Progress Report: Department of Housing and Urban Development

Overview

First Lady Michelle Obama joined HUD Secretary Shaun Donovan at HUD headquarters.

Shaun Donovan, Secretary of Housing and Urban Development, took office during a nationwide economic crisis triggered by a nationwide housing crisis. For the first three months of the Obama Administration, Secretary Donovan and HUD focused on tackling these twin crises through two measures: the Obama Administration's housing plan to attack the root of the crisis; and HUD's charge within the American Reinvestment and Recovery Act to help jumpstart the economy, make lasting investments for economic growth, and create much-needed jobs.

• Restoring HUD's leadership by ensuring access to safe, decent, and affordable housing nationwide;
• Rebuilding communities, metropolitan and rural, that have declined over years of neglect, into multi-income communities of opportunity;
• Going green to catalyze energy-efficient housing and sustainable growth; and
• Remaking HUD as a model for innovation and responsibility in government.

The push forward in these first 100 days reflects President Obama's resolve that his Administration must plan for the future as well as respond to crisis. So HUD has begun, in these first 100 days, to lay the foundation for the change President Obama promised to the American people: forming partnerships across the government to fight mortgage fraud; stabilizing regions still reeling from long-passed disasters and a legacy of federal ineptitude; and finding new leverage points to build sustainable communities and revive isolated enclaves of poverty and dysfunction.

Some of these missions will wrap up soon - early Recovery Act funds will be distributed swiftly to halt the vicious cycle of job loss. Some will make their greatest impact after this Administration has ended. New crises will demand attention, and enduring priorities will require persistent focus. But as the challenges before us change, the urgency with which we have tackled them will not. Significant work lies ahead, but in this time of crisis, we have charted a strong new direction for HUD.

The American Recovery
and Reinvestment Act

Reaching President Obama's Recovery Act goals

The $13.6 billion Recovery Act investment in HUD programs reflects the principal goals of the Act: to generate jobs in the near term; to lay the foundation for long-term economic growth, through investments in areas like energy efficiency; and to help families and communities hardest hit by the economic crisis.

The $4 billion of American Recovery and Reinvestment Act (ARRA) support for the Public Housing Capital Fund, along with $510 million to renovate Native American Housing and $250 million to conduct energy retrofits of Assisted Housing, provide powerful vehicles for the Recovery Act's economic recovery goals because they begin quickly, are labor-intensive, and create local, American jobs where they are needed most - jobs that can't be exported, and that help stabilize low-income communities with the highest unemployment rates. These projects will also serve long-run Administration goals by creating lasting neighborhood benefits and retrofitting housing to make it more energy efficient - saving American families money on their energy bills and reducing greenhouse gas emissions.

HUD's Recovery Act projects are built to create change quickly by supporting shovel-ready projects. The Tax Credit Assistance Program will accelerate the production and preservation of tens of thousands of units of affordable housing through a $2.25 billion investment to unstick projects frozen for lack of private investment due to the credit crunch. HUD's Community Development Block Grants will also hit the streets swiftly, with $1 billion to help local governments rehabilitate affordable housing and improve key public facilities. And by achieving full 12-month funding for Section 8 project-based housing through our $2 billion Project-Based Rental Assistance program, we will enable owners to undertake much-needed project improvements to maintain the quality of this critical affordable housing.

Further investments directly into communities will help families who have borne the brunt of the economic downturn. The $2 billion Neighborhood Stabilization Program will be used to stabilize and revive local neighborhoods and housing markets with heavy concentrations of foreclosed properties, and the $1.5 billion Homelessness Prevention Fund will assist the vulnerable families and individuals who are on the brink of homelessness or have recently become homeless, helping to stabilize their lives as larger Recovery Act investments begin to turn the economic tide.

Swiftly jumpstarting the economy

For Recovery Act investments to jumpstart our economy, funds must be distributed swiftly as well as accountably and transparently. That's why new and existing HUD staff joined together in an unprecedented push to allocate by formula, only a week after President Obama signed the Act into law, $10 billion of HUD's $13.6 billion in Recovery Act investments to states and localities - of which over $4 billion has already been obligated. Notices for the remainder of the funding, available competitively, have already been released, or will be released over the next month - the first step towards distributing those funds.

