Cover Story

Putting HUD's house in order

Can the new landlord in Washington make one of the most troubled federal agencies work? TeamBush promises a "no-frills" approach that, as HUD secretary Mel Martinez says, gets government "out of the way of" private-sector, faith-based solutions that deliver low-income housing

Issue: "Mel Martinez: HUD's man," March 3, 2001

For residents of the 1400 block of R Street in Washington, D.C.-nine blocks north and two blocks east of the District's most famous address, 1600 Pennsylvania Avenue-it's good to be odd. The odd-numbered buildings on the north side of the street are home to Yuppie singles with $200,000 to spend on cramped urban condos. The buildings have aristocratic-sounding names, like The Gladstone, and wrought-iron fences surround the well-tended flowerbeds out front.

But the south side of the street is a different story. No flowers decorate the front of the run-down, U-shaped facades-just cement steps where young men sit listlessly for hours each day, sullenly watching their neighbors across the street. Nor do the buildings have names: They are known simply by their notorious, even numbers: 1416, 1428, 1432, 1436 and 1440.

The five buildings have a total of 122 apartments for tenants receiving federal rent subsidies. Each year, the Department of Housing and Urban Development pays $975,000 to the partnership that owns the buildings. In return, the owners maintain the 122 units as "Section 8" housing, charging far less per square foot than they could get on the open market. With guaranteed government income, there's precious little incentive to modernize or beautify the apartments-or even to make them marginally livable. From January of 1999 through October of 2000, D.C. police were dispatched to the buildings for emergency calls more than 500 times-nearly once a day.

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Not surprisingly, many neighbors want to see the dangerous, drug-infested buildings shut down. Why would anyone want to live in such a place, they wonder? But people do want to live in such a place. Like most big cities, D.C. has a waiting list of poor residents who can't afford market-rate rents. Nearly 13,000 people in the District are waiting for Section 8 housing like the R Street properties, and the average wait time for an available unit is nearly four years. And that's hardly unusual: New York City's Housing Authority has waitlisted 110,000 families looking for affordable housing and told new families added to the list to expect an eight-year delay.

The housing crunch stems from a mixture of middle-class prosperity and bureaucratic ineptitude. As cities like D.C. and New York have experienced economic revivals, property values have risen at astonishing rates, making affordable housing all but impossible to find. Consider the numbers for the nation's capital: In evaluating mortgage loan applications, banks generally want to see that housing costs will eat up no more than one-third of an applicant's monthly income. But among Washington residents who qualify for federal housing assistance, paying even one month's rent on the open market would consume 112 percent of the household income. Nationally, 5.4 million families fork over more than half their monthly income to pay the rent on severely substandard housing.

Naturally, the federal government has a cabinet-level department charged with eradicating this problem. But ever since its inception during the Johnson administration, the Department of Housing and Urban Development has been one of the most inefficient and scandal-plagued departments in Washington. Richard Nixon, Gerald Ford, Ronald Reagan, and even Bill Clinton set about to "reinvent" the agency, but to no avail: In 1994, the General Accounting Office named the entire department a "high risk" for waste, fraud, and abuse. No other federal agency made the list.

With HUD programs administered by 4,500 local housing authorities, 10,000 individual banks, and thousands of outside consultants and management firms, corruption can occur under even the best administrations. After a five-year investigation, a special prosecutor obtained convictions of 16 Reagan-era HUD officials who embezzled millions of dollars earmarked for renovations of substandard housing. Though he was never charged with any crime, Secretary Samuel Pierce admitted in 1995 that "my own conduct failed to set the proper standard" for employees of the department.

Unlike some government offices, in which wasted money hurts only the taxpayer, such scandals at HUD hurt the very people the department is supposed to be helping. Entitlement programs like food stamps or Medicaid guarantee benefits to anyone whose income falls below a specified level. But HUD's programs are not entitlements; when the money runs out, HUD simply tells eligible families they'll have to wait until additional housing becomes available.

The math is straightforward enough: It costs an average of $6,000 to house a poor family for one year. So, for example, the $935 million that HUD loses each year to fraudulent eligibility claims means that 156,000 needy families will go without assistance.

"Part of putting compassionate conservatism into action means using resources efficiently, so there is the means to treat with compassion those in need," Secretary Mel Martinez said during his Senate confirmation hearings, stressing that putting HUD's own house in order would be his "first priority" at the giant housing agency.

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