HOUSING POLICY

NEWS ANALYSIS

Jackson's Resignation: Opening New Chapter at HUD?

AFFORDABLE HOUSING FINANCE • May 2008

BY ANDRE SHASHATY

A troubled era in the 42-year history of the Department of Housing and Urban Development (HUD) ended when Alphonso Jackson resigned last month as the agency's 13th secretary.

Jackson kept a fairly low public profile for several years after joining the agency as deputy secretary in 2001. After taking over as secretary from Mel Martinez in 2003, he emerged as the lead spokesman for President Bush's two primary housing policy efforts: increasing homeownership, especially for minorities, and ending chronic homelessness.

Jackson began facing allegations of unethical and possibly illegal conduct at about the same time that the number of subprime mortgages in default or foreclosure began to increase, and just as the housing "bubble" began to deflate.

A barrage of questions about Jackson's role in HUD contracting decisions was unleashed in April 2006, when his remarks to a group of business people in Dallas were reported in the Dallas Business Journal by Christine Perez.

The newspaper quoted Jackson as saying he had canceled a contract after the contractor said he had a problem with President Bush: "Why should I reward someone who doesn't like the president, so they can use the funds to try to campaign against the president?" Jackson said. "Logic says they don't get the contract. That's the way I believe."

HUD typically awards more than $1 billion in contracts per year. In 2005, only 25 percent of HUD contract awards were made through full and competitive bidding.

In the aftermath of the story, several members of Congress called for his resignation, and the HUD inspector general (IG) conducted an investigation. The IG reported that two top officials said Jackson had in fact directed senior staff to consider the political affiliation of contractors when awarding contracts. The IG also found that Jackson had personally intervened to block several contract awards to firms run by people who support the Democratic Party.

AFFORDABLE HOUSING FINANCE magazine published a series of articles on the problems with Jackson and with HUD ("The Trouble with HUD and How to Fix It," June and July 2007). The series was recognized with the Jesse H. Neal Award from the American Business Media this year.

Later articles in AFFORDABLE HOUSING FINANCE quoted current and former HUD employees who said it was common practice among mid-level HUD staffers to give contracts without bidding to companies that were run by personal friends or former HUD staffers-without regard to their qualifications and without competitive bidding.

AFFORDABLE HOUSING FINANCE also reported that both the Government Accountability Office and the IG have issued reports during Jackson's tenure at HUD saying that procurement practices are very poor, that established procedures are not followed, and contractors are not often evaluated.

In its press release announcing his resignation, HUD took a stab at giving Jackson credit for promoting homeownership. It said, "Today, more than 75 million Americans are homeowners, including 3.5 million minority homeowners since 2002."

The press release failed to mention that the rate of homeownership peaked at 69.2 percent in the fourth quarter of 2004 and dropped to 67.8 percent by late last year. In other words, it was very close to the same level as when Jackson took office.

In 2002, Bush announced that he wanted to increase minority homeownership. In that year, Census data showed that African-Americans had a 48 percent rate of homeownership and Hispanics a 47.6 percent rate. In 2007, the rate for blacks declined to 47.2 percent. The rate for Hispanics increased to 49.7 percent.

The HUD press release also gives Jackson credit for overseeing "a national movement to redevelop public housing around the country into better, affordable, and safer mixed-income communities."

It fails to mention that under Jackson's tenure, the Bush administration has proposed several times to terminate funding for the main program used to redevelop public housing into mixed-income housing, the HOPE VI program. Jackson also presided over steep shortfalls in operating subsidies for public housing.

Industry leaders told AFFORDABLE HOUSING FINANCE strong new leadership is needed to get HUD back on track.

"It will take some time for HUD to recover from the damage inflicted by the Bush administration, especially during Jackson's tenure," said Sheila Crowley, president of the National Low Income Housing Coalition. "Vouchers, public housing, project-based Sec. 8, Community Development Block Grants - all have been weakened by the policies and practices under Jackson. One only need look at the abysmal state of low-income housing on the Gulf Coast two and a half years after Katrina to understand the lack of leadership at HUD in recent years."