Dr. Ben Carson
Secretary of Housing And Urban Development
Redefining the Multifamily Challenge
September 14, 2018
Thank you, Sue, for the kind introduction. I am delighted to join you for your fall Council Meeting.
The National Multifamily Housing Council has been a great partner to HUD -- my team and I appreciate all the insights you provide on a number of issues, like reforming HUD’s Affirmatively Furthering Fair Housing rule.
To say it’s been a busy spring and summer for both of us would be an understatement – what with booming housing markets, the affordability crisis, and the new regulatory agenda up on Capitol Hill, including reforming the GSE’s. To be expected, we don’t anticipate things to slow down this fall either.
This morning, I thought I would spend my time discussing with you some items on our top agenda – including the AFFH rule, our housing choice voucher program, and our push for rent reform.
Rent Reform- the Demand Side of the Equation
As I understand, several of the prior speakers at this meeting addressed the supply side of the housing crisis. So, what I want to do, is first turn to the demand side of the equation -- at least when it comes to federally assisted housing. Here as well, we’re facing a situation of overwhelming demand. Today, only one in four applicants who qualify for HUD assistance receives it. We’re helping nearly 4.6 million people, and every year we have around a 10 percent turnover rate – which means about half-a-million people are moving out of assisted housing every year.
If our federal budget isn’t going to grow, and if the lines for people wanting help continues to be very long – which they will be for the foreseeable future – we are going to lose what leverage we have to correct this imbalance between supply and demand.
Every one of us here knows that the current model of public housing is unsustainable, in both dollars and common sense. The costs of operating public housing continue to climb, yet, the way subsidies are currently calculated today, dates back to when Reagan was President. So, it’s definitely time for them to be adjusted.
But our rent reform agenda goes far beyond simply adjusting rents. It centers on three key issues.
First, the current policies ensure that the more our residents earn, the more rent they have to pay. Where then, is the incentive to work, or to get a better paying job, or have two parents living together and sharing their wages? There isn’t any, which really defies common sense. Our rent reform proposal, therefore, removes these perverse incentives by having a three-year recertification of income -- and removes the requirement that tenants must report any income increases, immediately. One could even say it’s like not having to pay taxes for three years.
This change will cut down on the major paper trail and encourage HUD-assisted households to earn and save more money and, eventually, achieve self-sufficiency. Which will give us the opportunity to serve another family. To me this is all about fairness – making sure other deserving folks also have a chance to receive federal housing assistance.
Second, our proposal will provide local public housing authorities with the flexibility to implement any one of our Choice Rent structures. We believe that local housing authorities, not Washington, should have more control and choice on how best to serve their communities – again, it just makes sense to provide greater flexibility to those officials who best understand the specialized needs of their residents.
A New Holistic Approach
Third, our policies are aimed toward moving families from a life of dependency to one of self-reliance and greater opportunity. We need to invest not only in bricks and mortar, but in human capital as well.
For generations, the idea of the government providing housing assistance meant only one thing—helping to pay the rent so families can have a roof over their heads. But we must also think about how we can help families access financial, educational, health, and other opportunities so they can move far beyond federal assistance.
That’s why we are focusing on initiatives that take a holistic approach – like our new EnVision Centers, a one-stop-shop for all our tenant’s needs. George Washington Carver -- the great American inventor and botanist of the prior century -- once said, “where there is no vision, there is no hope.” We need to envision a new path forward, one that focuses on the whole family and not just housing, and one that provides hope and a better outlook for our tenants – this is the underlying philosophy that drives our reform policies forward.
Turning to the supply side, we have a greater role in helping balance the equation by encouraging private development of multifamily housing.
We have on the books – if you haven’t heard this from yesterday’s speakers -- a number of initiatives to boost community development, like low-income housing tax credits (or LIHTC,) which have already created or preserved over two million units. And then there are the Section 108 programs (which uses Block Grant monies) and the new Opportunity Zones. This is one of the most significant provisions of the recently passed Tax Cut and Jobs Act, as it encourages public-private sector investment in affordable low-income housing AND necessary community amenities -- like grocery and retail stores. (In fact, I recently visited one of these zones with Representative Keith Rothfus in Beaver County, PA.)
