L. Neil Smith's

Number 20, December 15, 1996.

Close Down HUD

By Vin Suprynowicz

Special to The Libertarian Enterprise

         The federal Department of Housing and Urban Development helps folks who otherwise can't qualify for regular commercial mortgages. Common sense would predict that folks who have to turn to HUD for help are somewhat more likely to default.
         Common sense is right. The HUD default rate is considerable. (The head of HUD for Nevada, Paul Pradia, came to see me this week. I asked him what the current default rate is. He said "I don't have that at my fingertips." A ballpark estimate? He said "I'd rather not guess.")
         No matter: HUD retains the best security of all -- a first lien allowing the agency to repossess the house itself. This system guarantees that the long-suffering taxpayers get something back out of the bureaucrats' bad investments.
         At least, it used to.
         Since 1990, under a program of which few HUD "investors" are aware -- a program dubbed "Homes for the Homeless" -- these caring bureaucrats have decided to suspend their fiduciary duty to recoup something on our investments, instead offering these "surplus" repossessed homes, at a rate of just $1 per year, to nonprofit organizations who promise to use them to provide cheap, temporary housing to folks "trying to get back on their feet."
         Technically, HUD is supposed to either reclaim the houses later, or sell them to the non-profit agency at 90 percent of appraised value ... eventually.
         How would you guess this plan has fared?
         When federal auditors went to Baton Rouge, La. this year to see how the indigent tenants of an outfit called "Safety Net Inc." were getting along in their repossessed HUD homes, they found only one "homeless" person among the 43 tenants investigated.
         "Expensive cars were parked in front of houses that contained nice furniture and big screen televisions," reports Karen Gullo of The Associated Press. "Tenants were later found to be friends and business associates of the group's director," one of whom earned $58,000 per year but paid no rent at all.
         At least someone ended up in the houses. In St. Louis, HUD auditors found that Allied Housing Group Inc . -- granted a contract to purchase a dozen "repos" and resell them to low-income buyers -- had collected thousands of dollars in deposits from buyers who never got homes, while "wheeling" those funds in an unsuccessful attempt to buy additional houses.
         "We scraped to get the money together," said Pamela Wyatt of Bridgeton, Mo., who lost $7,900 in the scam.
         Allied's officials now can't be located.
         Mr. Pradia insists "What you have here is not a scandal with anything that HUD did; it's something that private parties are doing."
         The temptation is always to say, "What a shame that, in this one isolated case, a well-meant government program got politicized and ended up benefiting the well-fixed and the well-connected, instead of the poor."
         But that would be wrong.
         The catalogue of such outcomes is now so enormous that only those willfully in denial can any longer ignore the fact that this is what generally happens when government bureaucrats are put in charge of organized "charity."
         In the old days, the local religious and fraternal organizations who disbursed our charity made a big deal of distinguishing the freeloader from the "deserving poor." That distinction is important. If con artists are seen to divert our "charitable contributions" again and again, most folks will eventually stop "giving," and our world will be a colder place for it.
         Today, huge wads of extorted money are bundled up and sent far away from where the unwilling "donors" are able to watch what becomes of them, channeled through systems rife with political patronage.
         Then -- when the occasional rock is turned over to reveal the resulting swarm of maggots -- the lardmasters pull on their best stern, go-to-meeting faces and shout, "What? Out of all the rocks out there, the auditors managed to turn over the one rock that covered up a mess of rot and corruption? Don't you fret; we'll have that little problem cleaned up in no time!"
         Under pressure from Congress, HUD officials announced in October that no new "Homes for Homeless" leases will be issued ... after Jan. 1. Deputy Assistant Secretary Jacquie Lawing further announced HUD will decide next year whether to end the program entirely. Which is to say, they'll wait and see if the political heat has died down sufficiently to re-open it under a different name.
         Bill Clinton says "The era of big government is over." I agree. The Constitution does not authorize Congress to allocate any tax moneys for charity. We must close down the federal Department of Housing and Urban Development.
         Not just hang a new sign over the door. Lay off every employee. Pass special legislation forbidding them from accepting any other federal job for seven years. Auction off their computers and desks. Implode the emptied building. Haul away the rubble. Plant grass. Call it the "Taxpayers Memorial Park."
         And on the sign, write: "Expanding Soon."

Vin Suprynowicz is the assistant editorial page editor of the Las Vegas Review-Journal. The web site for the Suprynowicz column is at http://www.nguworld.com/vindex/. The column is syndicated in the United States and Canada via Mountain Media Syndications, P.O. Box 4422, Las Vegas Nev. 89127.

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