National Association of Homebuilders

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Remarks as prepared for delivery by Secretary Mel Martinez
Las Vegas, Nevada

Wednesday, January 22, 2003

Good afternoon.

All of us at HUD were deeply saddened to learn of Leon Weiner's passing late last year. He was a genuine legend in Washington and few can match the passion that he showed for housing issues and his determination to expand America's supply of affordable housing.

As has often been stated, Leon truly was the "conscience of the housing industry." And we will miss him.

The Bush Administration has tremendous respect and appreciation for America's homebuilders; your work allows families to achieve the "American Dream" of homeownership and is critical to the health and security of our communities and national economy.

In particular, I want to personally thank you for your leadership in the President's initiative to increase minority homeownership. The NAHB and its members are already playing a vital role in meeting the President's goal to boost the number of minority homeowners by at least 5.5 million families by the end of the decade.

Before I proceed, I would like to introduce you to several senior members of the HUD leadership team.

[Introduction of HUD Leadership].

They bring us years of experience in housing and urban policy issues and I feel very fortunate to have the benefit of their considerable knowledge and experience. I am very proud of our team at HUD; they make the success we have enjoyed possible. I am grateful to them for their service to the country and the President.

President Bush and I both recognize that the homebuilding industry plays a critical role in helping our nation achieve economic growth and vitality. And that is especially true in today's unsettled world. Your industry helped cushion the effects of the recession and it helped bolster our economy in the months following the tragic events of September 11.

Driven by the best financing conditions available in decades, new-home sales hit a record pace of over 1 million new units this past November, up almost 6 percent from the previous month. And in December, builders started construction on 1.8 million units - an impressive 16 percent increase over December 2001. We are also pleased to see that this is a nationwide trend…not just concentrated in one or two particular regions.

These encouraging numbers are a clear testament to the ongoing strength of the housing market and yet another indicator of a strengthening economy.

Since the opening days of this Administration, President Bush has worked to promote job creation and economic growth across America. We have met the tests before us because the American people have worked hard through difficult times.

And that is something, especially given the fact that we inherited a recession and were struck by the most vicious terrorist attacks in history. Yet, we emerged a stronger and prouder nation. Through all of this, Americans continued buying and renting homes and the housing industry remained a bright spot during difficult times.

As the President has said, the economy is recovering and we see encouraging signs: the nation is in its second year of economic growth and interest rates are the lowest in 37 years. And the overall homeownership rate - a key measure of economic prosperity - stands at 68 percent, nearly the highest ever recorded.

A little over two weeks ago, the President unveiled to the American people his growth and jobs plan to further strengthen the economy. His plan has three major components that will:

• Speed up the 2001 tax cuts to provide badly needed tax relief to American working families;
• Encourage job-creating investment in America's businesses by ending the double taxation of dividends and giving small businesses incentives to grow; and
• Provide help for those Americans out of work by extending unemployment benefits.

The President's plan will help create 2.1 million jobs over the next three years and will fuel economic opportunity and growth. I am happy to say that many of those jobs are coming from your industry.

We strongly believe that hard working Americans deserve to hold on to more of their own money - to take it home and spend or invest as they see fit. And it is our job in Government to remove the obstacles that impede the American entrepreneurial spirit from thriving.

I join the President in urging the new Congress to follow up on its speedy passage earlier this month of the emergency jobless benefits by passing the rest of this legislation as quickly as possible. It is sound policy and good for America. I would ask for your help and support in this effort.

In addition to the measures outlined in the stimulus package, the President and I strongly support the single-family tax credit because it is smart housing policy, it promotes homeownership - one of this Administration's top priorities -- and it is a vehicle for revitalizing distressed neighborhoods.

The homeownership tax credit will provide yet another powerful stimulus to the economy and the Bush Administration is committed to working with you to get this homeownership tax legislation passed.

We also must work in close partnership to dispel the myth that our nation is experiencing a "housing bubble."

Although the United States is the best-housed nation in the world, we as a country still face a housing shortage. In fact, housing experts, economists and analysts met this past week at a conference in California and concluded that the momentum gained from low mortgage interest rates will carry strong home sales through the end of this year.

Not long after 9-11, however, a number of leading experts predicted that the housing bubble would burst. They were clearly wrong. Instead, many Americans chose to simply delay, rather than cancel, their plans to buy. And home purchases ended up reaching an all-time high in 2001. While the final numbers are not in, sales in 2002 are expected to eclipse the 2001 record.

Bubbles of course do burst, but the housing market is not in the same category of other weaker and less competitive sectors of the economy.

