Hud Sucker Proxy

by Jonathan Chait | June 23, 1997

Upon hearing that I was planning to write about the proposed changes in federal housing policy, a press secretary at the Department of Housing and Urban Development graciously offered me an interview with the secretary, Andrew Cuomo. This was slightly odd. It's usually the reporter's job in these matters to solicit access to the Cabinet secretary and the flack's job to deny it. And I am the sort of reporter who quite properly would be denied; the story I wanted to write, examining public policy, didn't require access to anyone so grand as a member of the Cabinet. The merest ink-stained, backroom sub-wonk could tell me all I needed to know. So, not wanting to put myself ahead of my place, I demurred. No thanks, I said, explaining that less important HUD staffers than the secretary would meet my humble needs. "Are you sure?" the press secretary asked. We paused in a counter-ditherstep of mutual embarrassment, and I began to worry that my politeness was on the verge of appearing rude--after all, who was I not to interview a secretary?--so I said, of course, I'd be honored.

In Washington, inaccessibility is a pretty accurate barometer of clout, and the clout of the HUD secretary is indeed accurately reflected in the fact that he had time for me. Which would not matter at all, except that the low political esteem accorded Cuomo's title also extends to his department's basic mission. After a decade in which HUD sought merely to avoid scandal and extinction, Congress and Clinton have reached a new consensus on how to overhaul public housing that culminates years of negligence: simply put, they don't want so many poor people in the projects.

As a solution to the low-income housing problem this is, to say the least, counterintuitive--the brain-dead progeny of liberal bureaucratic inertia and conservative stinginess. Sure, public housing is a disaster--but in a sense, it had to be. Since HUDhas the funding to house less than one-third of those who are eligible, it accepts residents based on need. The less money you have, the better your odds of admission. As a result, public housing concentrates very poor people very close together in enormous projects, creating an atmosphere of festering, self-reinforcing poverty.

The solution to this, say Congress and the administration, is to clean up the projects by opening them to a better class of people. Under the new plans being discussed, instead of giving priority to the poorest, HUD would allot a minority of public housing slots for families earning below 30 percent of median income. The rest of the units would be reserved for families earning up to 80 percent of median income, or about $35,000 a year. The administration, the House and the Senate, who have yet to hammer out a final agreement, each set different income quota levels. But they all employ the same logic: relatively wealthier public housing residents would help foster a climate that values, rather than degrades, work, and they would be less likely to shoot each other, use drugs or just generally succumb to the cultural pathologies that turn projects into hellholes.

There is, admittedly, some logic to this approach. But if the goal is to change the culture of public housing, the method of setting quotas based on income is a clumsy way to go about it. When selecting the kinds of people who might exert a positive influence on a housing project's culture, the key factor is work. You want role models who get a paycheck instead of a welfare check--the size of the paycheck doesn't really matter.

Yet paycheck size, rather than employment status, is the basis for the new preferences, and this produces some perverse results. The category set aside for low incomes--below 30 percent of median income--effectively lumps together a welfare recipient with a full-time minimum wage worker, who would bring in just $10,000 a year, or 23 percent of median income. New York Republican Rick Lazio, the sponsor of the House bill, boasts, "We will use our limited resources to help those who are working to help themselves." Yet Lazio's bill, along with the other bills, wouldn't stop at turning away a welfare mother in order to make room for a burger-flipper. It would also turn away a burger-flipper in order to make room for the burger-flipper's supervisor.

It gets worse. Remember that housing projects aren't the only way that HUD provides low-income housing. HUD also gives out certificates and vouchers, which subsidize the rent for poor tenants who live in private-sector apartments. Since certificates and vouchers don't generally concentrate the very poor--people often use vouchers so they can afford rent in better neighborhoods--there's no real downside to giving all vouchers to the neediest. But Congress's plan does the opposite, restricting the number of low-income applicants eligible for vouchers.

