331 the department of urban decay
The federal government's attempt at a social housing policy goes all the way back to the U.S. Housing Corporation of 1916, which built homes for war workers. That body was sensibly liquidated right after the armistice, and the real disasters would have to wait for the coming of the New Deal. From the beginning, federal policy proved a strange, double-edged sword. Roosevelt's Federal Housing Authority make homeownership easier for millions of Americans, while at the same time it institutionalized racism in the housing market and began the condemnation of inner-city neighborhoods to a slow death.
We could also mention the effect it had on architecture and design. FHA's insistence on single-family houses on the largest possible lots determined the cookie-cutter form our suburbs took in the postwar years. It made the building of row houses, a traditional and popular style, nearly impossible, while the Authority's blinkered vision and near-total power over building finance precluded any sort of architectural experimentation. Frank Lloyd Wright's practical and beautiful 'Usonian house' design of the 30's never achieved success because this government agency forbade it for mortgage guarantees.
The fateful effects of the Housing Act of 1949, in public housing and urban renewal are covered in dreary detail elsewhere on this site, but there was no time to recall the story of Section 208 of that law. Section 208 was an afterthought in the bill, intended to encourage the construction of apartments. What resulted was on the whole very poor work, the urban 'garden apartment' complexes of the 50's and 60's that copied the design of federal projects for the poor; many of these, after treatment through another federal program, Section 8, are now occupied by crack houses and their clients. This scheme also led to the first big federal scandal, investigated by the Senate in 1956. Conspiring with corrupt FHA appraisers, builders were able to wildly overestimate their costs, and walk away with the difference, costing the taxpayers half a billion, which was money in those days. Another loan program of the time was run by the Veterans' Administration, and VA appraisers were caught at the same game in single family housing, in some cases signing off on subdivisions that had no paved roads or sewers.
In 1965, the Johnson administration inaugurated the United States Department of Housing and Urban Development, a bureaucracy that has since earned for itself the title of the most calamitous, corrupt and reckless bureaucracy ever hatched in this republic. Designed to oversee all the federal urban programs, HUD arrived just in time to preside over the climax of public housing's misery, and the imploding of the first projects. Richard Nixon inherited the nightmares; this president performed some courageous and necessary work for cities, shoveling out from the disasters of previous regimes and putting an end to urban renewal and project-building, Model Cities and the Office of Economic Opportunity. If Nixon's men could terminate proven failures, though, they were not prepared to admit that Washington should just butt out of urban affairs and let communities keep their own money. HUD funding went up, and the infamous Section 235 started to work its poison on stricken neighborhoods. Meanwhile, the 1974 Housing and Community Development Act made decentralization the new ideal: 'revenue sharing', in the parlance of the day. They would keep collecting the money, but then hand it back to cities as Community Development Block Grants.
It was one of the biggest pork barrels in our history, and not all of the money went to waste. Block Grants made up shortfalls in city budgets, paid for new staff, planning and studies. There were jokes from the beginning about Block Grant streetlights and benches, Block Grant trash bins, unexpected presents from Uncle Sugar. Suburbs, with their new political pull, soon found a place at the trough too. The funding guidelines required that the money go to help 'low and moderate income areas', but suburban and small-town congressmen had little trouble tweaking the guidelines to get their own bailiwicks included. There were plenty of other guidelines, and no end of paper to be filled out, but it didn't really matter. Money was moving, making gratifying headlines and keeping people happy. In effect, Uncle Sugar was saying to cities and their people, 'give me your disposable income, and I will see to everything. I will also give you back a nice allowance and advise you how you may spend it'.
Block Grants and other direct cash grants, though much reduced, are still with us, too politically popular to ever die completely. As with all such schemes where money flows to Washington and back again, an occult form of inflation results. A CBO audit finds that cities pay 30% more for sewage plants when the feds provide the money. HUD rent subsidy programs calculate 'market rents' at sometimes twice the going rate in inner city areas (that was the case in the neighborhood where I worked, and it was the same in every city of which I had knowledge; today, the margin is slightly smaller). Local non-profits with any business sense had a chance to make real money collecting HUD-level rents, though it was clear the arrangements were set this way to enrich the big property management companies who had the inside track with HUD in Washington. Nixon and a Democratic Congress also managed to move forward with some of the sillier ideas left over from Johnson's days, from HUD's Section 235 housing to UMTA's Detroit People Mover, and it invented a new one of its own, called Section 8. And Nixon's term brought the witching hour when HUD made its devil's pact, when it became a rogue agency.
