If the Republicans achieve their budget goals what will HUD’s budget be? Will it be a positive number? HUD anticipates this challenge and is launching a pinch of a PR campaign.  Now, the RBC is reality based — what is your verdict for HUD? If you were named its Secretary what would you focus your scarce budget on? Below, I offer a few thoughts.
According to this “expert source”
HUD’s major program offices are:
- Community Planning and Development: Many major affordable housing and homelessness programs are administered under Community Planning and Development. These include the Community Development Block Grants (CDBG), the HOME program, Shelter Plus Care, Emergency Shelter Grants (ESG), Section 8 Moderate Rehabilitation Single Room Occupancy program (Mod Rehab SRO), and Housing Opportunities for Persons with AIDS (HOPWA).
- Housing: This office is responsible for the Federal Housing Administration; mission regulation of Fannie Mae and Freddie Mac; regulation of Manufactured housing; administration of Multifamily housing programs, including Supportive Housing for the Elderly (Section 202) and Supportive Housing for Persons with Disabilities (Section 811); and Healthcare facility loan insurance.
- Public and Indian Housing: This office administers the public housing program HOPE VI, the Housing Choice Voucher Program (formerly – yet more popularly – known as Section 8), and housing block grants for Indian tribes, Native Hawaiians and Alaskans.
- Fair Housing and Equal Opportunity: This office enforces Federal laws against discrimination against minority households, families with children, and persons with disability.
- Policy Development and Research (PD&R): This office is responsible for maintaining current information on housing needs, market conditions, and existing programs, as well as conducting research on priority housing and community development issues through the HUD USER Clearinghouse.
- Government National Mortgage Association (Ginnie Mae)
- Healthy Homes and Lead Hazard Control.
- Partnership for Advancing Technology in Housing (developed in 1998)
As a nerd, I would encourage HUD to invest a lot more in PDR. Building on the Move to Opportunity experiments, HUD should be running many field experiments in which households are randomly assigned to treatment and then outcomes are tracked over time. What could be randomized? It could be the size of housing vouchers, it could be acceptance to elite charter schools, it could be free multi-family apartment energy audits to encourage property owners to retrofit their buildings. It could be a “cash for clunkers” in apartments to encourage renters to upgrade their appliances.
HUD could also use GIS mapping techniques and micro data on real estate prices by neighborhood to track the rise and fall of neighborhoods over time and across cities. Such a public data set would be crucial for developers and investors to know where opportunities are arising and for Mayors to see whether gentrification is taking place.  If a given geographical area is becoming a slum, then an “early warning” system indicating this could allow both the free market and government to work together to preempt this.
Again, to an economist the key issue here is what externality exists in the urban housing market to justify heavy government intervention? HUD should have to document such externalities and explain why funding it helps to mitigate these social challenges. What evidence would convince Republicans that HUD is “cost-effective”? Or is your claim that Republicans live in suburbs and don’t care about cities?
“Again, to an economist the key issue here is what externality exists in the urban housing market to justify heavy government intervention?” Well, for Section 8, maybe the fact that housing is too expensive for low-income housing to be built. And no, even places with less restrictive land use policies need Section 8 certificates.
“HUD should have to document such externalities and explain why funding it helps to mitigate these social challenges.” That’s called a budget request, and they do it every year. Not to mention audit responses to Congress critters and the GAO.
“What evidence would convince Republicans that HUD is “cost-effectiveâ€?” Nothing. Republicans don’t believe in evidence. “Or is your claim that Republicans live in suburbs and don’t care about cities?” Also true.
But I agree with you that HUD is a mess of a department. It’s a small department, but a messed-up one.
I don’t really know too much about what HUD does do, or what the arguments for it are, but here is a justification for what I think it should be doing.
Readers of this blog probably agree that the government, at some level, should actively work to better the lot of the poor. This can be through housing subsidies, medical care, cash transfers, what-have-you. There is a role for housing subsidies here, not because “low-income housing won’t be built otherwise and there’ll be nowhere for poor people to live” but simply because it’s good to have a diverse set of policies available. (Yes, direct cash transfers are more “efficient” than housing subsidies. But providing aid in-kind rather than in-cash can help improve targeting to those who truly need help, while reducing the “moral hazard” incentives for people to manipulate their situations to be eligible for benefits).
So, given that we are going to help low-income people with housing support, why should this be done at the federal level instead of the local or state level? Because people are free to travel and move. If Berkeley, CA decides to better the lot of its homeless people by paying them a salary and providing them with housing, then Berkeley, CA very soon finds itself with a lot more homeless people. As long as the homeless there are better off than the homeless elsewhere, and as long as people who move in are eligible for the benefits, then you’d expect homeless people to keep moving in. Eventually the homeless in Berkeley are no better off than before, there are just more of them, and Berkeley is a lot closer to bankrupt. As a general rule, redistributionary subsidies should be handled at highest possible level of government.
What evidence would convince Republicans that HUD is “cost-effective�
If you naively compare what HUD spends on running FHA + Ginnie Mae to Fannie Mae and Freddie Mac, which perform similar functions, HUD looks extremely cost effective. HUD does roughly the same thing with a drastically smaller, lower paid staff. I think it’s because (1) FHA/Ginnie restrict themselves to simpler products, both mortgages and secondary market securities, (2) because FHA underinvests in in technology and staff to process mortgages and so it takes a relatively long time to get an FHA mortgage, and (3) because FHA/Ginnie Mae doesn’t invest much in analysis or automated underwriting, which may make it a riskier enterprise. So FHA/Ginnie are very cheap but that cheapness reduces quality along many dimensions. So I have no idea if they’re cost-effective.
If you naively compare HUD’s costs for its Section 8 Voucher program, which subsidizes the rent of low-income households in the private market, to HUD’s costs for its construction programs, vouchers look pretty good. However, vouchers probably just redistribute existing housing rather than producing new housing, so vouchers may not be so cost-effective after all.
You can also compare HUD’s low-income housing programs to similar programs run by other agencies such as the Treasury Departments Low Income Housing Tax Credit and Home Affordable Modification Program (HAMP), or the Agriculture Department’s Rural Housing Service. I suspect HUD would come out looking pretty good in this comparison since it has real expertise in the housing market.
Such a public data set would be crucial for developers and investors to know where opportunities are arising and for Mayors to see whether gentrification is taking place.
The data are out there already. This is being done. This is how developers already look for advantageous properties. If the ‘improved value’ is LT ‘land value’ (or whatever the column is that designates ‘land only’, then it is a target. Been doing this for years. On my home computer I have perhaps 6-7 large US cities’ worth of data, since early naughties.
Anyway, What Jonathon said.