Protecting taxpayer investments

HUD is taking unprecedented steps to ensure responsible spending under the Recovery Act, particularly for programs and grantees with higher risk factors.

The flexibility accorded to states and localities by the Community Development Block Grant (CDBG) statute increases the challenge of ensuring spending on projects that provide a foundation for long-term economic growth, while balancing short-term job creation needs. The President has made clear to local governments that they must invest in prudent projects, so HUD has reached out directly to recipients and emphasized the importance of responsible spending, strengthening the language in the CDBG funding notice to stress the goals of the Recovery Act. When HUD receives spending plans from CDBG grantees, we will publish the list of proposed projects on our Recovery website, and hold imprudent plans for the maximum allowable time to enable public scrutiny before approval. If state and local agencies propose projects outside the goals of the Recovery Act, our staff will address it with them directly, and highlight those projects publicly to provide examples to the public and to other grantees.

HUD has also implemented a "zero-tolerance" oversight policy for troubled Public Housing Authorities (PHAs) receiving funding under the Recovery Act. Housing authorities will receive heightened levels of technical assistance, and won't be able to spend Recovery Act funds without formal HUD review and approval. Any significant delays in a troubled PHA's ability to pass this review will result in funds being reallocated to other housing authorities.

To ensure that Recovery Act investments are transparent, accountable, and effective, HUD will host cost-saving online webinars with grantees and practitioners across the country, and invite them to engage in live Q&A while watching the presentations through a webcast - an innovative way to save money on travel and reach as many people as possible.

Impact of Recovery Act investments

Recovery Act investments in HUD programs will create or save American jobs, heal communities blighted by foreclosures, reduce our nation's energy use and greenhouse gas emissions, and save American families significant money on energy bills. Through our $2 billion Neighborhood Stabilization Program (NSP), grantees will acquire and rebuild homes, fund down payments for additional properties, and demolish thousands of decaying structures that endanger communities and drive down home values - reaching an estimated 27,000-43,000 foreclosed properties, in addition to the first round of NSP funding prior to the Recovery Act, which should have twice as large an impact at its $3.92 billion funding level. All homes rehabilitated under the program will be sold at affordable levels to low- and moderate-income homebuyers that have gone through rigorous pre-purchase counseling.

Investments in energy retrofitting of public, assisted, and Native American housing will, in addition to creating new green jobs and helping to catalyze that rising market for the future, make a strong first step toward energy efficiency. HUD anticipates a 1.57 trillion BTU total reduction of energy use (the equivalent of 270,000 barrels of oil or 75,000 tons of coal), which will increase our energy independence and lead to $29,000,000 of annual savings on utility bills. Achieving this estimated reduction in energy use will reduce greenhouse gas emissions by 92,000 tons each year, taking one more step to save our planet.

Already improving communities nationwide

Across the country, HUD Recovery Act projects are already helping communities grow stronger. In Charleston, South Carolina, badly needed new roofs are being repaired over the heads of 334 families. The housing authority in Cynthiana, Kentucky is doing the same work, reroofing 105 apartments. Nearby in Louisville, the housing authority has made emergency repairs to heating pipes.

Elsewhere, localities will be investing in energy efficient retrofitting, lowering utility bills. In Clinton County, Pennsylvania, they will install energy-efficient windows, water-saving showers, and high-efficiency furnaces in the next month. Boilers are being replaced in Sioux Center, Iowa; Hornell, New York; Erie, Pennsylvania and many other places.

Responding to the Housing Crisis

Making Home Affordable

To respond to a housing crisis putting hardworking families out of their homes and causing vicious cycles throughout the economy, HUD partnered with the National Economic Council, the Department of Treasury, and the Federal Regulatory Agencies to develop President Obama's Making Home Affordable initiative, an aggressive plan to stabilize housing markets and arrest the initial driver of the economic crisis, while helping 7-9 million homeowners reduce their mortgage payments to a level they can afford.