Finally, we are using our Rental Assistance Demonstration or RAD initiative to improve and preserve our aging affordable housing stock by tapping into private investment. To date, the program has already generated more than $4 billion in private investment, which translates into nearly 100 thousand affordable housing units. In fact, I’ll be heading to Austin, Texas next week – weather permitting -- to mark the 100th thousand RAD property. It’s an incredible milestone for the Department and the families we serve.
Reforming the AFFH to Meet Demand
As many of you are aware, a federal judge dismissed a lawsuit which challenged our approach to amending the Affirmatively Furthering Fair Housing, or AFFH, Rule -- in particular, the judge upheld our decision to suspend the use of a computer tool that was failing to help communities meet their fair housing responsibilities, as required under the Fair Housing Act.
The reliance on models and computer technology to make fair housing assessments and decisions was at the center of the current rule. What we want to do in pursuing new rulemaking -- and why we’re asking for public comment from all parties concerned -- is to lessen regulatory burdens, while at the same time, help local officials meet their obligations. Comments on the rule are due October 15.
More specifically, we’re trying to bring fairness to fair housing, by increasing the supply of affordable multifamily housing through a number of initiatives, including financial incentives.
While the current rule centers on analytics to discover discrimination, I want to take a closer look at the archaic local and state regulatory barriers – such as zoning and land use restrictions – that are preventing the construction of new mixed-income multifamily developments, whether in poor or wealthier neighborhoods.
Basically, I want to encourage the development of mixed-income multifamily dwellings all over the place. And how can we do this? By rewarding the local authorities who loosen up zoning rules that artificially drive up the cost housing and multifamily development. While we cannot control local zoning, we can have influence by “incentivizing” local officials -- who would like a big juicy government grant -- to take another look at their zoning codes.
According to the Council’s own analysis, over 30% of the cost of a multifamily development nationwide, is the direct result of these type of regulations. Moreover, a large majority of big city land parcels are eligible only for single-family homes, and not larger multifamily buildings -- which could house more people, and in the process, moderate rent prices. As a study by the CATO Institute pointed out, federal housing subsidies are twice as higher in more restrictive zoned states because of the high price of land use.
What kind of policy changes should we be looking at? I’ve heard suggestions that range from giving property owners the right to build higher densities, to streamlining permits and reducing off-street parking requirements, to adjusting upfront impact fees.
Overall, it’s about time we take a long, serious, look at all the regulations that have held back America’s affordable housing supply – especially multifamily housing -- from keeping pace with demand.
Housing Voucher Acceptance
Finally, we are also exploring new ways to expand landlord acceptance of our housing voucher program.
To get to the heart of the matter, we recently sponsored the first large-scale studies on how and why landlords treat people with vouchers differently from other renters. I’m sure this audience can guess some of the answers – they include frustration with the program’s paperwork, inspections, and other bureaucratic processes, along with how local housing authorities resolve tenant disputes.
Overall, the decision to accept vouchers is a delicate balancing act which can tip either way -- depending on the landlord, tenant, local ordinances, and tight rental market.
To further the conversation, I have formed an agency-wide taskforce, whose first step is to take a landlord engagement listening tour. We’ll be starting right here in Washington, D.C. on September 20th, and then we’ll take to the road in the coming weeks.
As with all our initiatives, we’re inclined to local and voluntary, rather than federally mandated and compulsory, solutions. It’s the best way to get a buy-in from all the parties involved -- thereby making it a “win-win” for both tenants and landlords.
In closing, at HUD, we believe success should be measured by the number of families who have achieved self-sufficiency, and who no longer rely on subsidized housing.
We need to envision a new path forward in all aspects of our housing policies. And that’s what I want to bring to all those who HUD serves -- a new vision: one of hope, self-respect, self -sufficiency, and the opportunity to exercise their God-given talents.
Thank you again for the invitation to join you this morning.
I look forward to your questions.