Whenever a government authority interacts with real estate and construction people, the opportunities for corruption are obvious. Money leaks everywhere; the vast number of small projects, the mounds of paperwork involved and the intricacy of the bureaucratic mechanisms all conspire to create a sphere in which cash cannot be easily traced, and no one can prove or disprove that it achieved its intended goal. HUD field inspectors are the weakest point, as in the Section 235 scandals. Everything depended on their integrity and competence, and proper oversight was difficult without great expense. The government wanted paper results, as governments invariably do; false appraisals, faulty construction and neglected maintenance would not show up until later.
A different, more insidious form of corruption arose inside the offices, from collusion between HUD officials and property owners and management firms. In the 70's it became endemic in HUD programs, and the tie with big private interests led straight to political finance. Nixon and Carter turned Section 8 into a fundraising tool—an important one. In one state, Massachusetts, 70% of Carter's campaign contributions came from a cabal of Section 8 developers, who in turn received 90 percent of the state's Section 8 grants the following year. Political considerations also led HUD to pour money into local housing authorities without caring much where it went. Carter's administration enjoyed a very close relationship with Chicago's desperate CHA-the most highly subsidized authority in the nation, and also, according to a HUD report of 1983, the worst managed.
The Reagan administration made HUD an open sewer. Kickbacks and fraud amounted to an estimated two to four billion dollars of stolen public money. The investigations dragged on through the 90's, resulting in 17 convictions, including that of Interior Secretary James Watt, who got over half a million from developers and 'consultants' by using his influence on HUD's political appointees to steer projects to them. Only about $12 million of the money was ever recovered. Reagan's conservatives had promised to cut back or eliminate housing programs, but once again the temptation of loose money proved too great. Secretary Jack Kemp, the apostle of vouchers, never got his reform off the ground, and his fellow conservatives roasted him for it. He also failed in reforming the department's administration, and in the touted plan for selling off public housing to tenants. While local activists castigated Reagan for 'housing cuts', appropriations actually went up 65% in real dollars.
Almost since its inception, HUD has set the standard for administrative incompetence in Washington. It was designated a 'high-risk agency ' by the GAO in 1994, because of the wide opportunities for fraud involved in its programs and the lack of oversight. The Clinton administration too vowed major reforms, but its eight years produced only further scandals, as Congressional committees and the Government Accounting Office found the department impossible to audit-investigators couldn't even find out who had designed HUD's bookkeeping systems. As he left office, the infamous Secretary Andrew Cuomo falsely claimed that the GAO had removed the department's 'high-risk' label; in fact GAO cleared only one of HUD's programs.
The latest GAO oversight report on HUD (2004) highlights continued potential for highjinks, due to the department's poor documentation and limited program monitoring. No one at HUD has been indicted lately, but the stink is still rising. Every year brings a new kickback scandal somewhere, mostly involving FHA loans. The worst so far involved the nation's biggest owner of Section 8 housing, who creamed millions through kickbacks from inflated management fees over several states. Exploitation of its programs for political fund-raising undoubtedly continues, as it always has. That, of course, has come to be accepted practice in Washington, under either party, and no reporters or congressional committee chairman are much interested in digging.
Today, the focus of common, garden-variety corruption is not in Washington, but on the local level. HUD runs many of its programs through city or regional housing authorities, and its traditional lack of oversight remains an invitation for everybody in the authorities to pull out a plum. Former directors in San Francisco, Cleveland and a few other places are currently behind bars. A web search for the words 'housing authority indictment' turns up 41,500 hits, but we haven't the patience for them all; most readers will probably be familiar with the latest scandals in their home towns.
Henry Cisneros, Bill Clinton's beleaguered first HUD director, spent a day touring the worst projects in Chicago in 1993, and said if he had his way he's blow them all sky high. He may have lost his job, but he got his wish. Despite their inability to tame HUD, the Clintonians did good work defending the Community Reinvestment Act and the Earned Income Credit from Congress, pushing the idea of community policing, demolishing 68 of the worst projects, and promoting homeownership. Some aspects of their policy looked promising, with an emphasis on tax incentives and regulatory relief for depressed areas, and expanding programs that increase access to credit for inner city homeowners and businesses.
