By Gene Lowe and Dave Gatton
July 4, 2011

Department of Housing and Urban Development (HUD) Secretary Shaun Donovan addressed the Council for the New American City, chaired by Columbus (OH) Mayor Michael B. Coleman, on the first morning, June 17 of the 79th Annual Conference of Mayors meeting in Baltimore. Donovan recognized the important work of mayors in their cities, and gave high praise to Coleman for his city’s accomplishments with the Neighborhood Stabilization Program (NSP).

The Secretary then highlighted how key HUD programs impact the lives of citizens. He said that housing counseling is very important and that those who receive it are 15 percent more likely to stay in their homes. “We need to fight for housing counseling,” Donovan said. Mayors are also using HUD programs such as “Rapid Rehousing” to reduce homelessness on the streets. The Secretary cited Salt Lake City Mayor Ralph Becker, Vice Chair of the Conference of Mayors Committee on Community Development and Housing, for his work in preventing homelessness. Another HUD program that is realizing its potential is the Sustainable grants program that connects housing to transportation. But, Donovan noted, funding the program in the future will be a challenge.

“HUD is being transformed,” the Secretary said, through such programs as Choice Neighborhoods that will draw on the resources of other federal departments — Education and Health and Human Services (HHS) — along with public housing programs to change neighborhoods. But, this effort cannot be accomplished with five to six grants a year; HUD will work with cities to attract private capital to achieve the goal of rebuilding neighborhoods across the nation. HUD is also working to simplify rules of Section 8 Housing Choice Vouchers to achieve future savings in the program.

As for the Community Development Block Grant (CDBG) program, Donovan said, “We need to show that it works.” He said further that the flexibility of the program makes this hard to show. The Secretary added, however that CDBG creates jobs.

Donovan alerted the mayors that both CDBG and the HOME Investment Partnerships program may not receive any funding in the U.S. House of Representatives for FY2012. He urged the mayors to use CDBG to leverage every possible dollar; the Section 108 loan guarantee program is effective in this regard. Mayors should also be cognizant of the transparency of the CDBG program funds: where they are going, and how effective the funds are being used in their cities. All of this must be shown to Congress. “We must be smart, innovate, and reform our programs,” Donovan said.

Following the Secretary’s remarks, the Council held a forum on “Jumpstarting Local Real Estate Markets.”

Robert Klein, founder of Safeguard Properties, Jim Rokakis of Western Reserve Land Conservancy, and Jack Konyk of Weiner Brodsky Sidman Kider PC, presented the Council with a proposal to more quickly resolve properties that are vacant and abandoned homes in city neighborhoods.

As the mortgage foreclosure crisis continues to rack communities, Klein told the mayors that many homes continue to be abandoned prior to completion of the foreclosure process, bringing blight and continued deteriorated property values to neighborhoods. In addition, legislators and news media in recent months have made the issue of bank “chargeoffs” or walkaways” more public. “Especially when the homeowner has left the property vacant, charged off properties remain in limbo, with no clear responsibility for maintaining the property,” he said. “When servicers and mortgagees make the decision to charge off a low value property, everybody loses.”

The three experts agreed that to date, recent attempts to address these challenges of low-value properties have met with limited success because disposition has occurred on a small scale, often case-by-case. Their proposal would involve servicers and GSEs transferring large volumes of defaulted low-value properties from their portfolios nationally into a single entity whose mission is to promote and preserve affordable housing and rehabilitate properties and neighborhoods.

Under the proposal, occupied properties would be subject to a re'structured financing arrangement based on property value; habitable, abandoned properties would be repaired and rented, with an opportunity for eventual homeownership; and vacant and uninhabitable properties would be demolished.

Following this panel, Elizabeth Mendenhall of the National Association of Realtors provided examples of how employers were assisting employees in the purchase of a home. “Employer-assisted housing (EAH) can be a key program in helping families enter the real estate market responsibly,” Mendenhall told the mayors. The Council and the NAR will work with cities this year to help establish demonstration EAH programs in communities with private and public sector employers.

On the jobs front, Initiative for a Competitive Inner City (ICIC) President Mary Kay Leonard announced that the Council and ICIC would launch a joint research effort this year. She reviewed the first publication entitled “The Role of Anchor Institutions in Inner City Job Creation,” which provides examples of how large entities such as hospitals and universities can be catalysts for small business job creation and neighborhood revitalization.

Concluding the session, Chattanooga Mayor Ron Littlefield and Cisco Executive Norm Jacknis discussed how information technology infrastructure could be used to connect young entrepreneurs globally and to convince them to locate in cities.