Department of Housing and Urban Development

Executive Summary

The Department of Housing and Urban Development (HUD) is the federal agency primarily responsible for housing programs, enforcement of fair housing laws, and improvement in the quality of life in the nation's cities, towns, and villages. More than 10 million Americans benefit directly from HUD's single-family mortgage insurance and housing subsidy programs. Millions more benefit directly and indirectly through HUD's other major programs, such as community development block grants.

The department has approximately 13,500 employees--3,500 in its Washington headquarters and 10,000 in its 10 regional offices and 70 area offices across the country. HUD's fiscal 1992 budget was $25 billion.

HUD was established as a cabinet-level agency in 1965, charged with the broad mission of both creating and maintaining decent, affordable housing and stable communities. This action was a consolidation of the Federal Housing Administration (FHA) and U.S. Housing Authority which were created in 1934 and 1937 respectively.

The National Performance Review (NPR) analysis indicates that HUD's most pressing problems and the greatest opportunities for improvement are in management of public housing and asset management and disposition.

While only 24 of the nation's more than 3,000 housing authorities are classified as troubled, these authorities account for 18 percent of all public housing units. Collectively, they receive more than 30 percent of all public housing operating subsidies, consume more than 25 percent of all future modernization funds, and have an average vacancy rate of 13 percent.

NPR recommends a comprehensive five-point program to reinvent the nation's public housing program. Particular focus is given to the need to cut red tape to get improved results. The program includes the devolution of control to local public housing authorities (PHAs) with an established performance record and a cooperative effort of federal and local officials and public housing tenants to eliminate unnecessary HUD requirements. It also includes a hard-hitting targeted HUD initiative to resolve the problems of the relatively few troubled PHAs. HUD should also be authorized to use new construction and modernization funds to develop demonstration models. These models give public housing tenants market powers and freedoms by creating mixed-income developments that fund portable tenant subsidies. With a portable subsidy, an assisted tenant becomes a paying customer rather than a dependent beneficiary of public housing. HUD should be allowed to authorize sale of existing public housing units when the proceeds could guarantee replacement of the units in greater numbers with enhanced housing options for public housing tenants.

HUD also faces the overwhelming and worsening tasks of managing problem loans and disposing of foreclosed properties. The key to doing so is to use public-private partnerships that use market dynamics to achieve results in managing and disposing of real estate assets. HUD staff will measure performance rather than administer through government bureaucracy and red tape--steer rather than row.

The current inventory of multifamily units is approximately 48,000 units and growing. Assuming no change in policy, HUD would require an additional $6.5 billion in budget authority to process this inventory. HUD needs more flexibility to address management and disposition of formerly subsidized housing projects--especially authorization to use portable rental subsidies, rather than the presently required project-based subsidy procedures, for tenants in buildings to be sold when they would be more cost-effective for HUD's overall mission.

Nearly $1 billion in HUD-coinsured loans are already in default, and existing audits indicate that billions more in defaulted loans are expected. HUD also has an inventory of more than 90,000 single-family loans, valued at about $3.3 billion, about half of which are not current. Last year, approximately 17,000 new loans were taken into HUD's inventory, and only 1,700 were resolved through foreclosure.

Finally, HUD should develop a Loss Mitigation Program for early intervention with FHA-insured homeowners in financial difficulty.

HUD Secretary Henry Cisneros has been aggressive in making HUD reinvention a central theme in his management of the department. Reinvention labs are underway through the experimental use of sales of HUD's inventory of single-family properties in cooperation with nonprofit organizations and their communities, as well as in innovations in public housing management, affirmative marketing, a homeless initiative in the nation's capital, and a community partnership against crime.

The most important past, present, and future commitment of taxpayer funds through HUD is represented in the outstanding portfolios of: 1.4 million public housing units, 2.2 million privately owned units assisted under contract by HUD, $378 billion of outstanding FHA insurance, and $12 billion of real estate and loan assets held by HUD.

The HUD NPR review focused primarily where the money is--in these outstanding portfolios. Some of the NPR recommendations will lead to specific, measurable financial benefits. Those savings are expected to be $602.0 million in budget authority and $424.9 million in outlays from 1994 through 1999.

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