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HUD: Case Study in Secret Shutdown

by Larry Bush on 04/04/2011

in Merely Rumors

The posters are going up at the Weaver Building, headquarters for the U.S. Department of Housing and Urban Development. They will go up in HUD’s 10 regional offices and 50 plus local offices across the nation. Individual employees are being encouraged to post stickers that carry the same message:

“I Believe In HUD.”

As members of congress and community groups held workshops on avoiding foreclosures or sought to negotiate terms with lenders, the key federal agency charged with housing policy had opted out.

Holdover bureaucrats at the U.S. Department of Housing and Urban Development (HUD) visited each of the ten regional offices to hand down a direct order that HUD top staff were not to participate in foreclosure workshops even when requested by members of congress. In the region that included the most hard-hit states of Nevada, Arizona and California, all such requests were to be handled by a small office in Santa Ana, California that had a miniscule travel budget.

When the lead HUD official in Fresno, California was found to nevertheless be participating with local officials on foreclosure and housing issues, Washington acted to discipline him with a lowered performance rating and threatened to reassign him to Michigan. Discipline and lowered performance ratings for other key staff quickly followed suit, including in Las Vegas, with the nation’s highest foreclosure rate, Sacramento, which handled cities into the San Joaquin Valley, and San Francisco, where staff was trying to work with then-Speaker Nancy Pelosi.

Today the Fresno Office director has retired, the next level official is leaving for another job, and HUD would prefer to close the office completely. For Washington, the fact that Fresno is one of the hardest-hit housing markets and already facing significant economic challenges is not enough to keep the Fresno HUD office staffed if it meant one fewer senior official in HUD’s Washington Headquarters. In an agency that exists to work in communities, communities come last. Earlier, when the local Fresno Democratic congressman beefed about HUD’s failure to help his community, HUD Secretary Sean Donovan penned an op-ed in the Fresno Bee blasting the congressman.

After the first year of the Obama Administration, the results can be seen in a survey across all federal agencies of federal employees done for the federal Office of Personnel Management.

Mismanagement Costs

Mismanagement at HUD, at all levels, plunged the Department into last place among the largest 32 federal agencies in 8 of 13 categories last year, dropping even lower than it had been in prior years of Republican administration. Overall, HUD ranked 31 out of 32 federal agencies for employee satisfaction. It was dead last among those rated for training and development, for strategic management, for leadership, and teamwork.  “Climate Assessment” experts fanned out to HUD offices nationwide in an effort to craft solutions with proposals like holding an “office retreat” to discuss problems.

At the same time, HUD employees in the Western Region filed a mounting number of Equal Opportunity claims against the department – 27 at last count in the region – and the Department began settling the claims for hundreds of thousands of dollars in individual cases. The top official of the western region was directed to stay out of the office while continuing to earn a salary of more than $155,000 a year and officials from Washington or other regions were ferried into San Francisco to oversee the office at increased expense, including per diem. The total bill footed by taxpayers, including staff time estimated at $100,000 per case, totals into the millions of dollars in one HUD region alone.

HUD’s response to past budget and staff cuts has been to contract out the work done by federal employees – often at higher cost as a trade-out for lower staff numbers. Take as one example HUD’s decision to contract out records searches for Freedom of Information Act requests. The work, previously done by staff at regular government pay rates charged to the requestor, now is rolled into a Lockheed Martin contract that costs HUD $400 million, part of $800 million it pays for IT services and systems.

The result is that the public now has to pay more for its information and HUD staff is denied opportunities for better jobs. Employees seeking records on such mundane issues as a job selection process have been told the cost would be in excess of $30,000 to provide the records search.

The effect is to allow managers to escape accountability for their decisions, harms both employees and the public, and makes HUD more costly and less efficient.

Contracting out also has severed the relationship HUD has with its customers, as residents in assisted housing and public housing now have to take their complaints and concerns to an outside contractor rather than to HUD staff. HUD could claim a reduction in total personnel, but the result is that HUD is less informed now about such issues as tenant safety and housing quality standards.

The myth is that federal workers can do more and cost less if positions are unfilled and duties for individual employees are increased. The reality behind this myth is that it costs more and does less.

Declining Customer Service

HUD’s acquisitions of Real-Estate Owned properties (REO’s) is the office that handles FHA-insured homes that have fallen into foreclosure and become real estate owned by HUD. In California, acquisitions in 2010 totaled 3,493. In 2011, they are forecast to rise to 6,773. Yet there has been no additional hiring.

The consequences for HUD customers and taxpayers are hidden from view, but are nonetheless real. One factor in the housing bubble was a too-casual approach to home valuation, with property appraisals little more than a drive-by to eye a home from the outside and slap a value on it. HUD, with shortened staff and more responsibilities, now finds even a drive-by is too much. Instead HUD operates its oversight like a fly-over, viewing things from 30,000 feet.

Red flags are missed until they become a crisis. Bell, California now is under investigation by several state, federal and local agencies over how it has spent public funds. HUD noticed problems early on but Bell officials declined to provide records without a formal California Public Records Act request. An overburdened HUD staff pushed it to the backburner.

HUD’s new senior leadership from the Secretary and Deputy Secretary includes an important vision of how the agency can serve communities. It envisions stronger partnerships that leverage programs at Energy, EPA, Health and Human Services and a half dozen other agencies. It will make dollars go further and do more to help those HUD is intended to serve.

These important policies, however, remain mired in a bureaucratic swamp that has kept in place most of the leadership at mid-levels of people chosen by the last administration because they were adverse to taking risks that might deliver better results, and who looked at HUD customers and staff as problems and not solutions.

Even today there is no place where a HUD employee or the public can find a listing of HUD’s MOU’s and partnerships with other agencies so that it can be more responsive to the needs and opportunities as understood by the Secretary.

Nearly every issue, from helping homeowners struggling with mortgage costs to the cutbacks in state and local funds that fund nonprofit partners, has suffered even more since Obama took office because employees were not empowered to be part of the solution but were treated as the problem.

The new Congressional Republican leadership has signaled their intention to make deep budget cuts, with some projections suggesting that HUD’s budget could be reduced by as much as 21 percent.

HUD staff knows how such a cut would be implemented: more wage freezes, furloughs, leaving vacancies unfilled or even abolished, and office closings. In two words: salary savings.

The reason is that managers, especially those in Headquarters, always find it easier to make budget cuts by saving on the salaries of other workers, usually those outside Washington who make up the majority of HUD employees.

It is a secret shutdown.

[Larry Bush served as HUD’s Public Affairs Officer for Region IX covering California, Arizona, Nevada and Hawaii from 1995 until September 30,  2010. His claim against the Department was settled with a payment in the mid-six figures]



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