Congress is expected to resume action on legislation (H.R. 3221, the Housing and Economic Recovery Act) which provides relief to homeowners facing foreclosure. Included in this
legislation is language creating a housing trust fund which provides resources for building of rental housing for extremely low-income house holds.
Congress deserves much credit for moving rapidly to address the mortgage crisis; however, it must also be scolded for not moving as quickly to address the affordable rental needs of many equally distressed families. While homeownership is an admirable goal, it is not one within reach of millions of Americans. They are still in need of affordable rental housing but the cost of rental housing is eerily creeping out of their reach as well.
The affordable housing crisis faced by renters is not new. The National Low Income Housing Coalition (NLIHC) has issued a report,
Out of Reach, which documents how much a family earning minimum can afford to rent in local markets. In its 2008 report, NLIHC found that a worker earning the minimum wage can not afford the national average fair market rent (FMR) of $900 a month. The FMR is an estimate of what a household could reasonably expect to pay for rent and utilities. This estimate is determined by the
Department of Housing and Urban Development (HUD). This same must earn an hourly wage of $17.32 to afford the national average rent. HUD’s worst case needs report determined over five million currently unassisted households face rent burdens which exceed 50 percent of their income. Additionally, the
State of the Nation’s Housing 2008 report released by the Joint Center for Housing Studies of Harvard University earlier this year stated a family with severe housing cost burdens have only $257 a month for food, $29 for clothing and $9 for health care.
Cuts to the public housing programs, the Community Development Block Grant (CDBG) program and the failure to provide sufficient vouchers for local communities has created a severe shortage of affordable housing units for low and extremely low income families. The housing trust fund will help, some what, to alleviate this problem. But, Congress must take the same proactive approach to meet the needs of families renting homes and apartments. Families in rental properties are impacted just as severely by the downturn in the economy as homeowners. The difference is homeowners carry greater political weight simply because they are homeowners.
Congress must make similar investments in programs which preserve and produce decent, safe and affordable rental housing. In the short term, this investment must include increases in funding for public housing, vouchers, the CDBG and HOME programs; greater flexibility for public housing authorities to develop mixed income communities modeled after the HOPE VI program; changes in the tax code which ensures more money is kept in the pockets of low income families; an energy policy which ensures low income families have access to heat and air conditioning when the need arises; and policies and programs which promote entrepreneurship and job creation in low income neighborhoods.
Long term, serious discussions must begin about drastically restructuring HUD. As long as the HUD Secretary is accountable to the president, and only the president, housing problems will persist in this country. There is no consistency from one administration to the next. Recipients of federal housing dollars must change their approach to administering these funds according to the priorities of each administration. This can be expensive and confusing. By making a few fundamental changes to how the Federal government oversees housing, we can increase the opportunity to successfully provide decent, safe and affordable housing for everyone.
First, there needs to be a housing czar similar in responsibilities and structure to the Board of Governors of the Federal Reserve System. The Federal Reserve Board consists of seven members appointed by the President and confirmed by the Senate to serve 14-year terms of office. Members may serve only one full term, but a member who has been appointed to complete an unexpired term may be reappointed to a full term. The President designates, and the Senate confirms, two members of the Board to be Chairman and Vice Chairman, for four-year terms. The terms of the restructured housing agency should be at least 10 years. This new structure will allow for consistency in planning, administration, funding and evaluation.
Second, there needs to be a consensus that housing is a necessity to establish a foundation for future success. I am not a proponent of housing as a right but I do believe without it the chance for success is minimized.
Third, there should be consolidation of programs. HUD contains too many departments and programs with similar responsibilities and little to no interaction. Consolidating programs and redefining their scope and responsibilities will not be popular and difficult to achieve but is necessary.
Fourth, there must be greater flexibility and responsibility given to local provides to adapt programs to local needs. A one size all approach simply does not work. Combining the best of both the CDBG and HOPE VI programs can provide a model for how these programs should be oversee by the federal government and administered locally.
Campaign 2008(aviewfromdc is seeking to inform its readers about the positions taken on housing and community development programs by those under consideration for vice president by Sen. John McCain (R-AZ) and Sen. Barack Obama (D-IL). In this issue we provide you with a snap shot of Minnesota Governor Tim Pawlenty (R) who is one name under consideration by McCain).
