Rebuilding the Research Capacity at HUD (2008)

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1 Introduction In November 2006 Congress requested the National Research Council convene a committee of leading experts in housing and community devel- opment and related fields to evaluate the Office of Policy Development and Research (PD&R) of the U.S. Department of Housing and Urban Development (HUD) and its current research plan. The committee was charged to “provide HUD and the Congress with a set of options and recommendations for Congress to consider regarding the future course of research needed to address future technology, engineering, social, or eco- nomic issues” (U.S. House of Representatives, 2005). More specifically, the committee was charged with five tasks: 1. Assess how well the current research program is aligned with the Department’s mission, goals, and objectives. 2. Assess the quality, timeliness, and usefulness of recent and current research products. 3. Assess the allocation of resources to data development and analy- sis, research projects, demonstrations and experiments, program evaluations, and other activities. 4. Identify unmet research needs where HUD could provide unique value or should be active to meet the housing needs of the future. 5. Develop a set of options and recommendations for the future course of research within HUD. The committee was directed not to offer budget recommendations.  

 REBUILDING THE RESEARCH CAPACITY AT HUD In commissioning the study, the House expressed specific concerns (U.S. House of Representatives, 2005): The [House] Committee is concerned that HUD’s research office has b ­ ecome largely a grant making organization rather than conducting lead- ing edge research with a strong in house capacity. The National Research Council is directed to provide a report to the House and Senate Commit- tees on Appropriations, prior to the submission of the President’s FY2007 budget request that reviews current research priorities and makes recom- mendations on a new course of research for HUD. The Report should include specific recommendations and should examine the elimination of an in house research office, if the Council sees no long-term value to HUD specific research or that HUD related research can or should be done by other Departments. A DIFFERENT LANDSCAPE Urban society has changed radically since the establishment of HUD in 1965 and the creation of PD&R in 1973. The operational challenges facing HUD and the policy challenges facing PD&R have also changed dramati- cally in the past 35 years. Urban areas and their central cities are very dif- ferent places now from what they were in the 1960s. A much smaller share of metropolitan economic activity is concentrated in the urban center, and suburban regions now include more than half of all metropolitan jobs, as well as most of the people residing in metropolitan areas. This trend has important consequences not only for urban finance, but also for the spatial relationships between housing and employment locations in urban areas. The demographic composition and labor force behavior of households has also changed in fundamental ways over the past 35 years. Most house- holds now contain two or more workers, and more of these workers now work full time. Households also typically contain fewer members, a result of fewer children and fewer multigenerational households. In addition, the U.S. population is aging rapidly as a function of improved life expectancy, lower fertility, and the movement through the age distribution of a particu- larly large cohort born after World War II. As a result of these changes, as well as rising incomes, housing demands have changed. Financial markets have become much more sophisticated and are inti- mately involved in urban development, now including the retail single- family housing market as well as multifamily and commercial sectors. The housing finance system, once characterized by savings and loan associations and mutual savings banks, accepting deposits and making loans in their localities, has become a system of very large lenders, tightly connected to the major financial centers of the United States and the world. Commercial and residential mortgage-backed securities have provided unprecedented 

INTRODUCTION  liquidity for investment in urban infrastructure by private actors, while at the same time generating new complexities and stresses in financial markets, as the problems associated with subprime mortgages have dramatically demonstrated. The programs overseen by HUD have also changed enormously over the past 40 years. The housing assistance programs that existed in 1965 have either been repealed or substantially changed; public housing and subsidized housing construction programs have been largely replaced by housing demand subsidies to allow low-income tenants to choose their own housing. Federal urban renewal programs have been completely replaced by locally sponsored development activities financed by partnerships between federal and local agencies. The Federal National Mortgage Association (Fannie Mae) was formerly an agency in HUD that bought and sold only Federal Housing Administration (FHA) and Veteran’s Administration (VA) home mortgages. Its competitor, the Federal Home Loan Mortgage Corporation (Freddie Mac), did not exist in 1965. Nor did the Govern- ment National Mortgage Association (Ginnie Mae), which issues securities backed by FHA and VA mortgages. Changes in technology have made housing and nonresidential construc- tion more efficient in the last three decades, though the technical advances have been slower and less dramatic than those envisioned by HUD in the 1970s. Despite slow progress in technical productivity over several decades, technology seems poised to assume a far larger role in housing and urban development in the near future. The increasing importance of energy costs in urban life, coupled with a growing recognition of the potential envi- ronmental consequences of energy use, have stimulated developments in conservation technology for both new buildings and the retrofitting of existing buildings. The above changes justify the need for a careful review of how well PD&R is positioned to address the key housing and urban development issues in the country. METHODOLOGY To carry out its charge, the committee reviewed multiple sources of information in order to understand the various functions of PD&R and to evaluate it with respect to its quality, relevance, timeliness, and credibility. The primary source of information for the committee came from direct exchanges between the committee and the current staff of PD&R, either through face-to-face conversations at committee meetings or through writ-   s A this report was in press, the federal government placed Fannie Mae and Freddie Mac in Conservatorship. 

