Affordable Housing Finance

HOUSING POLICY

HUD Update

What’s Ahead for Donovan

AFFORDABLE HOUSING FINANCE • March 2009

Battling foreclosure crisis at top of new HUD chief’s priority list

BY BENDIX ANDERSON

WASHINGTON, D.C.—Shaun Donovan has promised to make the foreclosure crisis “job one” in his role as secretary of the Department of Housing and Urban Development (HUD). And that’s just the beginning: HUD will address rental affordable housing, be more accountable to Congress, and take a larger role forming U.S. housing policy, according to Donovan at his confirmation hearing Jan. 13 before the Senate Committee on Banking, Housing, and Urban Affairs. He was unanimously confirmed by the full Senate on Jan. 22.

Donovan, 43, promised a “bold and comprehensive plan” to prevent foreclosures, in part by making the HOPE for Homeowners program, which has helped just 100 homeowners facing foreclosure, more effective. He also said HUD will provide technical assistance to localities to help them use $3.9 billion in Neighborhood Stabilization Program funds to rehabilitate distressed, foreclosed housing into affordable housing.

Rental housing comes next on Donovan’s list of priorities, starting with the renewal of expiring Sec. 8 contracts in HUD’s rental portfolio. He also mentioned a $30 billion backlog of capital needs in HUD’s public housing portfolio. By making these properties more energy efficient, HUD could meet deferred capital needs and lower its operating expenses at the same time.

Donovan pledged to make HUD’s programs work more smoothly with the latest generation of housing programs like the federal low-income housing tax credit. In addition, he said he would strengthen contract oversight at the department, which has come under fire for the way it awards contracts to outside firms. He said he would also provide regular progress reports to the Senate. “I’m a numbers guy,” he said, promising to “make HUD a model of evidencedriven government.”

Larger role for HUD

At the confirmation hearing, senators voiced their high expectations that HUD will take a significant role in deciding U.S. housing policy—both by fighting foreclosures and by managing the financial crisis that foreclosures have helped to create.

“When the so-called ‘principals’ are discussing the economy, … I want to hear that you are there,” said Sen. Mel Martinez (R-Fla.) during Donovan’s confirmation. “Insist on a seat at the main table.”

Martinez said he believes that HUD also “unquestionably” has a role in regulating Fannie Mae and Freddie Mac. HUD should also have a role in distributing the remaining $350 billion of Troubled Asset Relief Program money, said Sen. Bob Casey (D-Pa.). “Any grant for further relief should include foreclosure prevention dollars—tens of billions of dollars,” he said.

Donovan himself called HUD “an agency with a critical role to play as government partners with the American people to overcome the greatest economic crisis we have faced in many decades.”