Our plan is helping families in three ways:

• We are driving down interest rates to historic lows - down to 4.78 percent for 30-year fixed-rate mortgages - saving the average family that refinances their mortgage $2,000 per year.
• Through new guidelines for refinancing at Fannie Mae and Freddie Mac, we will allow 4-to-5 million homeowners to refinance and take advantage of low mortgage rates, which they otherwise wouldn't have been able to do, because their home values fell in the market collapse.
• We have committed up to $75 billion to help 3-to-4 million homeowners at risk of foreclosure modify their unaffordable mortgages into affordable ones.

These three planks of our housing plan will keep American families in their homes and prevent the falling home prices that result from nearby foreclosures. This program will serve borrowerswho are delinquent on their existingmortgages, as well as those in imminent danger of default due to job loss. Already, refinancing applications are up 88 percent, 11 major loan servicers have signed contracts to participate in the program, and Fannie Mae refinanced $77 billion of mortgages in March, nearly twice their February total, and their highest volume in one month since 2003.

In addition to these measures, HUD has proposed legislation to Congress to reform HUD's FHA foreclosure avoidance efforts and enhance the flexibility of HUD's Hope for Homeowners refinancing program.

HUD is actively reaching out to raise public awareness of the opportunities in Making Home Affordable. We have used special efforts like roundtables with President Obama, foreclosure prevention events, and partnerships with governmental, nonprofit, and for-profit entitieswho can reach homeowners who may be avoiding their lenders, and traditional means like public service announcements, press conferences, and the state-of-the-art Making Home Affordable website (www.MakingHomeAffordable.gov). The website enables consumers to determine if they are eligible for the program, estimate their potential payment reduction, and find a local HUD-approved counseling agency for assistance with their loan. Over six million people have already visited the site.

FHA - filling lending void and preventing foreclosure scams

The Federal Housing Administration (FHA) has played a critical role in augmenting Making Home Affordable and preserving the availability of mortgage credit. With the collapse of global credit markets,FHA works with strong and well-managed private sector entities to expand access to homeownership to lower-income households not well-served by the private market. To ensure availability of credit in higher-income markets as private capital has dried up, HUD was successful in advocating to raise single-family loan limits, making millions of additional middle-class families eligible for affordable loans backed by FHA, as well as Fannie Mae and Freddie Mac. FHA implemented the new higher loan limits in its programs just seven days after their enactment in the Recovery Act.

FHA's role has grown substantially, from 2 percent of lending activity in 2006 to 24 percent of single family mortgage dollar volume in the last quarter of 2008. This increase in volume has demanded a focused response to prevent fraud and abuse, as unscrupulous lenders enter the market. Confronting mortgage fraud has been a central focus of Secretary Donovan's first 100 days. Reflecting his commitment to strengthening HUD's role to combat mortgage abuse, particularly in disadvantaged and minority communities targeted by predatory lenders, HUD has taken strong steps to reinvigorate its enforcement abilities and prevent criminals from running free. In these first months, Secretary Donovan has:

• Partnered with the Federal Trade Commission and state Attorneys General in sending a coordinated message about foreclosure rescue scams, highlighted by a joint press conference on April 6 with Treasury Secretary Timothy Geithner, Attorney General Eric Holder, Federal Trade Commission Chair Jon Leibowitz, and Illinois Attorney General Lisa Madigan;
• Met with Attorney General Holder to establish a coordinated approach to address mortgage scams targeted at minority communities by coordinating fair housing and fair lending enforcement;
• Ensured that the President's Housing Plan includes appropriate steps to protect consumers and monitor for civil rights compliance; and
• Testified before the Senate Banking Committee on the President's housing plan and before a Senate appropriations subcommittee about the need for more funding to drive FHA fraud-prevention efforts and the reactivation of a program to dispatch teams of FHA investigators to conduct on-site reviews of lenders, especially those whose refinance portfolios show signs of distress and abnormally high default rates.

The continuation of the Making Home Affordable outreach effort will provide consumers with astrong warning and tools to avoid foreclosure prevention scams. In the public service announcements, celebrities will present a simple message that homeowners do not need to pay to receive the help they need, but rather should seek free assistance offered by HUD-certified counseling organizations.

