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The Real Lessons of the HUD Scandal
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15421 |
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CURRENT ISSUES
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12 / 1989 |
2,590 Words |
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Stuart M. Butler
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There is a famous scene in the movie Casablanca in which Claude Raines, as the French chief of police, is closing down Rick's American Bar on orders from the wartime German authorities. He uses the pretext of illegal gambling. "I hear there's been gambling going on here," he tells his friend Rick, played by Humphrey Bogart. "I'm shocked, shocked!" Just then, an employee sidles up to the police chief: "Your winnings, sir," he announces. Raines, obviously embarrassed, pockets the money and quickly proceeds to close the bar.
The recent congressional hearings on influence peddling at the U.S. Department of Housing and Urban Development (HUD) no doubt proved entertaining to Casablanca aficionados, since they bore such a remarkable resemblance to the movie scene--except that there has been no evidence of any embarrassment. Congressman after congressman took air time to express shock that influence had been used to secure agency grants for certain housing developers. Strangely, when back home running for election, these same lawmakers normally boast of their own abilities to win grants for influential constituents.
It is easy merely to be cynical about Congress' reaction to the grantsmanship that was taking place at HUD during the Reagan administration. But if federal housing policy is to be put back to track, it is vital that Americans appreciate the real causes of the scandal and what needs to be done to reform the agency. For while the congressional investigation has centered on the breakdown of management controls at HUD during the Reagan administration, the real culprit is the design of federal housing programs themselves. These were created with the intention of allowing influence to be used to channel dollars to developers--it's just that Congress intended lawmakers to be exercising that influence. Thus, reforming the agency means changing the whole thrust of federal housing policy.
The foundations of today's housing programs--and today's scandals--were laid during the Depression, when the federal government sought to bolster the housing industry and protect homeowners from foreclosure. The public housing program was launched, for instance, not to house the poor--in fact, units were not restricted to the poor until quite recently--but to create employment in the building trades. Similarly, the Federal Housing Administration (FHA) mortgage insurance programs were introduced to revive the middle-class market for new home construction.
Because the aim was to boost construction and thus generate well-paid employment for construction workers, the regulations governing the programs were not designed to house Americans as cheaply as possible. On the contrary, rules were instituted, and continue today, specifically to make federally funded housing expensive. Wasteful? Of course, but as the old adage goes, "One man's waste is another man's job." For instance, the Davis-Bacon Act, introduced in the 1930s and still very much in force today, requires workers on federal construction projects to be paid the "prevailing" rate (which means in practice the area maximum) and restricts the use of apprentices. This makes public housing far more expensive than equivalent private units, so the same dollars house fewer poor families. But it achieves the original aim of the programs--an infusion of federal cash into the construction industry and into the pockets of construction workers.
The Depression ended more than 40 years ago. So
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