Will HUD Fade Away?

The 2000 Census reveals an interesting pattern in the Midwestern United States. The population of the Midwest is aging rapidly, as younger people move to the coastal states. Meanwhile, many Midwestern cities are suffering a net loss of residents; the population of St. Louis, for example, dropped by more than one-sixth between 1990 and 2000. The loss leaves St. Louis and other cities with an oversupply of unwanted housing, including public housing. An aging population, a large number of public housing units, economically depressed areas with people who need work--this is the ideal situation for Section 202 housing conversion.

As many long-term care operators know, Section 202 is the funding category of the public housing assistance act that specifically affects supportive housing for low-income elderly. The bulk of the money budgeted for Section 202 by the U.S. Department of Housing and Urban Development (HUD) consists of five-year contracts for rental assistance and capital advances for supportive housing projects. As a result of legislation passed last year, Section 202 money also can be used for conversion of existing public housing stock to assisted living units.

The housing conversion components of Section 202 can meet a variety of needs in our present period of budget surplus and relatively low mortgage rates. They make affordable assisted living available to the hundreds of thousands of low-income elderly who do not need intermediate care but require help with activities of daily living. The funds rehabilitate deteriorating public housing units and reduce the "urban wasteland" problem that has blighted many of our central cities. At the same time, hiring people to convert the units and staff the facilities increases employment in areas that have lost industrial and retail jobs. All of this explains why both Republicans and Democrats on Capitol Hill have cited Section 202, "the bedrock of HUD's elderly housing," as one of the most successful programs in urban redevelopment.

Enter the Bush administration. Despite strong bipartisan support, the involvement of faith-based organizations in assisted living conversion and a continuing budget surplus, the administration has chosen to tread water for Section 202 funding.

Part of the problem is the continued suspicion of HUD programs among conservative Republicans. Throughout most of the 1990s, HUD was classified by the General Accounting Office (GAO) as being at "high risk" for waste, fraud and abuse. Some of the problem resulted from widespread abuses during the Reagan administration; other reasons include massive corruption in local housing agencies that contract with HUD, such as the troubled Puerto Rico Housing Authority. Reforms instituted by HUD Secretary Andrew Cuomo during the latter part of the Clinton administration succeeded in restoring confidence in HUD management, and today the department no longer is on the "high risk" list. Even so, Senator Phil Gramm (R-TX) recently announced that the Senate Committee on Banking, Housing, and Urban Affairs will devote all of 2001 to oversight and review of existing HUD programs. In other words, HUD will be treated as a convicted felon on parole rather than a reformed agency capable once again of addressing urgent needs.

A second reason for reluctance to significantly expand Section 202 is the personal ideology of newly confirmed HUD Secretary Mel Martinez. Martinez, a onetime refugee from Castro's Cuba, rose to become head of the elected board of supervisors of Orange County, Florida, before his recent cabinet appointment. According to Rob Woodson, now HUD's deputy chief of staff for policy, Martinez strongly opposes government involvement in housing production because it violates capitalism. Woodson told members of the American Association of Homes and Services for the Aging (AAHSA) at their spring Washington meeting that there has been a tendency to view HUD as "the 911 for urban America," creating wasteful "boutique solutions" for every problem. Secretary Martinez favors instead adoption of tax credits for single-home ownership, which he sees as the solution to most urban problems. However, HUD is not responsible for administration of tax credits, which means that Martinez distrusts the tools that Congress has provided hi m to address housing needs.

This distrust and suspicion of HUD is reflected in President Bush's budget guidelines. The administration claims that the President's proposed HUD budget for the next fiscal year will increase by $1.9 billion. The "increase," however, is a sham. It is true that the HUD budget authority will increase as a result of legislation enacted several years ago in anticipation of inflation in the cost of housing vouchers. President Bush's budget, however, actually proposes to reduce HUD spending by roughly 5%, which is obviously far less than authorized. Most of that cut will occur in public housing, including the termination of the Drug Elimination Program for housing projects and cuts into the funds available for repair and maintenance. The Rural Housing and Economic Development fund also will be eliminated.

The good news for Section 202 is that President Bush does not plan on cutting that program. In the current fiscal year, $779 million is devoted to supportive housing for the elderly, with $50 million of these funds for assisted living conversion grants and an additional $50 million for service coordinator grants. No changes in these areas are proposed for next year.

Nevertheless, AAHSA is not entirely happy with the program--and for good reason. AAHSA has been a major advocate for the conversion provisions of Section 202, and most conversion grant recipients have been AAHSA members. One might assume that because AAHSA providers often are connected to faith-based organizations, that would imply that they are well placed for next year's grants. Two problems intrude: First, long-term care providers have always had great difficulty wresting budgeted funds for service coordinators from the local housing authorities; in some cases, a yearlong grant for Section 202 funds has taken more than a year to process. Second, and on a more fundamental level, AAHSA is concerned that funds for assisted living conversion and service coordination are "set aside" from other 202 activities--in other words, are taken from the common funding for grants and earmarked for these activities. This action places funding for assisted living conversion in direct competition with other funding to benefi t housing for the low-income frail elderly; what is spent on one can't be spent on the other. Apparently believing that this isn't the best way to run a supportive program, AAHSA has placed establishment of a separate budget for housing conversion on the table as one of its legislative priorities for this congressional session.

AAHSA and the long-term care community face a considerable uphill battle in passing real reforms to Section 202. Despite HUD's impressive progress during the past decade, the department's current leadership sincerely believes that solving America's housing needs is a job more appropriately handled by other agencies.