These effects might seem random, but there is a purpose here, and it has nothing to do with uplifting the poor or redeeming the projects. Public housing residents and voucher recipients pay 30 percent of their income in rent. That doesn't cover the full cost, so the government pays the rest. Replacing very poor recipients with slightly better-off ones would lower the cost of that subsidy. So while the income quotas are not an efficient way to change the culture of public housing, they're a very efficient way to save the government money.

To be sure, keeping the poorest people out of public housing will make the projects more livable, however clumsily. Yet what's the point of solving HUD's problem if you make the low-income housing problem worse? The new approach is tantamount to making Medicare solvent by denying coverage to the old and the sick. Those who don't get in, after all, will not move to Highland Park. They're still going to live in areas of highly concentrated poverty with all the same pathologies of the worst housing projects. Abdicating responsibility for that condition is not the same thing as resolving it. Over time, some 1.5 million fewer subsidized housing units may be available for the poor. HUD has been reduced to quibbling about how many.

What makes this new consensus so difficult to swallow is that there is a very easy way to break up the ruinous overconcentration of poverty without abandoning the neediest: HUD could replace public housing with vouchers. The logic is simple. Instead of trying to design a living environment for the poor, the federal government helps them pay the rent. Since tenants can use their voucher anywhere they want, their landlords--unlike public housing authorities--have an interest in maintaining decent living conditions.

For a while it looked as though HUD would adopt such a strategy and go full-voucher. Since the Reagan administration,HUD's stock of housing projects has remained frozen; the only additional housing assistance has come in the form of vouchers. After the Republicans took control of Congress in 1995, vowing to abolish the department altogether, then-HUDSecretary Henry Cisneros proposed giving vouchers to all public housing residents. But then a funny thing happened: the Republican Congress decided to keep the current system--about two-thirds public housing, one-third vouchers--and eliminate funding for any new vouchers.

Now, hold on a second. Why did the Republicans--public housing's fiercest critics--maintain the status quo? Vouchers, remember, embody their free-market ideology. As a matter of fact, they invented the idea. Well, part of the reason is that housing projects generate clients with a strong vested interest in perpetuating them, while vouchers do not. Most public housing is owned by private landlords, who receive federal subsidies and lobby hard to preserve them. (Reagan's housing scandal involved well-connected landlords lobbying for a piece of the HUD action.) Local housing authorities run the remainder of the projects, and they, too, depend on Washington's largesse. By contrast, voucher users tend to spread out. Hence, their landlords have little individual interest in housing subsidies--in other words, there's no comparable lobby pushing for more vouchers.

More importantly, vouchers cost money. Republicans may hate the projects, but tearing the projects down won't save money, since by law Congress must find new housing for current residents. That leaves only one way to cut costs: squeezing the vouchers.

This miserly approach to housing for the poor comes just as the federal government is preparing to lavish billions more on housing subsidies for the non-poor. The home mortgage interest deduction and capital gains tax breaks on home sales--which, combined, cost more than four times HUD's budget--subsidize home ownership by the middle and upper middle classes. President Clinton wants to expand the capital gains exclusion, and a bipartisan faction in Congress proposes a deduction for homeowners who sell a house for less than they bought it. These policies combine to construct an edifice of housing subsidies that grows in generosity as it moves up the income scale, like a great inverted pyramid.

Maybe what scares Republicans most about their old pet idea is that vouchers might actually work. Not long ago John Weicher, a housing expert at the conservative Hudson Institute, testified before Congress. His disquisition on the evils of public housing was going along swimmingly. And then he mentioned that vouchers might require more funding, not less. "The subcommittee chairman looked at me funny. That wasn't what he was expecting to hear," recalls Weicher. "He sort of frowned briefly, and moved on."

In its original, New Deal, incarnation, HUD sought to accomplish two things. First, to universalize housing. Second, to transform the poor by altering their environment. The second goal ran aground on its own ambition, as gigantic housing projects degraded rather than uplifted working-class culture; this failure, in turn, discredited the entire housing movement. AHUD freed from the albatross of housing projects would no longer be so easy to neglect. But, for policymakers bent on balancing the budget and cutting taxes for suburban swing voters, a revitalized HUD may be too frightening to contemplate.

Jonathan Chait is a senior editor of The New Republic.

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