Monday, December 12, 2011

HOME is a block grant, remember?

by Ethan Handelman, National Housing Conference

Today’s Washington Post takes another swing at the HOME program, this time focusing on housing developments in North Carolina. The article fundamentally misunderstands the concept of a block grant, in ways that make much of its criticism misplaced. It also fails to set the particular projects analyzed in the context of real estate development, with all the risks and surprises inherent to that activity.

HOME is a block grant—the federal government allocates money to localities (mostly states and cities) who in turn use the funds for particular projects. So, the federal government isn’t overseeing individual projects directly, but rather making sure that the localities (called in ever-mellifluous HUD-speak, “participating jurisdictions”) are using the funds correctly. That’s fundamentally different from a categorical or direct assistance program, where funds flow from the federal government to specific projects.

So, when the Post describes Charlotte housing director Pamela Wideman as ending a failed housing development and repaying HOME funds to HUD, it may be a failure of a particular development, but it’s an example of the HOME program functioning the way it should. HUD made a grant, Charlotte chose a project, the developer pursued it, the project failed to come together, and HUD got repaid.

“But,” says the observant reader, “why did it take ten years?” That’s where the realities of real estate development come in. Housing of any kind, and most especially regulated affordable housing, is difficult and risky to develop. A developer must nearly simultaneously achieve control of an appropriate piece of land, obtain commitments for funding from multiple sources, and convince overlapping local authorities to approve the project. That process can drag out for years even in a normal economy. With the massive disruptions we see in most real estate markets today, the challenge is even worse.

So, should HUD have better data systems so that it can better evaluate and report the results of its HOME grants? Of course. Should HUD monitor each individual project in detail during the development process? Not at all—that’s the job of the localities who make grants to the projects. HUD should be monitoring its grantees, encouraging and empowering them to make decisions that make sense for their local real estate markets and affordable housing needs. That’s the system by which HOME has created over one million affordable housing units and leveraged other funding sources nearly 4 to 1.

No comments: