April 30, 1995 - From the April, 1995 issue

Mark Fabiani: A New Majority in Washington – The Impact on HUD

The U.S. Department of Housing and Urban Development (HUD) is up-for-grabs and the federal commitment to housing policy is under attack. As the policy arena continues to shift, The Planning Report presents an interview with Mark Fabiani, Deputy Assistant Secretary for Operations at HUD and former Chief of Staff for Mayor Tom Bradley, on the battle over reinventing HUD, Los Angeles' failed Empowerment Zone application, the new Community Development Bank proposal, and the impact on local communities of HUD budget rescissions.

In April, Mr. Fabiani will be leaving HUD to join the White House staff as Special Associate Counsel to the President. 

Let's begin with a fundamental question: Is there a compelling need for a federal housing policy linked to a cabinet-level housing agency? 

There is no question about the need. The goal of creating meaningful work and decent, affordable housing for all Americans is an end most people would embrace. However, there is now substantial disagreement about the means we use to achieve that end goal. 

Many of the existing government programs - the existing means, if you will - have certainly outlived their usefulness. Unfortunately, many Republicans want to use this to discredit the goal of creating decent, affordable housing for Americans. Our job must be to keep the goal firmly in mind and find new means of achieving the goal more effectively. If we succeed, there will certainly be a place for a federal housing policy. 

If there is a HUD in two years, what will it look like, and around what policies and programs will then be a national consensus?

The national consensus will not be sorted out for some time. I believe the national consensus will eventually form around the concept that services ought to be provided directly to individuals. The middleman should be eliminated, whether it's the federal bureaucrat or the service provider at the state or local level. We need to combine our scarce resources, coordinate their distribution, and to the greatest extent possible, provide services directly to people. This is one of the striking features of the best Empowerment Zone (EZ) applications.

For example, many cities want to combine the pot of assistance available to an individual -food stamps, AFDC, job training - and use these resources to help a family most efficiently. For some people we can subsidize their first year's wages, while others can use the assistance to pay tuition at a junior college. It's inevitable we are heading in the direction of direct, hands-on delivery and less bureaucracy; it's just a question of time. What happens to agencies and service providers under this scenario is anyone's guess, although it is safe to say that those who cling to outmoded programs will find the going tough.

One of the priority objectives of the federal housing policy is rebuilding and sustaining existing neighborhoods. As someone familiar with local government, what federal strategies does HUD propose for community and neighborhood renewal? 

As Deputy Assistant Secretary for Operations, I'm responsible for the Empowerment Zone Initiative. The EZ program is a perfect example of achieving a common goal through new means. Empowerment Zones combine the best thinking of both liberals and conservatives. We hope to use the tax system to encourage private investment and we seek to use public resources to leverage additional funds from businesses, foundations, and state and local government. Our goal is to help make neighborhoods better places for businesses to locate and people to live.

President Clinton understands tax incentives alone won't do the job if a business feels its property and employees aren't safe. Thus, the EZ program tackles the endemic problems in communities while using the market to attract businesses and jobs. The results are very encouraging. The EZ program has brought businesses, foundations, labor unions, churches and community groups together with City Halls all across America. 

For example, the City of Detroit, which many people have literally written off, secured over $2 billion in private sector commitments to match federal dollars. In Baltimore, $1 billion has been committed by the private sector. This is the kind of program we think can work. It builds on solutions coming from the local level; it doesn't rely on Washington dictating ideas to communities and it gives local governments the tools to do the job. 

Give us some background on why Los Angeles failed to secure an Empowerment Zone Designation. And, having received a $125 million consolation prize, what are the likely benefits of Los Angeles' Community Development Bank proposal? 

The competition was incredibly competitive. Few expected cities such as Detroit to file outstanding applications, and yet many cities, including Detroit, came out of nowhere with excellent applications. Thus, Los Angeles was in a tough race from the start. From the beginning of the process, Vice President Gore instructed he didn't want politics to play a role in the selection process. He wanted applications to be judged on their merits. If a politically well positioned city didn't deserve to win, then they didn't deserve to win. 

In the end, though, Los Angeles actually fared very well in the process. The Vice President and Assistant Secretary Andrew Cuomo fought hard in Congress to secure additional funding for Los Angeles, Cleveland and four other cities. As a result, Los Angeles came away with $125 million in economic development money. Although the initial disappointment in Los Angeles was understandable, the city should be commended for how it has since reacted. The business community has come together, under the leadership of George Mihlsten and others, to create the largest community lending institution in history. Since the President awarded this economic development grant to Los Angeles, cities across the country have been looking to Los Angeles and its community lending institution as a model for what might be done elsewhere. 

Drawing on your knowledge of Los Angeles, give us an insight into the difficulties putting Los Angeles' Empowerment Zone application together. Similarly, what advice would you offer those responsible for the implementation of the LA Community Development Bank proposal? 

During the EZ selection process this summer, I played the role of informing people on the East Coast about the particular challenges West Coast cities face in these competitions. For instance, few Washingtonians understand just how ethnically diverse and geographically dispersed a community Los Angeles is. They don't understand the lack of a monolithic power structure and how the community does not necessarily look to one leader. Because of these special factors, Los Angeles took many months just to decide the boundaries of the proposed EZ. 

