Shaun Donovan had a problem. As deputy assistant secretary for multifamily housing at the Department of Housing and Urban Development (HUD) during the Clinton administration, he learned of two troubled low-income senior-housing developments in Atlanta, comprising some 500 units. The nonprofits that managed the homes lacked the capital to rehabilitate the aging buildings. A larger nonprofit was in negotiations to take over management of the buildings and find further capital for rehabilitation, but HUD rules prevented the takeover until after financing for the rehabilitation was completed -- and the money wasn't there yet. The developments were set to close without new management, so Donovan intervened to shepherd the deal through HUD's bureaucracy. Within three years, the new managers had rehabilitated the buildings by securing state tax breaks and issuing bonds.
"He saw right away that applying this wooden rule didn't make sense for anybody," Bill Kelly, who worked on the deal and now heads Stewards of Affordable Housing for the Future, told the Prospect. "He really understood the importance of practicality and detail in addition to the broad public-policy experience he has."
In fact, it's hard to talk to someone in the housing community and not hear a good opinion of Donovan, who is President-elect Barack Obama's pick to head HUD. Calls to affordable-housing advocates, policy experts, and community activists suggest that Obama has picked a winner. Donovan's only detractors appear to be conservatives who don't think the government should have much of a hand in the housing market.
Despite his relative youth -- he is 42 years old -- his experience covers nearly every aspect of housing policy: Donovan is a Harvard-trained architect with a master's in public administration, who has worked at an affordable-housing nonprofit in New York City, at HUD, in the private sector with Prudential Realty, and most recently as New York City's commissioner of housing preservation and development under Mayor Michael Bloomberg. There, he has received plaudits for spearheading the New Housing Marketplace Plan, the largest municipal affordable-housing plan in the nation, and for his support of inclusionary zoning, which requires developers to reserve certain percentages of their properties for low-income renters.
At HUD, he'll face a number of tasks, not the least of which will be reforming a bureaucracy that has grown moribund and suffered from lack of funding in the last eight years. Even before Bush it was a neglected agency -- its organization has not changed substantially since it was created in the 1960s. The current secretary has only been in his post since June, after his predecessor resigned following a series of scandals. Conrad Egan, president of the National Housing Conference, observed that Donovan may want to look beyond the Beltway when filling sub-Cabinet positions since state- and local-level players spearhead much of the innovation in housing finance and administration.
"That's really the biggest thing that we're all looking forward to, the idea that this agency [can change from] 'their full job is to interpret regulation and do whatever they can to hinder local agencies from getting work done' to one that looks to be a partner with local agencies," said Michael Kelly, the executive director of Washington, D.C.'s, Housing Authority and president of the Council of Large Public Housing Authorities.
Egan also emphasizes revitalizing the department's Policy Development and Research Office with new staff and resources to focus on new solutions to housing problems; currently, HUD's main focus is the maintenance and replacement of subsidies and housing stock that have existed for decades, but expansions to face rising demand for housing and bold policy ideas are not its stock-in-trade.
Donovan faces two immediate crises in his job. The first and most obvious is the fallout of the sub-prime mortgage crisis. The new secretary will help oversee the Treasury Department's Troubled Asset Relief Program -- the government's jackknife for dealing with all economic problems but especially financial fall-out from the housing bubble's collapse. Within HUD, the Federal Housing Authority needs to rework its failing mortgage-loan modification program, which attempts to stem the rising tide of foreclosures by refinancing loans. This will require Donovan to immediately begin work -- likely with Federal Deposit Insurance Corporation Chair Sheila Bair -- to find a politically palatable way to halt mortgage defaults. But it's clear that Donovan understands the dynamics of the situation, having gone on the record to warn about foreclosures in New York as early as 2004.
The second crisis is that of affordable and public housing. Stocks of both have not been growing, and maintenance costs continue to be a burden as federal funding has fallen over the last eight years. More than one person in the housing-policy community concurred with Bill Kelley who told me [Donovan "respected the role of rental housing" which has fallen by the wayside due to a bipartisan focus on the virtue of homeownership.
"The notion that 'putting everybody into homeownership' is the substance of our national policy is just crazy, and it doesn't work for a large portion of the population, and he understands that," Kelly said. "We've been on this homeownership kick for so long, and it was getting problematic even before the last five years, when it got out of control."
Instead, Donovan has repeatedly demonstrated an ability to get government agencies, private developers, and even philanthropic organization on the same page, creatively using financial leverage and zoning laws to create affordable housing. One reason for Donovan's appointment, some speculate, is Donovan's ability to bring people together -- Egan calls him the "great persuader." He will need this skill to rebuild dysfunctional relationships between HUD and public and private developers, state and local housing agencies and local communities. Those who have worked with him seem confident. "He will harness the energy and skills of the private sector for the best interest of affordable housing," said John Kest, an ACORN official in New York City. "That really is his true genius."
The question remains whether he will be able to convince congressional leaders to open their pocketbooks amid a time of expensive stimulus packages. Donovan doesn't have an extensive D.C. power base, and his position is complicated by the creation of a White House Office of Urban Policy.
The new office will reportedly be headed by Adolfo Carrion, who is not well known in the national housing-policy community, and augmented by Senior Adviser Valerie Jarret, an experienced housing hand whose wide-ranging portfolio could include development issues. Those two may have the final say when it comes to prioritizing Donovan's funding requests, but they will also be able to coordinate with other agencies more effectively, moving past the traditional silos that have created bottlenecks throughout the executive. The Urban Policy Office could be the chance for housing policy to become more integrated with related issues in transportation, education, poverty, and energy.
"The opportunity, which I think we're all crying for in various ways," Egan said, is "to bring the resources that the department has together with the resources that exist at the federal, state, and local level regarding transportations strategies, health strategies, education strategies, and job-development strategies."
