FIRST-DAY AND FIRST-YEAR ADMINISTRATIVE REFORMS

A new conservative Administration can and should implement the following reforms that focus on both people24 and process.25 Implementation of these reforms simply requires courageous political leadership across all of HUD’s key appointed positions.

HUD political leadership should immediately assign all delegated powers to politically appointed PDAS, DAS, and other office leadership positions; change any current career leadership positions into political and non-career appointment positions; and use Senior Executive Service (SES) transfers to install motivated and aligned leadership.

The President should issue an executive order making the HUD Secretary a member of the Committee on Foreign Investment in the U.S., which will gain broader oversight authorities to address foreign threats, particularly from China with oversight of foreign ownership of real estate in both rental and ownership markets of single-family and multifamily housing,26 with trillions worth of real estate secured across HUD’s portfolio.

The Secretary should initiate a HUD task force consisting of politically appointed personnel to identify and reverse all actions taken by the Biden Administration to advance progressive ideology.27

The Office of the Secretary or the leadership in the Office of General Counsel should conduct a thorough review of all subregulatory guidance that has been instituted outside of the Administrative Procedure Act (APA). Additionally, departmental leadership should:

Immediately end the Biden Administration’s Property Appraisal and Valuation Equity (PAVE) policies and reverse any Biden Administration actions that threaten to undermine the integrity of real estate appraisals.28 2. Repeal climate change initiatives and spending in the department’s budget request.29 — 508 —Department of Housing and Urban Development 3. Repeal the Affirmatively Furthering Fair Housing (AFFH) regulation reinstituted under the Biden Administration30 and any other uses of special-purpose credit authorities to further equity.31 4. Eliminate the new Housing Supply Fund.32

The Office of the Secretary should execute regulatory and subregulatory guidance actions, across HUD programs and applicable to all relevant stakeholders, that would restrict program eligibility when admission would threaten the protection of the life and health of individuals and fail to encourage upward mobility and economic advancement through household self-sufficiency. Where admissible in regulatory action, HUD should implement reforms reducing the implicit anti-marriage bias in housing assistance programs,34 strengthen work and work-readiness requirements,35 implement maximum term limits for residents in PBRA and TBRA programs,36 and end Housing First37 policies so that the department prioritizes mental health and substance abuse issues before jumping to permanent interventions in homelessness.38 Notwithstanding administrative reforms, Congress should enact legislation that protects life and eliminates provisions in federal housing and welfare benefits policies that discourage work, marriage, and meaningful paths to upward economic mobility.

The AS or PDAS for the Office of Policy Development and Research should suspend all external research and evaluation grants in the Office of Policy Development and Research and end or realign to another office any functions that are not involved in the collection and use of data and survey administration functions and do not facilitate the execution of regulatory impact analysis studies.

The Office of the Secretary should recommence proposed regulation put forward under the Trump Administration that would prohibit noncitizens, including all mixed-status families, from living in all federally assisted housing.33 HUD’s statutory obligations include providing housing for American citizens who are in need. HUD reforms must also ensure alignment with reforms implemented by other federal agencies where immigration status impacts public programs, certainly to include any reforms in the Public Charge regulatory framework administered by the U.S. Department of Homeland Security (DHS). Local welfare organizations, not the federal government, should step up to provide welfare for the housing of noncitizens.

FHA leadership should increase the mortgage insurance premium (MIP) for all products above 20-year terms and maintain MIP for all products below 20-year terms and all refinances. FHA should encourage wealth-building homeownership opportunities, which can be accomplished best through shorter-duration mortgages.39 Ideally, Congress would contemplate a fundamental revision of FHA’s statutory restriction of single-family housing mortgage insurance to first-time homebuyers.40 This would include (with support from HUD leadership): 1. Moving the Home Equity Conversion Mortgages (HECM) program once again to its own special risk insurance fund. 2. Revising loan limit determinations. 3. Providing statutory flexibility for shorter-term products that amortize principal earlier and faster. Statutorily restricting eligibility for first-time homebuyers and abandoning the affirmative obligation authorities erected for the single-family housing programs across federal agencies and government-sponsored enterprises.41

The HUD Secretary should move the HUD Real Estate Assessment Center (REAC) from PIH to the Office of Housing, which already implements property standards in its multifamily housing lending programs through the multifamily accelerated processing (MAP) lending guidelines. Giving HUD the authority to streamline the enforcement of compliance with housing standards across the federal government and flexibility for physical inspections through private accreditation should also be considered. HUD should maintain its requested budget authority for modernization initiatives that are applicable to the Office of the Chief Information Officer and program offices across the department.