Compare this to the situation in other cities: New York, Congressman Rangel took the lead; Detroit, Mayor Archer quickly organized the boundaries; and, in Baltimore a well-coordinated group of community organizations swung into action. As a result, these other cities quickly decided their boundaries and had a great deal of time to work on their program. Los Angeles has unique challenges and problems, and it's important the federal government recognize those challenges. The $125 million economic development grant is a chance to create the nation's largest community lending institution and will show Washington Los Angeles is doing something entrepreneurial with its resources. 

The details surrounding the establishment of LA's Community Development Bank have yet to be finalized. Some suggest there will be a battle between the Mayor's Office and City Council over the composition of the board and the division of funds between venture capital equity/loans and grants. What are HUD's expectations?

What's so encouraging about the Los Angeles community development bank model is it allows for everything from small micro-loans to large venture capital fundings, and everything in-between, including revolving loans and small business lending institutions. Everyone is watching closely to see what Los Angeles is doing. This is an opportunity for groups which have not traditionally experiment a success. 

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In your opinion, what is the role for Rebuild LA (RLA) in the revitalization of Los Angeles and the Community Development Bank? 

I understand the focus on RLA has shifted toward assisting small businesses and enhancing business­to-business networks. This is generally consistent with what needs to be done to create job growth in our nation's cities. 

Job growth in needy neighborhoods is generally not going to come from a major company opening a manufacturing plant. Job growth comes from neighborhood-based small businesses that can get the capital to grow. Inner-city revitalization efforts will succeed or fail based on our ability to get small businesses the capital they need to expand. 

How is the 104th Congress treating HUD's budget priorities? 

It couldn't be any worse. HUD has seen $7.1 billion, which was already appropriated by Congress and promised to cities, rescinded from its budget. This is approximately 25 percent of HUD's total yearly funding. And this is just the first battle. There is no question it's a grim situation. 

How has Sec. Cisneros’ "Relations for the Year 2000" recommendations fared both in Congress and with HUD's own constituencies? 

Frankly, HUD would be better off had we begun to reinvent the agency two years ago. Certain parts of HUD — such as the Office of Community Planning and Development under Assistant Secretary Andrew Cuomo — were dramatically reinventing themselves two years ago. Assistant Secretary Cuomo began by proposing to combine seven separate homeless programs into a single program to finance continuum of care systems in every city in the country. This is the kind of new thinking on which both Republicans and Democrats agree. 

Unfortunately, much of what happened at HUD in the first two years amounted to tinkering around the edges. Major changes in public housing and FHA weren't forthcoming. After the November elections, there was a mass scramble to put something new to the table, and although what's now on the table is creative and innovative, people on both sides of the aisle reviewed the proposals with skepticism. 

The traditional interest groups supporting HUD wondered if the new ideas were a knee-jerk reaction to the election results. Many Republicans, who traditionally oppose HUD, said this new plan is too little, too late. It's a difficult situation, and we would be better off had the department done something more dramatic two years ago. 

What do the budget rescission votes and proposed changes in HUD policies mean for metropolitan Los Angeles?

It's dramatic. The notion of upgrading public housing, thereby allowing it to be privatized, requires spending some money. The rescissions basically eliminate the funds that could be spent to put public housing in a position to be privatized, allowing competition on the open market. 

Los Angeles will lose at least $159 million in federal housing and community development funds and 3,000 units of affordable housing if Congress approves the Republican supported take-back of resources already promised to the city. This take-away of money Los Angeles has been counting on will hit the city hard. Vouchers for homeless families, people with AIDS, and poor families would be slashed; innovative programs to train kids in public housing as apprentices would be dumped; and funds for drug treatment and monitoring of recovering addicts would be reduced. 

The Community Development Block Grant (CDBG), which Los Angeles uses to finance its Community Development Department, would be cut substantially. Homeless programs would also be cut substantially, and Los Angeles is the homeless capital of America. Again, this is only the beginning. If the Republicans get their way this year, there is no telling what they'll chop away at next year. A city like Los Angeles relies tremendously on these resources. 

Many people now argue it's bet­ter to put these resources into one large block grant. In theory, it's a good idea if you can protect the total amount of resources. The Republicans have a different plan: They want to put the resources in large block grants and then steadily reduce the amount state and local governments receive. In a few years, communities like Los Angeles will have the same problems but without the same amount of resources. 

If you were consulting to Mayor Riordan, how should Los Angeles prepare for federal housing cuts as well as consolidation of the LAI CRA, Housing Department and other community development de­partments? 

From what I read, Los Angeles is doing the right things. The city is taking a new look at old problems, taking no program for granted, and not assuming any program works. That's the bottom line. Everyone, in Washington and at the state and local level, ought to decide on the goals we share, and take another look at new, more effective means to achieve those goals. 

There is no question many of the programs we've relied on for many years no longer serve their purpose. Los Angeles is doing the right thing by looking at everything anew. It's clear we need fresh approaches to solve our long-standing problems. The ultimate challenge is to find these new means without abandoning our fundamental goal of creating a more just, more livable society.

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