Obama Presidency Would Fully Fund CDBG and Restore Operating Subsidies

If elected president, Democratic nominee Sen. Barack Obama (D-IL) promises to fully fund the Community Development Block Grant (CDBG) program and restore public housing operating subsidies to their “original purpose” as part of a comprehensive Urban Policy Agenda. Obama is calling for an urban policy which calls for a stronger Federal commitment to cities by stimulating economic growth, increasing the supply and availability of affordable housing, improving safety within cities, and addressing urban poverty.

If elected, Obama promises to:

- Create a White House Office of Urban Policy with a director appointed to coordinate all federal urban programs. The director will report directly to the president.

- Increase the production of affordable housing by creating an affordable housing trust fund and reforming the Federal Housing Administration (FHA). (Legislation is currently working its way through Congress which creates a trust fund and to make revisions to the FHA. Obama supports the legislation);

- Provide an additional $10 billion in additional authority for mortgage revenue bonds (MRB). MRBs are tax-exempt bonds that state and local governments issue through housing finance agencies (HFAs) to help fund below-market-interest-rate mortgages for first-time qualifying homebuyers. Eligible borrowers are first-time homebuyers with low to moderate incomes below 115 percent of median family income.

- Provide a ten percent universal mortgage tax credit for up to 10 million middle-class homeowners who do not itemize their taxes and thus do not receive a mortgage interest tax deduction.

- Ensure funding is provided for any mandates imposed by the Federal government.

- Increase funding for business development and infrastructure improvement;

- Create a National infrastructure Reinvestment Bank to enhance Federal transportation efforts;

- Create 20 Promise Neighborhoods where comprehensive services are available to address deeply entrenched concentrations of poverty; and,

- Create a prisoner-to-work program modeled after the welfare-to-work program to assist ex-offenders find employment after their release from prison.

For a comprehensive list of the initiatives proposed by the senator go to http://www.barackobama.com/issues/urbanpolicy/.

Analysis

The senator is proposing an ambitious urban agenda which, in addition to be very costly, raises almost as many questions as the issues it attempts to solve. The most important component of this agenda is simply this: he is placing a priority on urban America. That can not be underestimated in seeing some of these initiatives brought to fruition.

The creation of a White House Office of Urban Policy, designed to “coordinate all federal urban programs” with its director reporting to the president seems to diminish the role of the Secretary of Housing and Urban Development (HUD). How the two offices coordinate will be critical to the success of these urban initiatives. In the Washington, DC world of politics one has to assume the office in the White House, the seat closest to the president, will have greater authority. The office is also expected to ensure federal dollars are spent on the “highest-impact programs”. It is unclear if this means deeper targeting in some programs or performance-based funding.

Obama’s initiatives are clearly focused on the low and very-low income households. It is not unreasonable for supporters of programs such as CDBG and HOME to brace for efforts to secure deeper targeting of those funds. In calling for full funding for the CDBG program, he hopes to restores cuts to the public housing operating subsidies but does not specify to what levels. There is nothing in his document which stipulates fully funding operating subsidies. It is also unclear how HUD programs will be restored to their “original purposes”.

The creation of a housing trust fund and a new FHA are likely to occur before the close of the current legislative calendar. While an increase in MRB authority would be welcomed, it is unfortunate his agenda does not call for an increase in low-income tax credits. An increase in tax-credits would spur additional production and provide housing relief for working families.

While it is encouraging that Senator Obama is creating an urban vision for the country, there are significant hurdles to overcome. The relationship between the White House Office on Urban Policy and HUD could be too traumatic for its own good. The same holds true for the Departments of Transportation, Commerce, etc. Personally, I think establishing the White House office is a mistake. It makes more sense to provide HUD with greater resources and flexibility to allow communities to meet the needs of their community. While Obama’s rhetoric will sound encouraging to those in the housing and community development field. The reality and experience suggests there may be some improvements but not enough to over turn the damages done due to reduced funding and lack of flexibility over the last eight years. It is also important to note: Obama is not planning to increase funding to these urban initiatives. He recently delivered a speech to the United States Conference of Mayors in which he indicated that while he will be a friend to them, not to expect additional revenue. The revenue must come from "the bottom up".

