Breaking Down HUD For The New Secretary

President-elect Donald Trump has indicated his intent to nominate Dr. Ben Carson as Secretary of the Department of Housing and Urban Development. Should Carson be confirmed, he'd have a lot to learn (as he has no experience with housing or government). We're here to help. 

What Is HUD?

From an administrative perspective, HUD is huge. It has a budget of nearly $50B and employs more than 8,000 workers. HUD controls more than $1 trillion in home mortgage loans. It runs the Section 8 housing voucher program that helps 5 million Americans pay for private homes and provides 2 million others with affordable housing. HUD also fights housing discrimination by enforcing the Fair Housing Act of 1968. Lastly, HUD conducts The American Housing Survey, a massive, biennial survey on homes, housing costs and related subjects. The extensive data is used by policymakers, researchers and businesses to understand local communities. 

HUD's Biggest Challenge

Carson's biggest headache will be affordable housing. Rents are rising; in coastal cities they're skyrocketing. (As a famous philosopher of our time once said, “the rent is too damn high.”) Meanwhile, wages are stagnant, exacerbating housing affordability. Government housing-assistance programs haven’t been able to keep pace even though research suggests unaffordable housing is one of the leading causes of poverty.

When Google employees are living in a truck on the campus instead of renting an apartment, you know you have a serious problem. Hipsters with tech jobs aren’t the main issue, though. For nearly 80 years, dating back to the Housing Act of 1937, federal policymakers have defined families as being “burdened” if they spend more than 30% of their income on housing. Just 20% of households earning less than $20k/year were below that threshold, according to the 2013 American Housing Survey. It's been trending in the wrong direction—52% of renters below the poverty line spent more than 50% of their income on housing in 2013, up from 42% in 1991.

Scarcity of product is contributing. According to Jim Lapides of the National Multifamily Housing Council, “It’s fair to say that we are certainly in a unique time economically. America is facing an enormous deficit when it comes to aligning the supply of apartments with demand. Between 300,000 and 400,000 apartments must be constructed annually to simply keep pace with population growth. Yet, between 2011 and 2015, just 208,000 apartments were developed annually.”

It's all snowballing to create an epic mess where Americans simply cannot afford somewhere to live. “The evidence does suggest that since the 1960s, this is the worst it’s ever been," said Barbara Sard, VP for housing policy at the Center on Budget and Policy Priorities, a liberal think tank.

HUD's Failings, Then And Now

In many ways the department Carson may lead is still recovering from its very public failures in the '70s and '80s, when large-scale government subsidized public housing projects such as Chicago's Cabrini-Green (above) became notorious slums. Harvard sociologist Matthew Desmond, the author of Evicted: Poverty and Profit in the American City, said after the failure, ‘We just took the money away. It gave the impression that we tried and failed at this. We’ve never recovered from that.”

These days most of the tens of billions in government subsidies for housing goes to homeowners, not renters, in the form of tax deductions. Mortgage-interest deduction totaled $70B in 2015, almost double the total budget of Section 8 programs, public housing and other housing tax credits for low-income people. Desmond said that by prioritizing assistance for homeownership, which primarily benefits middle-class and wealthy families, over rental assistance for the poor, the federal government is making the nation’s poverty problem worse.

What Can Carson Do?

The majority—about 75%—of poor Americans who qualify for housing assistance don’t get it, according to the Center on Budget and Policy Priorities. Of those families below the federal poverty guideline, 67% don’t get any housing assistance. Julian Castro's (above) replacement could help change that, or could promote other reforms that would let the government help more poor families afford housing.

“The number of families renting their homes currently stands at an all-time high and as many as 4.4 million new renter households will form over the next decade. Therefore, it is critically important that business leaders, the Trump administration and lawmakers in Congress work together to promote the pro-growth policies that support the apartment housing industry," Jim says.

The GSE Question

Ben Carson will also face challenges with Fannie Mae and Freddie Mac. Steven Mnuchin, President-elect Trump’s nominee to lead the Treasury Department, said privatizing the GSEs is “right up there on the top 10 list of things we’re going to get done,” setting off a buying frenzy among investors. Fannie Mae and Freddie Mac guarantee about 60% of the mortgages in the United States and are the biggest source of homebuying credit.

“GSEs play a really crucial role in meeting the needs of housing, especially workforce housing," Jim says. "They’ll need to play a critical role in the marketplace for the foreseeable future.”

Carson's Strategy?

How will Carson handle these problems, should he be confirmed? Our best evidence is an op-ed he wrote for the Washington Times last year. Carson (who did live in affordable housing growing up) spoke about the Fair Housing Act, saying the Obama administration is relying "on a tortured reading of the Fair Housing laws to empower the Department of Housing and Urban Development.” In the op-ed Carson also commented on a ruling in Texas that declared it was proper for lower courts and HUD to make a determination based on "disparate impact" rather than any specific intent to discriminate. While the ruling was seen as a victory for fair housing advocates, Carson claims it promotes further "mandated social-engineering schemes" that only makes discrimination worse and equality further off.

Carson also harshly criticized HUD's actions in Dubuque, IL, last year, claiming the department was overreaching and "redistributing poverty" by weighing in on the city's distribution of Section 8 vouchers. He compared HUD policies to communist rule, which may indicate he'd sharply change the administration's direction. Just how and to what effect remains to be seen.