According to our sources in Minnesota, the governor is more supportive and knowledgeable about the issue than past governors. He has provided some helpful support for affordable housing but with the exception of $10 million to supplement cuts in public housing – just enough to prevent doors from closing – there has not enough support from the state for building affordable rentable multifamily units.
Pawlenty has been very supportive of addressing homelessness in the state. He has supported a model created his housing commissioner, Tim Marx, calling for homeless prevention as a state priority. A business plan was developed which calls for working with the Department of Corrections, and Human Services with the housing commissioner acting as the coordinator. It is a model which is being reviewed by other states.
While the homeless initiative has created discussion on the importance of the topic, it has taken some attention away from the affordable housing issues in Minnesota. There has been some administrative support for the programs and some flexibility to public housing agencies but not enough new resources or incentives to local governments for originating affordable housing as a homeless prevention vehicle. The governor is exploring a CD initiative which will provides funds for localities to match with money based on affordable housing needs.
Q&A with Kurt Creager, Principal, Housing Solutions, LLCKurt Creager founded
Urbanist Solutions LLC; which is a consulting and development corporation specializing in transit oriented development and development of mixed income, sustainable communities. The firm is active in five western states serving public and private clients, including housing agencies. Creager was CEO of the Vancouver Housing Authority in Vancouver, WA serving the communities in SW Washington for over 15 years. He led the development of 3,500 dwellings, helping transform the agency into a sustainable and dynamic local housing provider. The agency served as a community renewal agency and public development authority and was classified by Standard and Poor's as Strong with a Stable Outlook. Creager is the former chief of Housing and Economic Development for Metropolitan King County in Seattle. There he established the Housing Opportunity Fund, a debt and equity fund which has invested in over 9,000 affordable housing units in over 40 localities to date. He began his career in the private sector where he was responsible for land use entitlements for commercial, residential and industrial developments. Creager is past president of the National Association of Housing and Redevelopment Officials (NAHRO), Washington, D.C., and currently serves as the representative to the United Nations for NAHRO’s Non-Governmental Organization.
1. You recently left your position as the head of the Vancouver Housing Authority (VHA) to start your own business. How much has changed from when you started in this field? Housing Solutions After twenty-five years in the public sector I was ready for a change. The work was very rewarding and I never once regretted my career choice. My strengths however, are development and development finance. Therefore, I wanted to produce more housing with the gifts I have been blessed with. I wanted to push myself a bit harder to increase the scale of my development practice and work in multiple markets simultaneously. After serving as Senior Vice President for a private investment and development corporation in Phoenix, I created UrbanistLLC in 2007. To answer your question, when I attended a legislative briefing at the PNW Region Conference in Spokane, Washington this April, I was struck by the fact that some things have not changed much at all. HUD is still under funding local housing authorities and is squeezing them even more than was thought possible a couple of years ago. Embargoed administrative fees, capital funding and public housing operating fund shortfalls are creating a perilous situation in many localities. Some entities are at their wits end with this chronic under funding and are moving to divest their stock of public housing. Others are doing heroic work to sustain their local programs, often using local resources to do so while hoping for a more favorable national housing policy in the next administration. The most profound change, however, in the last two years was the downdraft in equity pricing because of the lack of demand in the market for low income housing tax credits, which occurred in the fourth quarter of 2007. This is a national problem and will persist until private corporations and Government Sponsored Enterprises (Fannie and Freddie especially) are again profitable, stoking their investment appetite. In the meantime, many good projects are not able to go forward because they have an equity gap. Unless they are located in a state or locality with redevelopment and/or housing trust funds, many of these projects are effectively dead in the water. Even if they are financially viable projects, they must be prepared to close in 30-60 days or risk added uncertainty from further repricing. Public and private developers alike took the availability of abundant capital a bit too much for granted and are learning some hard lessons as a result of not having exit strategies in place for each of their transactions. It is indeed a problem, but it will not last forever.