(Next week a look at Republican nominee Sen. John McCain’s housing policy.)

Q&A with Conrad Egan, President and Chief Executive Officer of the National Housing Conference (NHC)

Conrad Egan is the President and Chief Executive Officer of the National Housing Conference (NHC). Mr. Egan is the President of the National Housing Conference. He served the United States Department of Housing and Urban Development (HUD) as Director of the Office of Multifamily Housing Management and later as Special Assistant to the Secretary of HUD. He served as Executive Vice President of NHP Inc., one of the Nation’s largest multifamily property owners and managers. He also served as the Executive Director of the Millennial Housing Commission. He is currently serving as Chairman of the Fairfax County Redevelopment and Housing Authority, and on the Boards of the Community Preservation and Development Corporation and the Open Door Housing Fund. For more than 75 years, the nonprofit NHC has been the United Voice for Housing (www.nhc.org). A membership drawn from every industry segment forms the foundation for NHC’s broad, nonpartisan advocacy for national policies and legislation that promote suitable housing in a safe, decent environment. NHC's research affiliate, the Center for Housing Policy, specializes in developing solutions through research. In partnership with NHC and its members, the Center works to broaden understanding of the nation’s housing challenges and to examine the impact of policies and programs developed to address these needs.

1. What do you think is the biggest challenge facing the housing community today?

To become relevant, once again, by connecting more to the middle class housing challenges while maintaining our commitment to lower income households and by reinventing our strategies to connect with the increasing creativity and political will at the state and local levels. We can achieve this by moving to an incentive and performance-based system which rewards state and local leadership and by joining with transportation, jobs and energy conservation strategies and opportunities.

2. Your organization has conducted a significant amount of research on the housing crisis facing working families. What must be done to ensure these families have decent, safe and affordable housing?

We need to significantly increase the availability of sites and other opportunities which increase the supply of workforce homes by better utilizing underutilized sites, fostering inclusionary zoning and reducing regulatory barriers.

3. As Congress seeks to reach an agreement on a housing bill to address the mortgage crisis, which provisions in the legislations under debate hold the most promise for affordable housing?

The legislation will provide funds to help stabilize impacted neighborhoods and retooling of the Federal financing tools to encourage and support broad-based loan and restructuring for challenged borrowers.

4. You participated in a retreat designed to develop a public housing agenda for the new administration, what is your reaction to the discussions at that meeting?

We need to increase the momentum to convert the public housing system from an abusive parent-child relationship to a contractual relationship between consenting adults. We need to couple this with connecting the public housing inventory to the world of real estate by attracting debt and equity capital from the investment markets through a transformative move to property/collateral based financing with a conclusive commitment to completely eliminate the capital backlog.

5. As you peer into your crystal ball, what does the future hold for affordable housing as we know it today? Will it change? If so, in what way? Will it stay the same? If so why?

The challenge of meeting the housing needs of extreme/very low income households will become harder as the budget noose tightens. But we must remain heroically committed to the goal. Opportunities to connect housing with transportation and climate challenges initiatives will increase and we must be strongly involved in those efforts. There will be more emphasis on improving the government sponsored enterprises (GSEs) and Federal Housing Administration (FHA) support of affordable housing through updated financing techniques and products. (GSEs are a group of financial services corporations created by the United States Congress. Their function is to enhance the flow of credit to targeted sectors of the economy and to make those segments of the capital markets more efficient and transparent. The Community Reinvestment Act (see June 11 posting) will be strengthened, expanded and updated. The national, state and local leadership will increasingly support good affordable homes for all Americans. The business community will recognize the importance of affordable homes and will become more involved.

Interesting Reads

Here is an article in the June 21, 2008 edition of The Washington Post which discusses the difficulty the budget situation will present to the new president.

http://www.washingtonpost.com/wp-dyn/content/article/2008/06/20/AR2008062002889.html?hpid=topnews

Here is a link to a recent three part series in The Washington Post on the credit crisis.

http://www.washingtonpost.com/wp-srv/business/creditcrisis/

Here is an article in the latest edition of New Yorker Magazine on what Sen. Hillary Rodham Clinton (D-NY) won by losing the Democratic nomination.

http://nymag.com/news/politics/47837/