Policy and Budget Initiatives

Gulf Coast disaster recovery

Within days of his confirmation, Secretary Donovan learned that a pre-Obama Administration decision not to extend the Disaster Housing Assistance Program (DHAP) for families affected by Hurricanes Katrina or Rita would cause over 30,000 families to be displaced on February 28, and potentially become homeless.

Secretary Donovan partnered with Secretary of Homeland Security Janet Napolitano to quickly find a way to protect those families and stabilize the Gulf Coast with a firm plan. Together, they designed a transitional program to give displaced families an additional six months to find alternative housing, with the ability to transition to HUD's Housing Choice Voucher Program (HCV).

As of March 31, 2009, over 13,000 of those 30,000 families had already transitioned to Housing Choice Vouchers or no longer required assistance. Until families who have been issued a voucher sign a lease with a landlord, their rent will continue to be paid out of the DHAP Closeout program.

Secretary Donovan assessed Gulf Coast recovery efforts as he toured New Orleans, Louisiana on March 5 with Secretary Napolitano, continuing on his own to Houston, Texas on March 6. Secretaries Donovan and Napolitano participated in a listening tour in New Orleans, with three stops: Southern University in New Orleans; St. Bernard Parish; and the Abundance Square development (a HOPE VI project). Secretary Donovan spoke with Gulf Coast residents and local officials at the Houston DHAP center on March 6, saying that the Administration is committed to rebuilding and recovery efforts. While Secretaries Donovan and Napolitano saw signs of progress, they saw unfulfilled promises as well, and will continue to work with other members of the Administration toward full recovery in the Gulf Coast.

Greening HUD

HUD has announced that it is creating an Office of Housing and Sustainability to oversee the agency's efforts to drive energy efficient housing and sustainable growth. The Office will oversee an Energy Innovation Fund designed to stimulate private sector investment in the energy efficiency of the nation's housing stock. It will also implement a Sustainable Communities Initiative to catalyze a new generation of metropolitan and rural growth efforts, integrating transportation, housing and land use planning to maximize choices for residents and businesses, lower transportation costs and energy use, and build a new geography of opportunity. The Office will also have primary responsibility for managing the agency's newly announced partnerships with the Departments of Transportation and Energy, the Environmental Protection Administration and other federal agencies.

Secretary Donovan celebrates Earth Day at a Washington DC public housing development that is using Recovery Act funding for green retrofits

HUD views the emphasis on energy efficiency in the Recovery Act funding as a model for the future of the agency. Across programs, HUD has invested Recovery Act funding in research and evaluation for energy efficiency, and the Recovery Team is coordinating cross-cutting energy efficiency issues across program areas. HUD will draw upon the innovative energy work at the state and local level as grantees begin implementing ARRA programs, using those advances to shape the future of HUD programs.

Interagency Partnerships

From his first day at HUD, Secretary Donovan has engaged in partnerships throughout the Obama Administration to tackle pressing crises and begin building innovative collaborations to address longstanding problems exacerbated by lack of cooperation between agencies.

Housing crisis

Obama administration officials announce action on mortgage fraud

Secretary Donovan and other key HUD staff worked closely with the National Economic Council, the Department of Treasury, and the Federal Regulatory Agencies to develop President Obama's Making Home Affordable plan to respond to the housing crisis. In repeated meetings with Secretary Timothy Geithner from the Department of Treasury, Larry Summers from the White House, and other Administration officials, Secretary Donovan and his team helped arrive at a solution quickly, with cooperation across the federal government.

This level of cooperation continued as the Administration pushed to combat mortgage abuse. Secretary Donovan partnered with Secretary Geithner, Attorney General Eric Holder, Federal Trade Commission Chair Jon Leibowitz, and Illinois Attorney General Lisa Madigan to announce new coordinated efforts to protect homeowners searching for help from the President's Making Home Affordable plan - efforts like the coordination of fair housing and fair lending enforcement resources that HUD has established with the Department of Justice.

These partnerships have extended beyond the Administration. To assess the impact of foreclosures on Los Angeles neighborhoods, Secretary Donovan toured foreclosed properties in South Los Angeles with Mayor Antonio Villaraigosa and U.S. Representative Maxine Waters, and visited properties that the City Housing Department plans to buy and rehabilitate through the Neighborhood Stabilization Program. He discussed similar topics with Connecticut homeowners and housing advocates at a forum and tour of foreclosure-affected neighborhoods with Senator Chris Dodd.