2. What advice would you give to someone just entering the profession? I recently accepted the position of Executive Director at the Arizona State University Stardust Center for Affordable Housing and the Family, which is part of the College of Design. As a result, and because I am a housing and community development practitioner, I will contribute what I can to their undergraduate Housing and Community Development Program and their Masters in Real Estate Development Program, as appropriate. These programs are well established and what I will aim to impart is a sense of value in public service by helping build sustainable communities and helping families succeed through the provision of well designed affordable housing. The Center itself utilizes several undergraduate, graduate and post graduate students on many design and research projects and they are a great source of enthusiasm and energy. Some of them are foreign students which enriches us as an organization as well. To a person, they are committed to environmental sustainability and design excellence. I would advise young professionals that any time of economic uncertainty is the best time to hone your professional skills. Use this slack time to be more professionally competent and, by all means, look for volunteer opportunities during this economic downturn. These experiences will be rewarded tenfold personally and professionally. ASU is a large institution, with over 64,000 students in a multi-campus setting. We call it a model for the New American University, because through Centers like the Stardust Center we are embedded into the community and are collaborating to create a more sustainable city and region. These students will have a profound and positive effect on our collective future and they need a chance to make a positive difference.
3. There are divergent views on how best to meet the housing needs of the extremely low and low income households. What do you think needs to be done to ensure this population's housing needs are met?I am a believer that people with low and very low incomes need to be included in mixed income properties which also include a mix of market rate and workforce housing options. This is a large part of my private development practice. As professionals, we know that this works. The body of evidence from HOPE VI projects supports this belief. The experience in Canada shows that when subsidized clients (Rent Geared to Income or RGI) constitute no more than 1/3 of the mix of units, the projects can be financially sustainable without long term operating subsidies. To make this a reality in the USA, however, involves a political compromise which needs to be accepted by advocates for the very poor. Not all the housing needs of low and/or extremely low income people can nor should be addressed within each project. That is because sustainable communities are not homogeneous, they are diversified economically. In this manner, projects can and will provide adequate net cash flow to provide good amenities as well as adequate replacement reserves without requiring a perpetual subsidy. Neighborhoods will accept well designed, well maintained/managed low income housing. They will resent and resist enclaves of the very poor which have proven to be unsustainable financially. We need to embrace local and national housing policy that makes mixed income housing development the norm in my opinion.
4. This is a two for one question. To what extent has the Department of Housing and Urban Development (HUD) been an asset and/or liability in serving the needs of local communities? If you were HUD Secretary for a day, how would you maximize its assets and minimize its liabilities?Thanks for such a provocative question. For the most part people within HUD chose their career to help people and make a positive difference in local communities. Trouble is, they have not been led nor managed well at all the last 7 1/2 years. That is not their fault, their aspirations have been cut short and their professional talents ignored or discounted. Nor is it a knock on Secretary Preston, I wish him well during his remaining term of office, because he seems to genuinely grasp the internal and external challenges at HUD. That said, many good people inside HUD have seen their career hijacked for ideological purposes and some of the best have simply left, dispirited. The agency has not been a reliable business partner with local governments and local housing agencies, the very organizations that deliver federal programs locally. Indeed the policy and practice within HUD has been to scorn and abuse/neglect the very partners in the local community which deliver the federal resources at the retail level. I cannot think of any other industry where there is as much antipathy between business partners who should be working towards a commonly held vision. American communities deserve better. Cities, Counties and local housing agencies have been victimized by HUD’s policies and practices. I would say states faith based non-profits and tribes have fared somewhat better, but the relationship needs to be totally remade across the board.
On the second part of your question, I hazard to say the collateral damage done by HUD would make community partners skeptical of any prospect for change because they are justifiably wary. That said, the Department has a role to play as the only cabinet-level agency with responsibility for urban policy. Here is what I would do in my time, if I were given the opportunity. First, I would release the unspent backlog of capital and operating funds immediately. The Gulf Coast Communities have been treated in a shameful manner. I would decentralize decision making to the regions and empower staff to make decisions, not excuses, by executive order. I would make public housing asset management a voluntary program for all local agencies and drop the overly prescriptive method HUD has exacted upon local communities. It exists as one model but should not preclude better local, state and private asset management models. I would contact Mayors of America’s ten largest cities and indicate we as a department have let them down by failing to lead a conversation on urban policy and invite their consideration of HUD as a reliable partner in the future. After lunch with HUD employees at someplace big like the Washington Nationals' Stadium, I would invite the Director of Veterans Affairs and Secretary of HHS to caucus about how best to move forward on addressing the growing needs of the homeless including veterans and people displaced due to the recent wave of foreclosures. The Department needs to make project basing of all rental assistance vouchers a local choice and to simplify the means to use available vouchers to help end chronic homelessness.