They will likely be judged on their major initiative in urban policy, the 'Empowerment Zones' and 'Enterprise Communities'. These were ideas inspired by Margaret Thatcher's urban policy in Britain, based on a simple and attractive idea: mark off some of the worst inner-city slums, offer tax benefits for businesses to operate in them and create jobs, and pour in resources for social and rehabilitation programs to help out.
Once through the legislative sausage-grinder, though, EZ/EC turned out a near copy of the old Model Cities program, marshalling an entire host of bureaucracies to battle blight together. And as in Model Cities, exactly what is happening in an Empowerment Zone is not known now, nor ever will be. In EZ/EC, progress and integrity of a program are measured not by HUD, but by a city government's own 'self evaluation' A quote from the Cleveland Plain Dealer, from an outside researcher for HUD sums up the situation: "Most of the cities see this as another pot of federal money to support programs that they already had in place," In other words, cities and local social service programs have carte blanche to accept the money and spin fairytales about what happened to it, if anyone should ask.
What, exactly, has EZ/EC been doing? In Atlanta its minions handed out low-flush toilets to zone residents. In Detroit, 'EZ residents deliver messages of good health to their fellow neighbors. The community-health worker program has trained residents to educate people about maintaining and improving their health'. In Cleveland, the boundaries of the project zone were extended all the way to the edge of downtown, to subsidize a thriving corporation's new headquarters; another firm got a $3.8 million loan/grant package to create 38 new jobs. San Francisco set up a 'Neighborhood Youth Council'. In Houston, they opened 'Information Resource Centers' to tell residents about services available at other program offices. All these examples come from a 1998 HUD publication called 'EZ/EC Best Practices'. There are less entertaining ways to spend an evening than curled up by the fireside with a good federal report. This one goes on to explain how, in Ouachita Parish, La., 'an abandoned building is being constructed to house EC offices'; no one familiar with the operation of federal programs will be surprised at the news. Meanwhile, in time-honored HUD fashion, the department claims as victories everything in the neighborhoods that would have happened anyhow. Currently, they call the initiative RC/EZ. Changing names frequently is another HUD tradition; it helps them cover their tracks.
Today, HUD's major initiative in housing is the rent subsidy program called 'Section 8'. Conservatives call Section 8 a 'permanent entitlement', of exactly the sort that welfare reform sought to end. About half its clients are single mothers with children (most of the rest are the elderly and the disabled). The means test for eligibility actively discourages clients from working, and leads to near-universal cheating; many clients report no income at all. Because Section 8 has no time limits, it encourages permanent dependency. These points make a strong argument, but they did not stop one conservative administration from starting Section 8, and two others from expanding it. That is the way Washington works.
Section 8's defenders claim it's an improvement compared to earlier programs, and there is something to be said for it. It puts money in poor peoples' pockets, and has moved a considerable number of them into better neighborhoods outside the ghetto. In those neighborhoods, however, Section 8's reputation is poison. When Section 8 tenants move in, neighbors scream bloody murder about accompanying drugs and crime.
This is often exaggerated, and may carry a whiff of bigotry. But serious problems do arise when large numbers of Section 8 tenants are concentrated in a single place. This works in two ways. In large apartment complexes or streets of multi-family buildings that have fallen into the hands of a few owners or management companies, they are converted en masse to Section 8s. Or else, 'zones of transition', areas of delicate balance between a stable neighborhood and a slum, can attract large numbers of speculators hoping to make quick profits off the program.
However and wherever it happens, a neighborhood goes down. Besides crime and related problems, such concentrations definitely have a deleterious effect on surrounding property values, at up to a half-mile distance. In many cases, these concentrations contain many Section 8 tenants who used to live in high-rise projects recently demolished. Now, ironically, they are finding tenuous new homes in areas that are already being called 'horizontal projects'.
Every city has at least one of these new, HUD-created ghettoes. There is one in the beachfront L. A. neighborhood of Venice. Fortunately, Venice is an upscaling area, and can take the weight, though relations between the well-off and the poor can be extremely uncomfortable. Most aren't so lucky. Patterson Park on the east side of Baltimore, an integrated, working-class area that has faced decay with a strong renewal effort led by a CDC, finds Section 8 its biggest problem today. Neighborhoods like this, teetering on the sharp edge between decay and stability, are the most vulnerable, just as they were under Section 235 in the 70's. Outside investors buy up sad houses cheap, add a few cosmetic improvements, and collect big money from HUD until the buildings become uninhabitable.
