard to effect major changes through good management alone.

After many conversations with veteran HUD watchers, I think I have found two ways to jump-start fundamental change in the agency that are feasible from a political as well as a practical standpoint.

First, we need to solve HUD’s identity crisis by making it clear the agency does not exist to regulate the real estate industry, but to facilitate provision of affordable housing, to help revive and develop American communities, and to help solve the land-use dilemmas at the core of the housing affordability crunch.

Second, we need to give the people at HUD a new working environment with a much different mind-set and much better tools to work with. In short, we need to give them a fresh start.

It finally occurred to me that the fundamental problem with HUD is a lack of a clear mission. The agency does not know whether it is a regulatory body or a facilitator and financier of real estate transactions or a generator and disseminator of ideas on development issues.

People have talked about splitting the Federal Housing Administration (FHA) out from HUD and letting it operate as a government- owned corporation. That is the wrong answer. It’s not FHA’s deal-making capability that should be taken from HUD, it is the agency’s regulatory functions.

Fair housing should be handled by the Justice Department; it’s where the big cases go anyway. The Real Estate Settlement Procedures Act should be enforced by the Federal Trade Commission. Lead-based paint issues should be handled by the Environmental Protection Agency.

If these functions and possibly others were removed while HUD staffing levels were maintained, the agency might have enough people to do the job it was created to do. It might also have a much more positive approach to that work.

For some reason, the culture of a regulatory agency permeates HUD. Even in offices charged with development rather than regulation, HUD employees show a marked tendency to be suspicious and punitive. They try to kill deals, even if only by delaying them. They have no incentive to take any chances or even to make prompt decisions.

That might change, if it were made clear that HUD is NOT a regulator but a facilitator and financier charged with making things happen, not preventing them.

It should also be made clear that HUD is a generator and disseminator of information on housing and community development.

HUD’s Office of General Counsel had a budget of about $100 million a year in 2006. By contrast, the budget in the same year for all the agency’s policy development and research was just $31 million.

It’s harder to achieve my second goal of giving HUD staff a fresh start, but it’s not impossible.

I know the HUD building in the southwest quadrant of Washington, D.C., is just concrete and steel, but I also know that a pleasant, efficient working environment is a crucial ingredient to an organization’s effectiveness. And anyone who has been inside the HUD building knows it’s a stultifying prison of a building.

The place is inextricably linked to an inefficient way of doing business and an outmoded approach to housing and urban issues. Its systems are antiquated, and a new start would probably be cheaper than fixing them in the long run.

It’s also a direct physical reminder of the failures of this country’s urban policies. It was built in 1968 in the now widely disliked “brutalist” architectural style as part of the “urban renewal” of the neighborhood. As was the case in so many other cities, acres of affordable homes and small shops were bulldozed in the name of “slum clearance.”

That’s why I believe the best way to give the agency a new start is to abandon that building. Let’s cut our losses and move the agency’s headquarters staff to a new building, preferably something with glass curtain walls to help usher in a new era of openness and transparency in HUD decision-making.

Of course, new and more flexible programs are needed. Increases in funding would be great. But none of that will do much good unless the agency itself can be resurrected, with new people, new attitudes, and new ways of doing business.

After 40 years, it’s time to own up to the inherent flaws in this agency and demand radical change. Maybe you have already decided you will never deal with the department again, but think what could be accomplished if the agency was revitalized. It is possible, if we all work toward that goal.

What do you think needs to be done to fix HUD? Write to me at ashashaty@hanleywood.com.