Hud the Unlovable

The federal housing agency changes its focus every couple of years. The only constant is local frustration.
by | December 2002

Last year, shortly after taking over as President Bush's secretary of Housing and Urban Development, Mel Martinez cut off funding for "drug elimination" grants, a $309 million program aimed at providing drug treatment and beefing up law enforcement for residents of public housing projects. It wasn't either of these things that Martinez opposed--it was the fact that under his HUD predecessor, Andrew Cuomo, some of the money from the program had been used to buy back guns from tenants willing to turn them in. The National Rifle Association was fiercely opposed to the buy-backs, and the NRA had been strong supporter of Bush. So Martinez wasted no time in putting an end to the practice.

The move enraged local officials, especially since most of them were putting the money into security patrols, not gun control. But furious as they were, the locals weren't sure whom to blame: Martinez or Cuomo. Some saw Martinez selling out to a powerful interest group. Others faulted Cuomo's insistence on using a popular grant program to promote a cause for which it had never been intended. "Housing authorities got dragged into the desert of ideological warfare," says Kurt Creager, who heads the local agency in Vancouver, Washington, and leads the association of housing officials known by its acronym, NAHRO. "Very few of us were using the money for gun buy-backs, but now we're all scrambling to replace the lost funds."

If the locals felt they were caught in a federal crossfire, it was a familiar feeling. All through the past decade, they had grown accustomed to getting trapped by the ever-changing agendas and political ambitions of HUD's leadership. The 1990s were an era of passionate and politically driven secretaries, from Jack Kemp in the first Bush administration to Henry Cisneros and Andrew Cuomo under Bill Clinton. Each brimmed with ideas for reinventing, revamping and revolutionizing the agency and the federal housing program, prodding the nation's 3,300 housing authorities, who carry out HUD's policies at the local level, to change course over and over again.

Kemp sought to sell public housing to tenants, "empowering" them, as he liked to say, through the magic of homeownership. Cisneros set out to demolish the nation's worst public housing projects and create new ones, where the poor and the middle class could live side-by-side. Cuomo pushed an ambitious agenda to transform HUD's notorious bureaucracy, ending some of the inefficiencies that had plagued it since the its founding in the 1960s. In the middle of all that came Newt Gingrich and a Republican Congress that had very different plans for HUD. They wanted to shut down the agency altogether.

Martinez, who joined the current Bush cabinet from a county executive post in Orange County, Florida, promised that he would slow things down and give local authorities relief from all the upheaval. But since the episode with drug-elimination grants, the locals have been wary of expecting too much. "The current administration gives great lines about ending the Cuomo era of micromanagement," says Robert Rigby, housing director in Jersey City, New Jersey. "But that stated desire has not yet hit us. They haven't yet changed the environment."


In fact, housing authorities have watched the whole decade-long spectacle at HUD with a mixture of hope and dread. They knew from their own experience that the agency badly needed fixing. If all the ideas and agendas floating around the capital would improve public housing, so much the better. Yet they also knew their place at the bottom of the policy totem pole. With all the reinventing and political jockeying going on, they feared they would inevitably get squeezed in Washington's power games.

HUD's internal management did improve, slowly but steadily. By the time Cuomo left, the agency as a whole had worked its way off the government's watch list for waste, fraud and abuse. Congressional critics backed down on their threats to eliminate it. In fact, as HUD's managerial credibility has risen, Congress has increased its budget, so the local authorities have had more money to work with.

But those improvements have come with a cost. The more HUD has reinvented itself, the more sour its relationship with housing authorities has become. Tensions peaked under Cuomo, who slammed through a system for assessing the condition of the local projects. Housing authorities found the system both unfair and irrelevant. "Andrew came in and promised to change the world in 40 days or kill everyone trying," says Frederick Murphy, executive director of the housing authority in Syracuse, New York. "The assessment system was a disaster. It totally destroyed any positive relationship between the industry and HUD."

Martinez is much quieter than Kemp, Cisneros and Cuomo, as well as more sympathetic to the housing authorities. Mostly, he has kept HUD out of the news. He's declined to stake out titanic new visions for public housing and seems, so far anyway, uninterested in using the agency as a stepping stone to higher office. Shortly after taking over, Martinez put his aims this way: "One thing I don't want to do," he said, "is reinvent HUD."


The fact is, however, that after what happened in the 1990s, just leaving the agency in peace amounts to a minor revolution.