LONGER-TERM POLICY REFORM CONSIDERATIONS42

Congress has charged HUD principally with mandates for construction of the nation’s affordable housing stock in addition to setting and enforcing standards for decent housing and fair housing enforcement. Regardless of intent, HUD’s efforts have yielded mixed results at best. Even today, more than a half-century after Congress put enforcement of so-called fair housing in the hands of the HUD bureaucracy, implementation of this policy is muddled by the repeated applica- tion of affirmative race-based policies. Also, the production mandate for HUD’s housing portfolio has waned for decades with the department effectively working to maintain the public housing portfolio from the late 1990s when the Faircloth Amendment capped HUD’s public housing portfolio.43

Longer-term reforms of HUD rental assistance programs should encourage choice and competition for renters, encourage participation by landlords where appropriate,44 and encourage all non-elderly, able-bodied adults to move toward self-sufficiency. This can be pursued through regulations and legislative reforms that seek to strengthen work requirements, limit the period during which house- holds are eligible for housing benefits, and add flexibility to rent payment terms to facilitate the movement of households toward self-sufficiency.

Obviously, using government vouchers or other such programs to expand hous- ing choice options is not without its downsides. The turn toward mobility vouchers constitutes an abandonment of America’s public housing stock, and efforts to increase competition in the public housing market must not come at the expense of local autonomy and the ability of cities, towns, neighborhoods, and commu- nities to choose for themselves the sort of housing they want to allow. Freedom of association and self-government at the most local level possible must remain primary considerations in any conservative effort to increase competition in the public housing market.

Congress should also consider those areas in which federal policy negatively interacts with private markets, including when federal policy crowds out pri- vate-sector development and exacerbates affordability challenges that persist across the nation. It is essential that legislation provides states and localities max- imal flexibility to pursue locally designed policies and minimize the likelihood of federal preemption of local land use and zoning decisions.

In the same manner, Congress should prioritize any and all legislative support for the single-family home. Homeownership forms the backbone of the American Dream. The purchase of a home is the largest investment most Americans will make in their lifetimes, and homeownership remains the most accessible way to build generational wealth for millions of Americans. For these reasons, American homeowners and citizens know best what is in the interest of their neighborhoods and communities. Localities rather than the federal government must have the final say in zoning laws and regulations, and a conservative Administration should oppose any efforts to weaken single-family zoning. Along the same lines, Congress can propose tax credits for the renovation or repair of housing stock in rural areas so that more Americans are able to access the American Dream of homeownership.

Additionally, enhanced statutory authorities for local autonomy should extend to the prioritizing of federal rental assistance subsidies that emphasize choice and mobility in housing voucher subsidies over static, site-based subsidies and provide authority for maximal flexibility to direct PHA land sales that involve the existing stock of public housing units. Congress must consider the future of the public

housing model. At best, any new public investments will provide maintenance funds to bring substandard housing units and properties up to livability standards but will still fail to address larger aims of upward mobility and dynamism for local housing markets where land can be sold by PHAs and put to greater economic use, thereby benefiting entire local economies through greater private investment, productivity and employment opportunities, and increased tax revenue.

Any long-term view of HUD’s future must include maintaining the strong financial operations and reliable reporting that are needed to run a $50 billion- per-year agency. Before the Trump Administration, HUD effectively did not have a Chief Financial Officer (CFO) for eight years, and HUD’s financial infrastructure inevitably deteriorated. The department’s auditors were unable to conclude that HUD’s internal operations were producing accurate financial reporting. The audi- tors had identified multiple material weaknesses and significant deficiencies in the department’s internal financial controls. Overall, the deterioration of HUD’s financial infrastructure led to a lack of accountability with respect to the use of taxpayer funds as well as to pervasive difficulties with operations and program implementation.

However, by hiring a new CFO from the private sector with a proven track record of visionary leadership, HUD was able to implement an agencywide governance structure that improved its financial processes and internal controls and harnessed the power of innovative new technologies to bring a modernized business mindset to the agency’s financial infrastructure. By the end of the Trump Administration, for the first time in nearly a decade, HUD was able to address all of its previously identified material weaknesses, and the auditors were able to issue their first clean audit report on HUD’s financial statements and internal controls.

Finally, and more fundamentally, Congress could consider a wholesale overhaul of HUD that contemplates devolving many HUD functions to states and localities with any remaining federal functions consolidated to other federal agencies (for example, by transferring loan guarantee programs to SBA; moving Indian housing programs to the Department of the Interior; moving rental assistance, mortgage insurance programs, and GNMA to a redesignated Housing and Home Finance Agency). Generally, this reform path could consolidate some programs, elimi- nate others that have failed to produce meaningful long-run results, and narrow the scope of many programs so that they are closer to what they were when they were created.