In Chicago, Section 8 is rotting out such inner-city neighborhoods as Austin and South Shore, and also several of the poor southwest suburbs. In Columbus, near the Ohio State campus, the Weinland Park area contained 500 units run by a single management company. When they turned them into Section 8s, the neighborhood fell so quickly that the University felt compelled to clean up the mess, by purchasing and renovating the properties, and relocating half the Section 8 tenants to other parts of town.
HUD has done its best to ignore the problem, while issuing reports and press releases denying it exists at all. The department would also not appreciate anyone bringing up the fact that Section 8, with its inflated estimates of market rents, raises inner-city rental costs for everyone, and that by its nature it is prone to huge abuses. Recently, the Bush administration has proposed putting time limits on participants, just as was done in the welfare reform of the 90's. That would be a welcome first step. But Section 8's community-wrecking effects haven't appeared on their radar screen yet (tell me, exactly, how conservatives spend their time once they have a desk to sit behind?). The federal government now possesses extremely sophisticated mapping technology, pioneered by the Census Bureau. If HUD wanted to, it could easily define cancerous concentrations of Section 8s. That should take six months at the most; amending legislation to force the department to steer clients elsewhere might take five years, or it might not be possible at all.
One of HUD's smaller demonstration efforts hopes to promote mobility in housing for minorities, a laudable goal. It comes out a bit differently in practice. In Milwaukee, there is a 'Regional Opportunity Counseling' program meant to get poor families out into the suburbs. After 18 months, they reported moving five families, at a cost of $220,000, or $45,000 each, not including the Section 8 rent assistance they paid over the following years for each one. Over time, they hope to get the price per move down to $15,600.
It's worth remembering that Section 8 started out as a voucher program, a reform. But the government does not simply give away coupons. Rules must be established; there must be a new army of administrators, clerks and itchy-palmed inspectors. Ties must be established to sources of political money, usually the management companies and large owners. A real voucher program, if it were possible, would undoubtedly be a step in the right direction. In fact, there is one foolproof way to accomplish the stated national goal of improving housing conditions for the poor. Just send them a check. Some might spend the money on other things, on clothes and liquor, or on work tools or transportation or their children's education. Freedom of choice on the part of the government's clients does not seem such a bad thing, considering that over seventy years each and every federal attempt at assisting them by means of dedicated funding has resulted in failure and massive unintended consequences. This of course is not a politically feasible solution, or even a necessarily desirable one. But it was mentioned to point up the basic fallacy behind all of Washington's programs, and the key to their failure. There is no such thing as a family that is 'poorly housed'. There are only families that lack money and opportunity.
Every bureaucracy has a personality, a style, a code of conduct; these may change over time, but the changes tend to be small and incremental. The stamp of its founders and their ideals, and their legislative wisdom and competence, or lack of them, can stay with a bureaucracy forever. Some of the initiatives run by our vast public conglomerate have worked with relative honesty and efficiency: Roosevelt's TVA, Social Security and the coordination of the wartime production effort, NASA, food stamps, low-income heating and weatherization assistance, or the Community Reinvestment Act (administered by the Treasury Department). Some exposed themselves as failures within a few years: Roosevelt's NRA, public housing and urban renewal, Model Cities, or nearly all of the social welfare schemes concocted by the Johnson administration. Some, like the FBI or the CIA, took decades to reach the level of institutional ineptitude that keeps them in the headlines today.
It's easy to see that a clinker program needs to be terminated, but somewhat more difficult to make the conceptual leap to the next level, to admit that an entire retrograde bureaucracy cannot be reformed. How does it happen? No one in government would ever touch this question, and that is part of the problem. A greater, and more perplexing failure lies with those whose job it should be to keep an eye on government. The press and the academics carry some responsibility for noticing when a governmental enterprise has become seriously broken, for sounding the alarm and proposing measures to fix it. Few ever tried; what does this say about us as a nation?