The years of turmoil began in the first Bush administration, when Kemp promised to wage a "progressive conservative war" on poverty, with the emphasis on privatizing public housing by helping tenants purchase the units they were living in. Kemp made passionate speeches about how this would give them a greater stake in their communities and help lift them into the middle class.

The idea never gained much traction, however, within the Bush administration or with Congress. It also turned out that not many residents had the money or desire to buy homes in run-down or crime- ridden projects. Kemp's larger impact occurred inside HUD. Corruption had scandalized the agency during the Reagan years and Kemp successfully cleaned house. HUD's budget, after years of decline, was gradually built back up.

By the time Cisneros took over as President Clinton's HUD secretary, in 1993, the privatization effort had all but subsided and been replaced by concern for the physical condition of the nation's most deteriorated projects. A congressional commission found that 86,000 public housing units were in bad shape and isolated in pockets of poverty. Congress funded a program to begin demolishing some of those units, but Cisneros grabbed on to it and made it his own.

Cisneros, a former mayor of San Antonio, set the goal of blowing up America's most distressed projects, including many high-rises. He would replace them with something drastically different: townhouse communities where poor tenants lived next door to families paying market-rate rents, thus deconcentrating the poverty that had haunted public housing for decades.

But after the 1994 elections, when Republicans swept into power in Congress, Cisneros had to devote much of his energy to just keeping HUD alive. As an alternative to the agency's elimination, Cisneros suggested drastic reforms. One idea was to eliminate traditional public housing entirely, replacing it with a dramatic expansion in the number of housing vouchers residents could use on the private rental market. Other ideas included significantly downsizing HUD's staff, and reducing some 60 separate programs into three block grants.

While much of Cisneros' reform agenda never went anywhere, it did stave off HUD's critics. Congress left the agency alone, although not without slashing its budget. "HUD could have lost its seat at the cabinet table," Vancouver's Creager says. "Cisneros recognized that and mobilized to solve the core problems."

Then came Cuomo, in 1997. He had served as an assistant secretary to Cisneros, and he knew that HUD's credibility with Congress was still low. He forced through another round of reinvention that came to be known as the "HUD 2020" reforms. Management of many programs was turned over to private contractors, allowing staff levels to be reduced from 10,500 to 9,500. The first-ever assessment of the condition of the nation's assisted-housing stock was completed. And there was a new "enforcement center" to take action against negligent housing authorities and private landlords. By one measure, the changes seemed to pay off. In 1999, HUD's financial statements got their first clean audit ever.

Cuomo also had more traction with the White House than Cisneros or Kemp did, and his advocacy began to pay dividends. In 1999, Clinton's budget asked for new housing vouchers--and for the first time in four years, the Republican Congress gave him 50,000 of them. The pattern repeated itself the following two years, with 60,000 new vouchers for 2000 and 87,000 for 2001.

Unfortunately, the Cuomo reorganization was so drastic that it created a personnel crisis. Two in five remaining HUD staffers are eligible to retire within the next five years. "That was cutting muscle," says Michael Stegman, an assistant secretary under Cisneros.


It has put Martinez in a strange place for a Republican. He now finds himself staffing up the very agency that many in his party once wanted to eliminate. But aside from that relatively low-profile effort, and a non-controversial plan to increase minority homeownership, the agenda is short. "Martinez is less visible than any HUD secretary since the Reagan administration, but his message is very salient," Creager says. "He believes in ethical public administration, he believes in homeownership and he expects people to run local housing authorities in an effective manner. I can't argue with any of those. It may fall short of a vision, but in retrospect, the people with a vision often brought personal and political pain."

It's not as if all the fads and enthusiasms that have taken hold at HUD have disappeared without a trace. Kemp's strategy of selling public housing to tenants didn't go far, but years later, under Cuomo, it re-emerged in the form of Section 8 homeownership. Tenants can now use vouchers--normally reserved for rental housing--to make mortgage payments. The program is mostly a hit with housing authorities, and Martinez embraced it as part of his homeowership agenda.

In a similar way, Cuomo cut the ribbons at many of the projects rebuilt according to Cisneros' plans, and came to embrace their neo- traditional style of development. Another Cisneros proposal-- vouchering out public housing altogether--was too controversial to be adopted on its face but continues to echo in Washington. Lawmakers are more willing to pay for housing vouchers than they are to pay for more public projects--and the balance shifts more and more toward vouchers with every high-rise that comes down.