Today, demand remains strong, with new households being formed at a rate of more than 1 million per year. To meet this demand, and replace homes that are destroyed or demolished, the nation's homebuilders will need to construct 1.6 million new homes and apartment units each year.

Plus, this Administration is making it easier for people to purchase their own homes - a change that will help drive home development and sales. And, it will help more minorities become homeowners.

Giving every American the opportunity to own a home is the best investment that a family can make. Unfortunately, many Americans, especially minorities, have yet to enjoy the benefits of homeownership. While three quarters of white Americans are homeowners, less than half of Hispanic and African-Americans own a home of their own.

That is a statistic we must change. President Bush and I agree that the elimination of the homeownership gap is a top priority for HUD; it is fundamental to our mission as the nation's housing agency.

As you know, President Bush announced his goal to boost minority homeownership by 5.5 million families last June when he launched America's Homeownership Challenge, the centerpiece of the President's efforts to close the homeownership gap that exists between minority and non-minority Americans.

HUD's response to President Bush's challenge was the Blueprint for the American Dream Partnership - an unprecedented public/private initiative that harnesses the resources of the federal government with those of the housing industry to accomplish the President's goal.

We launched the Blueprint Partnership last October at the White House Conference on Increasing Minority Homeownership and the NHBA has been a partner in this effort from the start. I applaud you for your leadership on this initiative and want to thank the many local builder associations across the country for your support.

In particular, I would like to acknowledge your local Albuquerque, New Mexico, association for the great work they did in putting together our third White House regional homeownership event. Your folks pulled off a terrific meeting with little time and we look forward to working with each and every one of your local associations across the country.

When the President gathered us together at the White House Conference last fall, he had a simple message: "We want everybody in America to own his or her own home." Our Blueprint for the American Dream Partnership is the right response at the right time. It is unprecedented in scope and sets out to close the minority homeownership gap by harnessing the resources of the federal government to those of the housing industry.

We are committed to empowering minority homebuyers, especially low-income families shopping for their first home, to have better access to capital and more financing options. I am proud to say that our partners in the housing, real estate and mortgage finance industries, among others, have stepped forward with many invaluable contributions and investments.

These investments and initiatives will reap tremendous benefits for individual families and for the nation as a whole. We studied the potential economic benefit of adding 5.5 million first-time minority homebuyers by 2010 and found that it added a staggering $256 billion to the housing market. An increase in minority homeownership creates more jobs, increases consumer spending and the economic security of neighborhoods, and most importantly, is a "capital engine" for working families.

And I am also pleased that so many of you here today and so many of our other partners have been actively involved in this homeownership effort. We are grateful for your contributions, your energy and your commitment to achieving the President's goal.

Boosting homeownership among minorities is the right thing to do and now is the right time to do it.

In our goal to expand homeownership, the Blueprint partners are focused on several key areas. One is education. It is important that families looking to purchase a home are educated about the homebuying process … they need reliable, understandable information about their options for financing.

The vocabulary of mortgage lending and the process of buying a home are confusing and complex for even the experts; imagine how difficult they must be for a first-time homebuyer, or someone for whom English is a second language. The fact that there are some unscrupulous people who want to take advantage of the system adds to the problem.

We are working to provide consumer education, particularly to immigrants and minorities who are not familiar with the homebuying system, to make them more comfortable entering into the largest and most important financial transaction of their lives.

As we announced on Monday, HUD's proposed budget for the coming 04 fiscal year increases housing counseling by $10 million, providing $45 million to help families manage their finances and improve poor credit ratings in order to achieve homeownership.

We are also deeply committed to educating the housing industry about its legal responsibility to prevent discrimination and the need for our partners to take responsibility for educating future homebuyers about their legal rights.

Of course, it is hard to buy a home when there are few affordable homes to be found. In some limited parts of the United States - and particularly in our nation's inner cities - the average working family cannot find a house on the market that is within their price range.

In spite of overwhelming need, very little new construction of single-family homes occurs today in lower-income neighborhoods. The most common cause is that the cost of developing such housing in an economically distressed area would exceed the property's market value.

This Administration believes that the federal government can play a role in boosting the supply of affordable housing by helping to bridge the gap between the cost of development and the value of single-family homes.

To address this need, today I am announcing that our proposed '04 budget provides a $113 million increase (5 percent), in HUD's HOME program. An estimated $2.2 billion in total funds will be provided to state and local grantees to assist homebuyers and renters by helping finance the costs of land acquisition, new construction, rehabilitation and downpayments.

Our new budget also will fully fund the President's American Dream Downpayment Fund, by providing $200 million to help approximately 40,000 low-income families annually make the move into homeownership. And the budget continues to strengthen the ability of public housing authorities to use Section 8 Housing Voucher funds as downpayment assistance for families who are making the transition from renting to owning.

