New HUD Same as Old

U.S. Department of Housing and Urban Development Secretary Shaun Donovan recently gave a speech in New York in which he spoke of a “new direction in housing.” If there’s one constant with cabinet secretaries, it’s that they all promise that their department will be new and improved. The following are a few of Donovan’s lines that deserve comment.

The Federal Housing Administration is providing another critical bridge to economic stability…And with nearly half of first‐​time buyers using FHA loans, it is clear that the FHA has been central to recovery.

Thanks to his predecessor, Alphonso Jackson, who was “absolutely emphatic about winning back our share of the market,” the FHA’s willingness to pick up the subprime lending slack when the housing bubble burst has opened the door for a potentially huge taxpayer bailout. In fact, the government hasn’t just come to dominate the housing finance market — it practically is the housing finance market. Thus, there are plenty of doubts as to whether the housing “recovery” Donovan speaks of is sustainable without the government crutch.

In crisis comes enormous opportunity for change — as Rahm Emanuel says, ‘a crisis is a terrible thing to waste.’ Ensuring we don’t starts with getting the government back into the business of building and preserving affordable housing. Homeownership is incredibly important. But if this crisis has taught us anything, it’s that it is long past time we had a balanced, comprehensive national housing policy – one that supports homeownership, but also provides affordable rental opportunities, and ensures nobody falls through the cracks.

Like his boss, Donovan’s use of the word “change” is just a euphemism for bigger government. His contention that the government needs to get “back” into affordable housing is laughable. When did it leave?

This crisis has illustrated that only the Federal government has the scale and mechanisms to deal effectively with some of the forces that caused it.

It was the federal government’s “scale and mechanisms” that helped cause the crisis! Only powerful institutions with national “scale” such as the Federal Reserve, Fannie and Freddie, and HUD had the power and potential to create such a nation‐​wide bubble, bust, and recession. Donovan wants the arsonist to put out the fire.

The Federal government can be a key partner in helping communities foster the kinds of synergies between housing, education, public safety, and health you’ve helped nurture at the neighborhood level.

Words like “synergy”, “nurture”, and “foster” are vacuous bureaucratic rhetoric. They are supposed to imply that the federal government can turn decaying urban centers into utopias with gobs of taxpayer money and bureaucratic meddling. That’s just bunk.


In my recent paper on three decades of scandals, mismanagement, and policy failures at HUD, I show that little has changed at HUD other than the individuals occupying the throne. The history of Shaun Donovan’s tenure is yet to be written, but his speech makes me pessimistic.