If invited, I would testify before Senator Dodd's Senate Banking Committee with key stakeholders from his home state of Connecticut and tell Congress what the unmet housing and community development needs of American Communities actually are instead of ignoring the legitimate role of Congress as an oversight body. During the hearing I would voice support, for an emergency Homeowners Bill of Rights which establishes mortgage forbearance (through the GSEs as regulated by OFHEO) for every owner occupied home in America until summer 2009, thereby granting a new administration adequate time to forestall mortgage foreclosures. I would also advocate for a companion effort to increase consumer disclosure of any short term variable interest rate mortgage products including secured home equity lines of credit, to try to prevent the resurgence of poorly documented loans.
After the hearing, I would direct the Federal Housing Commissioner to approve every available and complete mortgage insurance application pending approval, by 5 pm Eastern. Finally, in cooperation with the US Conference of Mayors and National League of Cities, at a joint conclave at the National Press Club, I would commit HUD fully to implementing an environmentally responsible building standard (for FHA-insured homes, HUD funded homes and manufactured housing nationwide) which reduces greenhouse gasses to a rigorous but achievable standard. Seattle Mayor Greg Nickels would receive special accolades for pressing the cities on the greenhouse gas and climate change issue. Buildings account for nearly 40% of the green house gas problem, therefore building standards can help alleviate the problem as well.
In parting, I would direct that any unspent administrative money within HUD's internal budget would be released for mortgage default counseling with instruction to the Regional Directors to spend the money before September 30, 2008. I would then go sailing on Chesapeake Bay and watch the sun set over the Blue Mountains.
5. You were very successful during your tenure with the VHA and have an international reputation for your work and vision. If you looked into your crystal ball, what does the future hold for housing and community development programs? I had a great Board, as well as political, community and business support in Vancouver. We accomplished a lot in fifteen years by completing a project on average every 8 months. I also need to credit the fine staff I had the honor of working with, because we accomplished a great deal together.
I am very optimistic about the future. US Senator, Patty Murray from my home State of Washington is fully cognizant about what appropriations are needed to improve local programs, and she is tenacious. There is bipartisan support for housing solutions that work, and no matter who is elected President, I think it is fair to say that there will be changes in how national housing policy and programs are administered. Money will remain tight but more can be done to create a sense of common purpose and to focus our energy on solutions not political intrigue and strategy.
I am very pleased that talented professionals continue to serve as elected leaders and invest their talents on our collective behalf. I would be remiss if I did not mention my good friends and colleagues such as Renee Rooker (NAHRO President), Kim Herman (NCSHA President), Michael Kelly (CLPHA President), Conrad Egan (NHC President) and Akinola Popoola (NAHRO Sr. VP) who will step up to the challenge of NAHRO President in 18 months. These people are tireless in their advocacy for local communities and housing and community development practitioners, which bodes well for the future. I know our profession is in capable hands, because of the high caliber of these individuals and the staff of each of the professional associations.
The national trend for more progress in green building standards means that we housers can be at the cutting edge of domestic policy, if we show leadership on environmental standards and smart growth strategies. Local homeless prevention strategies are indeed working. Successful local and state strategies need to be replicated with increased funding for permanent supportive housing and services, especially as more combat veterans need housing and services.
I am reminded by why most of us entered this field in the first place and that is because we wanted to make a positive difference. That opportunity exists today, if we agree to move forward together as a country. Tomorrow will be a brighter day indeed.
Interesting readsHillaryland at War by Gail SheehyFairfax Will Buy Foreclosed Properties, Affordable Housing Is Part of Focus in Doling Out of Aid by Amy Gardner
11:16 PM
Julio Barreto
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