US Department of Housing and Urban Development (HUD) - History of Business in the U.S.
Identification: Cabinet-level department responsible for aiding citizens in finding housing and stimulating the development of American cities
Date: Established in 1965
Significance: Although the official mission of the Department of Housing and Urban Development is to help people find adequate housing and oversee the development of urban areas, it has evolved into the federal agency most helpful to the banking, real estate, and construction industries in the United States.
President Lyndon B. Johnson was very proud of his success in persuading the U.S. Congress to create a cabinet-level department to address the rebuilding of American cities and the needs of American citizens for adequate housing. As a matter of national policy, housing was first addressed in the U.S. Housing Act of 1937 and the Housing andHomeFinance Agency of 1949. Johnson was pleased to build on these initiatives developed by two of his heroes, President Franklin D. Roosevelt and President Harry S. Truman. Homes for the elderly were addressed in the Housing Act of 1959. As useful as these earlier pieces of legislation were in addressing some of the problems of housing, it was clear that a cabinet-level department would be helpful in dealing with housing and urban problems by the 1960’s. Johnson regarded the creation of the Department of Housing and Urban Development (HUD) as one of the centerpieces of his Great Society initiative.
Improvements in housing policy continued in 1968 with the passage of the Fair Housing Act, which prohibited discrimination in housing. The 1969 Brooke Amendment made it policy for low-income families to be required to pay no more than 25 percent of their income for rent in public housing. The Housing and Community Development Act of 1974 provided for block grants and urban homesteads. The 1977 Housing and Community Act continued aid for elderly and handicapped persons and provided for urban development grants.
A Business Orientation
By the presidency of Ronald Reagan, conservative forces had gradually shifted the emphasis at HUD away fromurban development and aid to individual citizens and toward assistance to businesses such as banks, real estate developers, and construction companies. Housing and Urban Development became a helpmate to business. For example, the 1988 Housing and Community Development Act authorized the sale of public housing complexes to resident management corporations. Although the Bill Clinton administration shifted the focus back on the individual citizen to a limited degree with its 1996 Housing Opportunity Program Extension Act, this legislation was most memorable for allowing public housing authorities to bar potential residents who might use drugs or engage in criminal activities that would threaten other residents; it did not provide significant new funding for public housing. By 2007, Housing and Urban Development began a new initiative to assist low-income individuals to purchase homes with as little as $100 down payment. Although this was done in the name of helping individual citizens, it encouraged people to purchase homes that they could not afford and aggravated the subprime mortgage crisis that developed in 2007-2008.
During the Reagan administration, HUD developed a reputation for rampant corruption. When the George H. W. Bush administration opened in 1989, his appointments to the agency discovered extensive mortgage fraud that was the product of the previous administration’s determination to make the agency friendly to business groups, such as banks, real estate firms, and the construction industry. These efforts were so successful that one staffer testified before Congress that Housing and Urban Development was being run as a “criminal enterprise.” Although some improvements were possible during the next decade, problems of inadequate oversight in the housing industry generally were part of the Bush administration, ultimately resulting in the crisis in the subprime mortgage market and the subsequent serious deterioration in the housing industry, although much of the responsibility must fall on Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) and not on HUD itself.
Arnold, Peri E. Making the Managerial Presidency: Comprehensive Reorganization Planning, 1905-1996. 2d ed. Lawrence: University Press of Kansas, 1998. A serious academic examination of the efforts to reform the bureaucracy of the national government to improve managerial innovation. Looks at housing related issues.
Cristie, James R., ed. Fannie Mae and Freddie Mac: Scandal in U.S. Housing. New York: Novinka Books, 2007. This book examines the scandals in Fannie Mae and Freddie Mac and their impact on housing policy in the United States before the 2008 takeover of both of these dysfunctional agencies.
Kurian, George T., ed. A Historical Guide to the U.S. Government. New York: Oxford University Press, 1998. This history of the federal government and bureaucracy provides a thorough understanding of the three branches of government and their relation to economics.
Roessner, Jane. A Decent Place to Live: From Columbia Point to Harbor Point—A Community History. Boston: Northeastern University Press, 2000. A case study approach to the problems of housing in one community in the United States, which has important implications for broader housing policy.
Willis, James. Explorations in Macroeconomics. 5th ed. Redding, Calif.: North West Publishing, 2002. In this textbook, Willis uses a macroeconomic perspective to explain the effect of taxation on society.
Zinn, Howard. A People’s History of the United States: 1492-Present. New York: Harper Perennial Modern Classics, 2005. Liberal interpretation of American history that sheds some light on the difficulties in U.S. policies, including housing policies.
See also: Mortgage industry; Commercial real estate industry; Residential real estate industry; Supreme Court and land law; commercial zoning.