Housing and Urban Development Department (HUD)

Secretary Department of Housing and Urban Development

Why It Matters

In the depths of the Great Depression, as the economic collapse caused bank failures, widespread foreclosures and massive unemployment, the government devised a strategy to stimulate the housing market, which was - and still is - vital to the health of the American economy.

Riding a wave of legislation, the government moved into the housing business - a move credited with jump-starting Depression-era homebuilding, which was a factor in recovery.

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Likewise, the housing market has played a major role in the 2008-2009 economic crisis. Questionable practices in the home-loan industry - including those by the government-sponsored entities Fannie Mae and Freddie Mac - contributed to the collapse. And as in the early 1930s, the government is counting on activity in its housing department to help bring the country out of the recession.

One of the first major steps taken to stop the economic nosedive in 2008 was a massive bailout and seizure of Fannie Mae and Freddie Mac. The U.S. Department of Housing and Urban Development (HUD) and the Federal Housing Administration are working to help victims of the recession delay or escape foreclosures, and have been the paymasters for recovery stimulus home-purchase aid. And activity continues.

In the third week of August 2010, the Obama administration called a summit, which included Treasury Secretary Tim Geithner and HUD Secretary Shaun Donovan, to lay the groundwork for a major overhaul of the way the government is involved in the housing industry. The work of the federal government in this area is considered crucial to pulling the country out of recession - which is why economists closely track housing starts, along with the unemployment rate, as an indicator of an improving economy.

At the center of this activity is HUD, which had its roots in the Great Depression, and is seen as a primary weapon in the battle out of the worst recession since the 1930s. The Cabinet-level department is responsible for addressing the country's housing needs, improving communities through grants, providing public housing and rental assistance for millions of low-income residents, and helping lower- and moderate-income families obtain home loans through its mortgage and loan-insurance programs. The department also enforces federal fair-housing laws, cracking down on landlords who illegally discriminate against people needing homes.

More on: Housing and Urban Development Department (HUD)

At a Glance
History
Offices
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Background

At a Glance

# of Employees: 9,739 full-time in fiscal 2011
2010 Budget: $43.6 billion
Address: 451 7th Street S.W., Washington, DC 20410
Email
Web site

History

HUD was born and nurtured under President Franklin D. Roosevelt's "New Deal," and got new life and responsibilities under President Lyndon Johnson's "Great Society." From its beginnings as a rescue measure for victims of the Great Depression, it has matured into an agency that:

is a major engine fueling the home construction and home-loan industry
is part of the country's fallback system to bootstrap the economy out of recession
enables and promotes the American dream of home ownership
provides housing - through rental assistance or public-housing projects - for millions low-income of families
helps guarantee that noone faces barriers to housing because of their race, religion, disability or other discriminatory factors
works to eliminate harmful lead paint from housing
directly operates Ginnie Mae, the government agency that helps stimulate housing capital through mortgage-backed securities
provides funding for a wide range of community- development projects

HUD's official mission is to "create strong, sustainable, inclusive communities and quality affordable homes for all. HUD is working to strengthen the housing market to bolster the economy and protect consumers; meet the need for quality affordable rental homes; utilize housing as a platform for improving quality of life; build inclusive and sustainable communities free from discrimination; and transform the way HUD does business."

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HUD has its roots in the Emergency Relief and Construction Act of 1932. The act created the Reconstruction Finance Corporation, which made loans to private corporations to provide housing for low-income families.

Home ownership was not common at the time; the U.S. was a nation of renters. And mortgages were much different than they are today.

"The average home loan at that time required very short-term credit, with terms generally ranging from three to five years," HUD historians say. "Large down-payments, second mortgages and high-interest rates were commonplace."

With the aim of getting the Depression-burned banks to ease up on credit, and to stimulate the employment brought about by new construction and repair projects, Congress passed the National Housing Act of 1934.

Among other things, the act created the Federal Housing Administration (FHA), which still exists and provides backing for a significant number of current single-family and multifamily home loans. In 1937, with authorization from the housing act, the FHA created the Federal National Mortgage Association - Fannie Mae - to stimulate more money for home loans by providing a secondary market for the sale of home loans.

