Julian Castro’s Big Job

Bruce Katz
Bruce Katz Founding Director of the Nowak Metro Finance Lab - Drexel University

May 27, 2014

Call me an earnest policy wonk, but I had high hopes that the nomination of San Antonio Mayor Julian Castro to be secretary of housing and urban development would spark a thoughtful conversation about an agency that plays a major role in America’s economy.

Unfortunately, the news has been treated almost exclusively as a political story. Pundits are taking Castro’s appointment as a sign that the 39-year-old mayor, a rising Democratic Party star, is being groomed for something bigger, even the vice presidency. As is typical in Washington, precious little attention has been devoted to exploring the state of housing and urban issues in the country and what, if anything, Castro and the federal government can do about them.

There couldn’t be a better time to have that discussion.

More than five years after the onset of the Great Recession—which saw aggregate U.S. home equity drop by an unprecedented $7 trillion across the country—the United States is facing a new, complicated mix of housing challenges. After years of exalting homeownership, and tilting federal policies in favor of suburban mega-mansions, the country is facing a rental squeeze: rising demand for rental units, rising rents and insufficient wages and incomes. Incredibly, one in four renter households are now paying more than 50 percent of their income for rent, crowding out expenditures on transportation, food and retirement savings.

The housing shift is structural rather than cyclical. America’s population is aging, and young adults are delaying marriage and having fewer children. As a result, the prototypical family of the suburban era—a married couple with school-age children—now represents just under 20 percent of American households, down from 24.1 percent in 2000 and 40.3 percent in 1970. This trend will only accelerate in coming decades.

This demographic tumult is, in turn, changing consumer preferences. Seventy percent of Americans now place a high priority on walkability, and similar majorities prioritize proximity to health care, entertainment, recreation, work, school and friends and family. Older Americans are increasingly seeking smaller homes and apartments, as well as places with easy access to medical services, shopping and other daily necessities. The Millennial generation, in particular, is choosing central cities and urban lifestyles, rejecting the suburban dreams of their parents.

Castro, then, takes office at the very moment when large forces are radically altering how and where we build our housing and design our communities. Yet the federal government has done little to adapt and, in some cases, even acknowledge these disruptive dynamics. The bulk of housing expenditures still flow to homeowners, particularly homeowners with high incomes. Funding for affordable housing is actually being cut and could be scaled back. No serious attention or resources are being dedicated to the new housing demands caused by the mass retirement of the Baby Boom generation. And the future of Fannie Mae and Freddie Mac, which play a huge role in the housing market, is still unresolved.

Castro has his work cut out for him at HUD. The department plays an important role in making housing affordable for low- and moderate-income renters and homeowners and in improving disadvantaged neighborhoods. But it can certainly do better. With Congress unlikely to approve or even consider any sweeping changes, three modest strategies deserve serious consideration.

First, continue the smart strategies and partnerships (within the federal government and across the country) undertaken by outgoing Secretary Shaun Donovan around resilient growth, sustainable communities and homelessness. Donovan deserves ample credit for his focus on integrating federal transportation, housing and environmental policies—particularly in response to the harsh realities of climate change and the increasing occurrence of natural disasters such as Hurricane Sandy. He also delivered real progress on reducing the numbers of homeless people through close collaboration with service-providing agencies. (Since 2010, homelessness in America has decreased by 6 percent, including a 24 percent drop in veteran homelessness and a 16 percent drop in chronic homelessness.) These efforts were enormous steps forward from the stove-piped departments and compartmentalized programs of 20th-century government and should be expanded.

Second, place HUD in the service of city- and metro-led housing strategies. As illustrated by Mayor Bill de Blasio’s 10-year housing plan for New York City (and advances in Philadelphia, San Francisco and elsewhere around issues like energy efficiency), cities and metros will be the vanguard of policy innovation and housing investment in the next several years. HUD can play a helpful role in the implementation of these locally driven plans, providing regulatory relief, expedited reviews, new innovative finance and cross-agency support. This would be a humbler HUD, perfectly aligned with the times, where cities innovate and the federal government follows.

Finally, lead the federal government’s adaptation to the disruptive demographic and environmental challenges facing the country and what they mean for building design, technology, energy efficiency, finance, location and services. As a former mayor, Castro knows how to convene disparate stakeholders and constituencies and help spur private, public and civic innovation and investment around complex issues. In the age of partisan gridlock and ideological polarization, the role of cabinet secretaries is to catalyze action outside Washington, D.C., rather than focus on legislative reforms.

These strategies will obviously not right all housing wrongs in the United States. But they will make discernible progress on pressing challenges and do so in a way that telegraphs a different way of doing business in Washington. In these polarized times, those would be remarkable achievements indeed. Worthy, you might say, of a future vice president.

This commentary originally appeared at