Because no one ever asked the question, we have a long way to go before we can say just why things went so wrong. We cannot put all the blame on either of the political factions; both deserve an equal share. We should not go so far as to say that such failures are inevitable in any government intervention. Other nations have housing programs, and while most of them built vast numbers of superblock Modernist projects they now heartily regret, they accomplished the job with far more clarity, honesty and efficiency than we could ever manage.
As I write, new proposals for housing policy are being introduced in Washington. The very names of these bills capture the piquant cheesiness of thought within the Beltway these days. The American Dream Downpayment Act and the Zero Downpayment Act claim to assist low income people in becoming homeowners, the first by providing grants for down payments, the second allowing FHA loans with no down payment at all. Both bills were introduced by Republicans, and supported by the National Association of Home Builders and the rest of the industry's big players. Taken together, this initiative is nearly a carbon copy of the infamous Section 235. It is guaranteed to ruin lives and wreck neighborhoods.
We'll propose two iron laws:
The Congress does not possess the competence to design an urban policy, and it never will. The mentality of the institution precludes coherence in policy in any domestic field. Congressmen respond to the needs of special interests in a consistently Pavlovian way; for each and every Housing Act considered since the New Deal, you may pore over the Congressional Record and the other documents and press reports, and you will find that the main concerns expressed are boosting the construction industry, providing jobs, shoring up financial institutions, rewarding local political allies-anything but providing housing for the poor.
Any measure the Congress takes up has to balance its favors between various interests, even if it means distorting the original purpose of the bill completely. Beyond that, the diffusion of decision-making power in many hands ensures that the favors must be spread widely; as famously in the Model Cities legislation of the 60's, any 'urban' bill gets diluted to offer something for every hamlet in the land, or at least for every influential member's district, whether or not they need it, or know how to use it.
The other iron law is that federal bureaucracies by their nature are incapable of administering urban programs. The stumblebum corruption of HUD, spanning four decades and nine administrations, should be argument enough. A HUD staffed by saints and angels with sharp pencils would fare little better, trying to squeeze the Congress's faulty programs onto a thousand diverse and distinctive cities, from Key West to Nome.
State programs often perform better, if only because they are simpler, but these laws of nature apply equally to state legislatures. I do not know of any other modern nation in which it is common for a legislative body to design a complex policy initiative. If other nations seriously want something done, a ministry designs the policy, a prime minister gives it the ok, and a parliament passes it into law. When a proposal enters the looking-glass world of our Congress or statehouses, anything can happen to it. It can and will be compromised in a hundred different ways to meet the concerns of committee chairmen or powerful interests; it can be left a shell, with all the good intentions in place and all the meat carved off; it can be twisted to effect outcomes completely the opposite of its original goals. The result will look like a policy, but it will be useless, a sorry joke.
All that remains is deciding what to do with this curious Department of Housing and Urban Development. It is a moribund, timeserving bureaucracy, disowned by Republican administrations but tolerated for its political fundraising opportunities, and subject to every sort of bootless tinkering and exploitation by Democratic ones. It cannot be reformed. Whether you are a lefty or a righty, whether your concerns are more with raising citizens up out of poverty or protecting the taxpayer's pocket, whether you think cities can be improved by better planning or by an unfettered level playing field, only one conclusion would seem possible. Abolish it, and wind down its programs or transfer them elsewhere. Lay off its 15,000 employees, or rehabilitate them and find them worthwhile work to do. Invite the press and the public to the festive dynamiting of its building on Seventh Street, and erect a historic marker on the site that schoolboys and schoolgirls may read, explaining exactly what happened, and why it must never happen again.
That would be fun, but in truth a monolith forty years in the making cannot be undone overnight. HUD activities are closely woven into the public-private arrangements by which every city's affairs are managed, and it will be difficult to disentangle them gracefully; cities, developers, community development corporations and other neighborhood groups have all come to depend on federal money in some degree. One possibility would be turning these HUD grant programs over to the states, as was done with welfare entitlement programs in the 90's. Or else, why not ask the cities and the CDCs what to do with it? Local efforts have far surpassed Washington in sophistication and effectiveness, and their people will be happy to provide some answers of how to shape up the federal monolith, or whether it deserves to survive at all. The old model, posited on top-down direction and the wise guidance of academic stars, has failed at all points. At the same time, local groups have blossomed everywhere, and their modest successes have made the best of them sustainable, made them, for lack of anything better, the new model, the cutting edge for all our discussions about the urban future.