Equally important, HUD wants to help you break down regulatory barriers and one of the steps I would like to announce is the creation of a new Office of Regulatory Reform.

Through this office, HUD will spend an additional $2 million next year on research efforts to learn more about the nature and extent of the regulatory problem and we will conduct a comprehensive study to determine the impact of barriers on the development of affordable housing. In addition, HUD will develop analytical tools that measure the effects of regulatory barriers on communities.

But most importantly, we will develop promising strategies to reduce those regulatory barriers that prevent rental, higher density, mixed use and affordable housing projects from being developed in a particular community.

To that end, we are eliminating the FHA policies and procedures for approving Planned Unit Development (PUD) projects. Effective immediately, FHA will no longer require approval of a PUD as a precondition for placing FHA mortgage insurance on a dwelling located in the development.

One of the tools we are already using is our Regulatory Barriers Clearinghouse, which gathers housing knowledge from across the country into a single website.

By giving builders and developers a place to share ideas and solutions for overcoming state and local regulatory barriers, we think we can help generate more housing opportunities.

As some of you might know, my government service began at the county level, when I was elected Chairman of Orange County, Florida. So I bring to HUD an appreciation for the difficulties you sometimes face in working with the federal government, and the regulatory barriers you often have to overcome at the state and local level.

I have committed HUD to eliminating many of these barriers and being a better partner with the private sector. Through our programs and initiatives, HUD is working to expand the public-private partnerships that leverage the resources of government with the expertise of the private sector - especially the nation's homebuilders. Together, we are helping local communities create new housing opportunities for more American families.

Along with promoting homeownership, we are expanding access to affordable housing, improving the quality of public and assisted housing and ensuring better accountability. We also are increasing housing opportunities for the elderly and those with disabilities.

To boost housing production in high-cost areas, I initiated a 25 percent increase in the loan limits for FHA multifamily insurance. This was the first such increase since 1992 and we appreciate your support and partnership in this effort.

FHA's basic multifamily housing insurance program also has seen a substantial increase in activity during the last two years. The $2.8 billion worth of mortgage loans we committed to in 2001 was the highest dollar amount in ten years.

Another key area that we are working on is the simplification of the buying process and increasing competition. Soon after taking office, I directed HUD to launch a major effort to reform the Real Estate Settlement Procedures Act, known as RESPA. Our goal is to make the homebuying process less expensive and far less complicated for consumers.

We believe that our proposal can reduce settlement costs by an average of $700 per closing. Overall, the annual savings to consumers could be as much as $8 billion.

That kind of savings will allow many Americans who are priced out of the homebuying market today to buy a home. And our "Homebuyer Bill of Rights," which we rolled-out along with RESPA reform, will simplify the homebuying process and make it less confusing and costly.

HUD also is committed to enforcing the law to stop predatory lenders from doing business. The Administration is targeting unscrupulous lenders by pooling the resources of the federal government and helping us work across agency lines. As a result, we are becoming much more effective in tracking down lenders who target first-time homebuyers, senior citizens, and minorities for predatory practices.

And in the past two years, HUD's Community Development Block Grant (CDBG) program has provided nearly $9 billion in assistance to states and communities to undertake housing and economic development activities. Both CDBG and HOME funds work because of the flexibility they provide to grant recipients - you spend the money in ways that will best help your communities.

As you can see, our top priorities at HUD mirror many of your concerns. We are both committed to increasing homeownership, especially among minorities; supporting production; ensuring an adequate supply of affordable housing for renters; and strengthening communities through economic development initiatives.

As I continue to remind our employees, HUD's mission is to serve people, not programs. Historically, HUD has often suffered from mismanagement and loss of focus - often straying from its core mission. On occasion, this resulted in poor service, program duplication and waste. Through our reforms and hard work, I can confidently say that things are improving.

And now that we have reached the two-year mark in our Administration, it is an opportune time to take stock of our accomplishments, measure our successes and take any corrective actions needed to get to where we need to be. I am proud of the job that we have done and I look forward to building on these successes as we move ahead.

I can guarantee you that HUD will continue to rely on the expertise of those of you on the front lines of the housing industry and those at the local level who best understand their communities. We want to hear your ideas on how together we can combat the problem of ensuring affordable, accessible housing for all Americans.

I look forward to strengthening HUD's partnership with America's homebuilders, with the goal of opening the American Dream to more families and individuals… and opening up our communities to new opportunities for growth and prosperity.

That is the challenge that I know we are all prepared to meet.

Thank you.