These actions, as groundbreaking as they were, didn't help the legions of low-income households that needed aid the most. Another round of legislation - the United States Housing Act of 1937 - created the Public Housing Authority, which provided loans to help local groups build low-rent public housing.

Over the next decade, multiple new programs were created and passed to new umbrella agencies. In 1942, the National Housing Agency (NHA) became the federal housing and home loan umbrella for all non-farm programs. The next year, the NHA was replaced by the Housing and Home Finance Agency.

The World War II-era Veterans Administration home-loan bill - approved in 1944 - had a major impact on the country, as it and its successor GI bills financed home loans for millions of new homeowners. This activity was a major contributor to the growth of suburbs, and a decline of the inner cities.

Congress took action to address this urban decline with the Housing Act of 1949. This law provided funding for cities to clear slums and redevelop their decaying areas. It not only provided money for housing construction, but also allowed funding for improvements in the urban environments, including water and sewer facilities, neighborhood centers, etc.

HUD was created as a Cabinet-level department during the administration of President Lyndon B. Johnson, as part of his "Great Society," taking over from the Housing and Home Finance Agency.

Created against the backdrop of the height of the civil-rights movement, much of the focus was on increasing appropriate housing and home ownership among minorities, and on protecting them from discrimination in housing.

The increasing role of the federal government in housing has not been without critics.

With the role of Fannie Mae and Freddie Mac in contributing to the ongoing recession that hit the country starting in 2008, the future of these agencies - as well as the FHA itself - is up for debate.During the August 2010 summit on the future of housing, HUD Secretary Donovan noted that between Fannie Mae, Freddie Mac and the FHA, 90 percent of home loans are now backed by the federal government, a situation he said can't continue: "The government's footprint in the housing market needs to be smaller than it is today."

The stakes are enormous. The current Fannie Mae and Freddie Mac portfolio - the loans that are now a hot potato for American taxpayers - ring in at $1.6 trillion.

Introducing the fiscal year 2010 budget, at a time when the economic outlook was much bleaker, Donovan painted HUD as a white knight - a key weapon in the battle to fend off recession.

"HUD is at the center of the federal response to the national mortgage meltdown and foreclosure emergency. In the midst of a credit crunch, the Federal Housing Administration is playing a critical countercyclical role. FHA represented 23.7 percent of single family mortgage dollar volume in the last quarter of 2008, up from 1.9 percent in 2006, serving 1.4 million households in 2008."

"HUD is actively involved in foreclosure mitigation, homeownership counseling and a myriad of efforts to curb mortgage abuse and lending discrimination. HUD is also part of efforts to rethink the regulatory structure governing the housing sector, to prevent the repetition of the reckless and speculative lending that precipitated the current housing crisis."

In 2012, the Obama administration is expected to push for a major restructuring of the way - and the level - that the federal government interacts with America's housing and mortgage industry. The August 2010 summit was a signal that discussions and ideas about what should be done are underway. The message from Geithner and Donovan seemed to be that the federal government will continue to be involved, but at a much lower level.

Offices

Office of the Secretary
- Chief of Staff
  - Congressional and Intergovernmental Relations
  - Office of Faith-Based and Neighborhood Partnerships
  - Office of Public Affairs
- Deputy Secretary
  - Chief Operating Officer
    - Chief Financial Officer
    - Chief Information Officer
    - Chief Procurement Officer
    - Disaster and Emergency Management Office
    - Office of Human Capital
  - Ginnie Mae
  - Office of Community Planning and Development
  - Office of Fair Housing and Equal Opportunity
  - Office of Field Policy and Management
  - Office of Healthy Homes and Lead Hazard Control
  - Office of Housing
  - Office of Policy Development and Research
  - Office of Public and Indian Housing
- Office of General Counsel
- Office of Inspector General
- Office of Strategic Planning and Management
- Office of Sustainable Communities