The other day, I let out a deep sigh and warily turned to examine the housing-related portions of the $787 billion American Recovery and Reinvestment Act signed into law by President Obama back in February. I’m late to the budgetary dissection, I know—especially with the housing industry abuzz about the $130 billion purportedly allocated to construction-related spending. Nevertheless, it was time for me to take a look, and one of the first things I noticed in the breakdown was the whopping $9.6 billion that will be funneled over to the U.S. Department of Housing and Urban Development (HUD) to stimulate the housing industry. What does that sum break down to, you ask? Excellent question. Here’s where most of the money is going:
• HUD’s Public Housing Capital Fund: $4 billion
• Redevelopment of abandoned/foreclosed homes: $2 billion
• Community Development Block Grants: $1 billion
• Energy retrofits and “green” projects: $250 million
Rather than consider the positive aspects of this influx of federal aid, I immediately recalled the agency’s tarnished spending history. And what I take away is this: Whenever the government gives HUD money to dole out, corruption inherently follows.
It happened in the 1980s under Reagan. For eight years, the agency famously wasted more than $600 million, sloughing out thousands upon thousands of taxpayers’ dollars to “development partners” (read: Republican campaign contributors). By 1989, that corruption came to light, and reform bills quickly emerged in Congress. Senators debated squashing the agency but opted instead for slashing its budget and reining in the management team.
For a brief time in the 1990s, HUD emerged from its shadowy past under the adept leadership of Henry Cisneros. But less than a decade later, the corruption once again bubbled to the surface. Alphonso Jackson—who some in the industry consider the worst secretary in HUD’s history—created an organization riddled with accusations of cronyism and bribery. And he ended up resigning—easier to walk away than work for a solution, I guess.
That’s why, this time around, I’m surprised that no one has yet asked the question, what will happen now? Where will the new round of stimulus money end up? Will we see the cycle of corruption start its rotation again? Our senior editor, Les Shaver, jokingly said, “We’ll probably start seeing landlords receiving $200 for a light bulb as part of the energy-efficiency ‘upgrades’!”
But this is a serious matter. HUD will be administering a lot of money over the next few months, and while many in the industry inherently trust the new secretary, Shaun Donovan, (he is one of our own, after all) much of the bureaucracy and attitude that keeps HUD perpetually problematic is still in place.
Will Donovan usher in a new era for HUD? Maybe. I’m still skeptical. But he will need to figure out exactly how he’s going to spend that $9.6 billion—and soon. And that’s one budget I will be watching carefully this year.