Disaster response

Since they took office, Secretary Donovan and Secretary of Homeland Security Janet Napolitano have partnered to repair the federal government's response to disasters in the Gulf Coast. When they determined that the pre-Obama Administration choice not to renew the DHAP program would displace 30,000 families, they began a swift process, working in conjunction with the White House, to create the Transitional Closeout Program and help those families move into permanent housing.

As HUD and the Department of Homeland Security continue to work together toward full recovery in the Gulf Coast and strengthening interagency disaster preparedness, they will be informed by the two Secretaries' joint visit to New Orleans on March 5, where they spoke with local residents who have weathered the hurricanes and their aftermath.

Energy and climate change

Energy policy has been at the forefront of the Obama Administration, and HUD has engaged with its Administration partners to break down bureaucratic barriers and find innovative paths to smart energy policy.

Secretary Donovan meets monthly with Carol Browner, the president's adviser on energy and climate change issues, and a number of other Cabinet Secretaries to coordinate their energy plans. HUD has also partnered with the Department of Energy (DOE) directly - on February 27, 2009, Secretary Donovan and Energy Secretary Steven Chu announced a major partnership between HUD and DOE that will coordinate home weatherization efforts under the American Recovery and Reinvestment Act, and leverage those funds to build a home energy efficiency industry and create green jobs, lowering energy costs and reducing greenhouse gas emissions.

Green jobs

HUD is meeting weekly with the Vice President's Office, the White House Office of Management and Budget, and a cross-section of Obama Administration agencies to coordinate green job generation. As a result of these meetings, the Department of Labor and HUD have begun forming a long-term partnership to connect residents of public housing and assisted housing to nearby job training. We are sharing information on training opportunities on the one hand, and the location of public housing residents on the other, to create clear pathways for employment in green jobs.

Sustainable communities

On March 18, 2009, Secretary Donovan and Transportation Secretary Ray LaHood announced a major partnership between HUD and DOT that will help American families gain better access to affordable housing, more transportation options, and lower transportation costs, and testified before a House appropriations subcommittee to that effect. The average working American family spends nearly 60 percent of its budget on housing and transportation costs, making these two areas the largest expenses for American families. Secretaries Donovan and LaHood want to cut these costs by focusing their efforts on creating affordable, sustainable communities.

HUD and DOT have created a high-level interagency task force to better coordinate federal transportation and housing investments and identify strategies to: enhance integrated regional housing, transportation, and land use planning and investment; develop federal housing affordability measures that include transportation costs; undertake joint research, data collection and outreach; and harmonize HUD and DOT programs.

Education and neighborhood renewal

HUD has begun discussions with the Department of Education over how the two agencies will work together to implement the Choice Neighborhoods initiative. This initiative will build on HOPE VI efforts to demolish troubled public housing and rebuild mixed-income, mixed-use neighborhoods, expanding the scope to include all neighborhoods of extreme poverty with a substantial presence of HUD public and assisted housing. HUD will challenge public, private, and non-profit partners to intervene with new housing and community-building tools in federal enclaves of concentrated poverty. The initiative will work in tandem with federal, state and local school-reform efforts, particularly Promise Neighborhoods.

HUD is partnering with the White House Domestic Policy Council, the Department of Education, and other agencies to begin making President Obama's goal of creating Promise Neighborhoods nationwide a reality. Modeled after the Harlem Children's Zone, the Promise Neighborhoods will provide a full array of services, including early childhood education, youth violence prevention efforts, and after-school activities, to an entire neighborhood's children, from birth to college.

HUD is also partnering with the Department of Education to ensure their Homeless Education Coordinators are aware of the new resources available through HUD's homelessness programs. The Departments are also developing joint guidance on how the programs can be coordinated locally.

