HUD (Hassle and Urban Dismay)

National | Why Housing and Urban Development must change: The next HUD secretary needs outcome-based, entrepreneurial approaches that help empower local neighborhoods to break the cycle of despair. Government cannot do it all, but it can at least stop promoting dependency

Issue: "How shall we then govern?," Oct. 28, 2000

An environmental design company recently contracted with a college to landscape and plan the grounds of the campus, including some new sidewalks. The sidewalks soon became a great source of frustration; no matter how officials attempted to steer the foot traffic-using ropes, small fences, or signs-the students would cut across the lawns, leaving paths across the grass. Finally, in a last-ditch effort, the firm consulted some of the students, who solved the problem in an instant. Their solution? Lay the sidewalks on the paths where the students walk. That solution shows an entrepreneurial mindset, one usually lacking in large, bureaucratic government agencies. An entrepreneur's first premise is that a service exists to benefit a specific base of customers (in the college grounds case, to provide walkways for students). There, the service providers went off track when one option of service provision (predesigned sidewalk tracks) became the end rather than a means-when they worked on the assumption that students should be modified to fit the paths, not vice versa. There's an important lesson here for government, even for the historically intractable Department of Housing and Urban Development. An entrepreneurial mindset could reshape and revitalize this department, but four specific things must change:

  • Programs and policies should be evaluated in terms of performance, not process or programmatic maintenance.
  • As with products, HUD's services must be designed with input from customers, those who will be using the services, since they have a firsthand knowledge of the problems and of available resources that may play a role in their solutions.
  • Projects must build on indigenous strengths of the community serviced, building self-sufficient sustainability rather than continued dependence.
  • Whenever possible, government assistance must be given with an expectation of reciprocity.