What all the HUD regimes have had in common, despite their ideological differences, is a lack of discretionary funds. Despite a deepening affordable-housing crisis, housing is fundamentally off the national agenda. There hasn't been a national housing production program since the 1970s, and none is currently envisioned. While HUD's budget has risen over the years--from $19 billion in 1988 to $31 billion in 2002--most of that is out of the secretary's control. The cost of renewing housing contracts rises from year to year, for example, and now consumes more than half of HUD's budget. Most of the rest, including billions in community development dollars, is allocated to state and local governments by pre-set formulas.

Indeed, in the current environment, even activist housing secretaries can only hope to nibble at the edges. "The challenge any HUD secretary faces, be it Kemp, Cisneros, Cuomo or Martinez, regardless of their personal motivations, objectives, politics and influence, is that the HUD budget is basically pre-committed," says Conrad Egan, policy director at the National Housing Conference. "By the time you add in salaries and expenses, there's nothing left. It makes you wonder. Why be a HUD secretary? You may as well stay home and not come into the office in the morning."


This is not to say that local officials don't feel HUD's impact every day. Most would say they feel it too much.

That opinion has grown since the Cuomo management reforms, and especially since the assessment of assisted housing. This was something HUD clearly needed to do. Each year, the agency was handing local housing authorities billions of dollars to fix roofs and do other maintenance. But when Congress asked HUD officials what they were getting for that money, they were unable to say. Cuomo finally got the answers but at the cost of HUD's remaining goodwill among its local partners. "I personally credit Andrew Cuomo with torpedoing the relationship that existed," says David Morton, head of the Reno Housing Authority and president of the Public Housing Authorities Directors Association. "He escalated friction between HUD and the housing authorities to a degree I've never seen in 30 years."

The annual public housing inspection program launched under Cuomo came to be known as PHAS. Hundreds of men and women toting wireless computers began fanning out into every public housing project in the country. They hiked through developments and peered into residents' homes, looking for signs of damage: cracks in walls, leaking pipes, broken fire detectors. The checklist ran 800 items long. Each time they found a problem, they punched away at their keypads, zipping the bad news back to HUD's offices in Washington. The procedure was an effective way to counter HUD's longstanding national reputation for waste, fraud and abuse.

But local housing managers had a much different view of PHAS. They saw Cuomo's inspectors as an invading army. The tiniest flaws sent the inspectors typing away. A closet door off its hinge could cost points, even if the tenant had never called in a work order. So could a weed growing through a crack in the sidewalk. Even well-run housing authorities felt they were doomed to fail the test. "It was a Gestapo approach," Morton says. "The attitude was 'you're all playing games and we're going to catch you.'"

What local officials found offensive about PHAS wasn't the fact that HUD was rating their performance. They agreed this was necessary and good. It was the absence of any local input into how the system should work. The housing authorities had no idea what they were being graded on or how that information would be used.

The current regime at HUD sees PHAS as a good idea, but one executed with HUD's traditional bureaucratic excesses--both in the top-down approach and the obsession with minutiae. "There were five or six different scoring factors related to holes in walls," says Michael Liu, Martinez' assistant secretary for public housing, "How many different elements related to holes in walls do you really need to determine whether or not there's a problem with the basic livability of that unit? It raises questions of basic common sense. How far do you need to go?"

Still, like so many other experiments of the past decade, PHAS has not disappeared; Martinez and Liu have asked the locals for advice on how to improve the inspections and make them more meaningful. HUD rules are due out soon that will specify changes in the system. "We've attempted to inject a clearer notion of what we want and a clearer way of measuring which gets away from the minutiae," Liu says.

Inevitably, however, all the years of frustration have taken their toll. In fact, they have generated something of an independence movement among local housing authorities and the associations that represent them. NAHRO hopes eventually to overthrow PHAS and institute its own assessment system. That project, which is still in early stages, is a collaboration with Standard & Poor's. The idea is not only to assess the physical condition of public housing but also to link the data with measurements of the authorities' financial condition. Proponents think this would give a better view of the locals' performance, and would be useful not only to HUD but to local housing managers and private investors as well.

Meanwhile, the PHAS fiasco has sparked discussions among some big city housing authorities about finding a way to get out from under HUD's oversight entirely. Some are pushing for a third-party accreditation system, similar to one used for hospitals. Others, increasingly entrepreneurial in their approach, are looking at ways to lessen their financial dependence on the agency by dipping into tax credits and other sources for cash, while partnering with private firms, nonprofits and foundations to fix up old housing and even build some new units. Creager's housing authority in Vancouver, for example, now depends on HUD for less than half of its assisted housing. "We've developed a diversified funding base," Creager says. "That makes us less vulnerable to the whims of federal policy makers."


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