Healthy Homes

HUD has initiated the first-ever Interagency Healthy Homes Working Group to better coordinate federal efforts in making homes safe from housing-related health hazards, partnering with the Department of Energy, Department of Agriculture, Environmental Protection Agency, Centers for Disease Control, National Institute of Standards and Technology, and National Institute of Environmental Health Sciences. The working group is establishing a national strategy to address housing-related health hazards, broadening to include not just childhood lead poisoning, but other hazards that threaten children and families in their homes.

Reform

Agency transformation

The Recovery Act has also become a platform for reform at HUD. Given the Recovery Act's unprecedented cross-cutting scope and aggressive timeframe, Secretary Donovan views its implementation as an opportunity to lay the groundwork for future transformation. The nature of the Recovery Act, particularly its many cross-cutting issues, has brought HUD staff together as "One HUD" working across program areas. This interconnectedness has made it possible to streamline and simplify programs. As Recovery Act funds must be spent quickly, HUD is redesigning its business processes, incorporating new tools for management oversight.

Efficiency

HUD has responded to President Obama's call for more innovative and efficient government, with a fiscal year 2010 budget that streamlines essential operations and consolidates or eliminates previously uncoordinated programs to increase efficiency.

HUD's 2010 budget proposal eliminates the American Dream Downpayment Initiative, which peaked at $200 million per year under President Bush, and eliminates funding for the Section 108 Loan Guarantee program, which cost the agency about $6 million per year.

Innovation in government

The housing crisis has sparked innovation in HUD programs, as seen in the new $1.5 billion Recovery Act Homelessness Prevention and Rapid Re-housing Program, which was adapted from HUD's current Emergency Shelter Grants program to enhance communities' ability to confront homelessness. The program provides much greater flexibility to prevent families from having to move to homeless shelters, and thenew and innovative Rapid Re-housing component allows communities to immediately assist persons who have fallen into shelters, and relocate them into conventional housing, avoiding further troubles down the line and lowering the ultimate cost to the public.

Transparency and public accessibility

HUD's Recovery Act programs will be implemented with an unprecedented level of transparency and accountability - and this new process will lead to a corresponding transformation of all HUD programs. HUD has already begun to provide regular, publicly accessible reports on the implementation of Recovery Act programs, so that partners and taxpayers know how HUD's ARRA funding is being spent. HUD holds itself accountable for the success of these programs by tracking milestones and accomplishments closely, and conducting rigorous analyses.

To make this information accessible to the public, HUD has introduced a new Recovery page on its website (www.hud.gov/recovery). This new page provides key information to state and local governments participating in Recovery Act programs, as well as the American public at large. It includes more information for the public on the progress of implementation, including the amounts of funding obligated across programs, a calendar listing Notice of Funding Availability submission deadlines, and guidance on how to comply with transparency and accountability requirements. We will also post information on best practices and highlight examples of the kinds of projects and jobs created through HUD Recovery Act funding.

Actions and Announcements

Protecting fair housing

Secretary Donovan launches Fair Housing Month

In a potentially groundbreaking civil rights case, HUD has taken steps to promote fair housing principles and support an appropriate settlement between a private fair housing group and Westchester County. In conjunction with the Department of Justice (DOJ), HUD has indicated that it strongly supports the "affirmatively furthering fair housing principle" at issue in this case. HUD, in conjunction with DOJ, has also indicated that it believes the optimal solution is a settlement that would promote the use of funds to develop housing in communities that would further racial and ethnic integration, and thus has begun to engage the parties in a serious effort to develop a settlement before trial.

Major grant awards

HUD has made significant grant awards over the first 100 days, including the award of $1.64 billion of Neighborhood Stabilization Program funds from the Housing and Economic Recovery Bill of 2008, $1.6 billion in grants to homelessness programs through Continuum of Care, and $1.86 billion in disaster relief funds to recover from flooding in Iowa and hurricanes in Louisiana and Texas.

Root causes of foreclosure crisis

On April 8, 2009, HUD released an interim report to Congress examining the root causes of the foreclosure crisis, required by the Housing and Economic Recovery Act of 2008. This interim report contains a review of the academic literature and industry press, concluding that most of the initial increase in the foreclosures was driven by subprime loans, but as the economy deteriorated in 2008, foreclosures among prime fixed-rate loans also rose, exacerbating the crisis.

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