 REBUILDING THE RESEARCH CAPACITY AT HUD ten requests for information over the course of the project. This informa- tion provided the committee with an enormous amount of detail about the current activities of the office, including descriptions of all the divisions in PD&R, their functions and recent accomplishments, funding levels and procedures, data sets, and staffing. In addition, the committee administered a brief questionnaire to a sample of the office’s professional staff for infor- mation on their education and work experience. A second kind of information came from reading a sample of the office’s completed research products that were produced either in-house or by an outside contractor. Among other things, the committee was interested in understanding the research design adopted by each study and assess- ing how well the chosen strategies and methods were appropriate for the questions of the research. In addition, individual committee members were familiar with many of the published research reports, and the committee drew on this expertise as well. A third kind of information came from interviews with a number of individuals who have been involved in the development of HUD and PD&R over the years or who had been in key positions to observe that development. The committee was interested in learning about the history of PD&R within HUD and why it was established. The committee spoke to individuals who formerly held critical positions within HUD, experienced congressional staff members, and various long-time users of HUD data and reports. Finally, the committee included former PD&R assistant secretaries and deputy assistant secretaries from both Republican and ­Democratic admin- istrations, as well as former visiting scholars whose combined personal experience at HUD extends for well over half the history of the office. In addition, the committee also included two former assistant secretaries of planning and evaluation from the U.S. Department of Health and Human Services. Perspectives were also sought from people who formerly held critical positions in other agencies and organizations that carry out similar research and research administration tasks. The committee met six times between February 2007 and January 2008, including holding two open meetings that included testimony from various representatives of HUD and other entities. In between these meetings, the committee carried out extensive internal discussions. This report represents the findings, conclusions, and recommendations of the committee. In keeping with its stated charge and its composition, the commit- tee focused its efforts on reviewing the primary policy development and research functions of PD&R, rather than all the functions of PD&R, which are numerous. For example, for historical reasons, HUD’s Office of Interna- tional Affairs, which administers the international activities of the depart- ment and coordinates international cooperative exchanges on housing and 

INTRODUCTION  urban issues, sits administratively within PD&R; the committee did not review the work of this office. Similarly, the committee did not review the work of the Office of University Partnerships, which is also located in PD&R and represents a substantial share of the appropriated PD&R budget but does not conduct research or participate in policy development. Also outside the committee’s review was the day-to-day management of key support units, such as the Budget, Contracts, and Program Control Division and the Management and Administrative Service Division, both of which are also administratively housed in PD&R. The goal of the committee was to evaluate the work as objectively as possible. In some instances, this meant having to judge the impact of the office’s work over the course of several administrations. But throughout its work, the committee’s intention has been to be as forward looking as possible. Consequently, the committee has continually asked itself one f ­ undamental question: Looking to the future, how prepared is the Office of Policy Development and Research to support the mission of HUD? REPORT ORGANIZATION The remainder of this report presents the committee’s findings, analysis, conclusions, and recommendations. Chapter 2 contains important back- ground information on the history of PD&R, as well as trends in staffing and budget that form the backdrop to the rest of the report. The next six chapters (Chapter 3 through 8) discuss the research and policy develop- ment activities by function, with separate chapters on policy development, internal research, external research, technology research, data collection, and dissemination. The committee’s distinction between external research, internal research, and policy development is useful analytically but a some- what artificial distinction: in practice, the data collection, internal research, external research, and policy development functions continually overlap and feed into each other. This is a repeated theme throughout the report, and Chapter 9 presents a number of case studies that illustrate the inter- relationships among these various activities. In particular, the case studies show how research feeds into policy development and program support, and how policy development and program experience in turn influence the research agenda. In Chapter 10 the committee pulls together a number of important strands from the earlier chapters to provide a general assessment of the current state of PD&R. In Chapter 11 the committee offers its recom- mendations for the future course of PD&R.