Policies meant to address the needs of low-income Americans should go beyond conventional custodianship and sustenance-level support. They should have as their new goal the promotion of personal savings and asset accumulation. Every low-income policy should be judged on the basis of whether or not the poor are enabled to accumulate assets and wealth, and to contribute responsibly to their own financial progress through "sweat equity." Why is this important? Currently, one third of all American households, and 60 percent of African-American households, have zero or negative financial assets. Twenty percent of all Americans are "unbanked," lacking even a checking or savings account. Although it has long been considered a central part of the American Dream, home ownership has not been possible for thousands of families-in particular, minority families and families living in our nation's inner-city neighborhoods, who are at or below the median income level. While 74 percent of suburban families own their own homes, only 51 percent of families living in center cities do. And while nearly 74 percent of white families are homeowners, black and Latino families who own their own homes account for only 47 and 46 percent of their populations, respectively. This isn't new territory for HUD. But many of its programs designed to get poor families into their own homes essentially provide one-time grants. There's a better way, as demonstrated by Housing Opportunities Inc., a nonprofit organization that has become a trailblazer in meeting the housing needs of low-income families. HOI uses an alternative strategy of asset-based lending, and it reinvests and reuses housing grant funds through a system of revolving loan funds. Loans repaid means more loans made. These are different expectations-because HOI expects new homeowners to repay the loans-and, consequently, very different results. "Government programs simply just give the money away," said HOI Vice Chairman and CEO James P. Butler. "The grant money has no regenerative mechanism and the conventional grant approach does not utilize funds to their optimal capacity.... Once the grant amount has been loaned, no future consumers can be served. There is only one round of lending." HUD should consider implementing a loan system similar to HOI's that will enable it to help more low-income families to achieve and maintain homeownership. It not only should, it could-the FHA is statutorily permitted to use money from its Mutual Mortgage Insurance (MMI) fund "creatively" to avoid claims and to protect its constituents' homeownership and equity. Currently, the MMI fund has a surplus of literally billions of dollars. The potential of creative loans, which would maximize the capacity and benefit of these funds, should be explored by HUD. And HOPE must be restored. In 1989, HOPE (Homeownership and Opportunity for People Everywhere) legislation was enacted to empower residents of public housing with avenues to homeownership. The program has been gutted over the years, and a bevy of federal regulations has crippled its ability to help low-income Americans. HOPE's mechanisms to help increase inner-city homeownership should be put back to work. One of the more visible ironies of HUD's ineffectiveness is that some perfectly good homes are sitting vacant. In 2000, the House of Representatives passed the property disposition proposal of the American Community Renewal Act. The provision would promote the transfer of property rights of FHA foreclosed properties to nonprofit groups within distressed areas-which then could match homes to hopeful homebuyers. But President Clinton has yet to sign this into law; clearly, this should be a top priority of the incoming administration. Another way to promote asset development among low-income Americans is to establish Individual Development Accounts (IDAs). IDAs provide a system of matched savings that includes tax incentives to encourage financial institutions and private-sector investors to set up, match, and support savings accounts for low-income families. The savings are to be used for specific purposes that promote the long-term economic progress and financial independence of families, including a first home, a college education, and small-business development. To date, 28 states are already experimenting with IDAs; HUD should encourage the other states to try them, as well. Though the most pressing problems that confront our nation's distressed communities may manifest themselves in external ways, in most cases their root causes are internal, at the level of spiritual and emotional needs. Such problems can be and have been solved, but not through HUD policies. Instead, change has come about through faith-based and community-based outreach and the efforts of men and women who have a personal long-term commitment to the individuals they serve. In these cases, without a fundamental internal change in values and visions, external remedies such as jobs and housing can have, at best, a short-term impact. "Community healers" have helped to free hard-core drug users and alcoholics from their addictions, and to transform violent gang members into "ambassadors of peace" among their peers. But a transformed heart needs busy hands and a full stomach. Once values-based personal investment has begun to engender change, HUD (as well as other government departments and their agencies) can play a critical role in providing practical opportunities for employment, education, and economic progress. When neighborhood- and faith-based outreach receives necessary resources and support from public agencies, potential for dramatic community-wide uplift increases. The partnership can work. A great example is seen in the crucial role that the D.C. Housing Authority played in addressing youth violence in some of the most crime-ridden areas of our nation's capital. At the Benning Terrace public-housing development-one of Washington's most dangerous neighborhoods-street warfare between two factions of youths (the Circle and the Avenue) had caused dozens of deaths in the previous years. Frightened residents dared not venture from their homes. Playgrounds became deserted, littered lots where children could not play for fear of violence. Taxis, service companies, and even the police did not often venture into what was known as the "war zone." This is what David Gilmore, the court-appointed receiver of the District's Housing Authority, encountered when his driver drove him slowly past (while advising against going into) Benning Terrace. "I saw the devastated conditions that have been a day-to-day reality for families for many months, perhaps even years," Mr. Gilmore said. "The first idea that came to mind-the idea that persisted until January 1997-was that my only option was to demolish those properties. I would tear those buildings down and disperse the folks who lived in them, even if this only meant moving the violence to another location." Demolition alone was estimated to cost $1 million; that didn't include the cost of finding new homes for the poor families who lived at Benning Terrace. But in January 1997, Mr. Gilmore found an alternative strategy for Benning Terrace. A grassroots organization (supported by the National Center for Neighborhood Enterprise) had worked with the leaders of the warring youth factions to declare a truce. Mr. Gilmore committed himself to providing the support and resources needed to stabilize the beachhead that the neighborhood group had established. Young people from both factions came together to create a unified organization committed to the uplift of their neighborhood. Available funds provided job training and employment opportunities. The youths worked together removing graffiti, doing landscaping and yard work, and performing minor repairs to housing units. Personal transformation among the young people paralleled the community's emergence as a thriving neighborhood where children could play freely and neighbors could congregate without fear. "Instead of bulldozers bringing that neighborhood down, the commitment of concerned individuals and the response of the young men raised it up, out of its devastation," Mr. Gilmore said. "The money we have spent supporting that transformation is just a fraction of the money that would have been spent anyway. Not one penny of additional funds was allocated for the transformation of the Benning Terrace neighborhood. In fact, far less was spent in salvaging the community than would have been spent in demolishing it. We have received a remarkable return on our investment, not only monetarily but, even more important, in terms of human benefit." David Gilmore exhibited extraordinary vision and creativity in his leadership of D.C.'s Housing Authority, but his ability to take quick and innovative action was enhanced by the fact that, as a court-appointed receiver, he had more flexibility than conventional Housing Authorities. HUD can grant similar flexibility to other Public Housing Authorities. Officials at HUD have begun to do so, but even more flexibility is needed. Other measures also should be explored. Charity tax credits (included in the Charity Empowerment Act) would allow grassroots initiatives to receive direct taxpayer support, for example. And the Community Renewal Act offers a broad array of "empowerment tools," from tax policy to education scholarships, to promote community revitalization. But all such programs-in fact, any program pushed by a new HUD secretary-must have three elements. They must be outcome-based. They must be entrepreneurial. They must empower their constituents as they build on their strengths.

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