1.6: Communities
The Promotion of Viable Communities Other Information:
The economic and social well-being of communities is vital to the nation’s overall growth and prosperity. Yet the viability
of many of America’s communities is threatened by a variety of economic and social problems, including high levels of long-term
unemployment, inadequate retail activity, and a deteriorating housing stock. For decades, federal, state, and local governments
and the private and nonprofit sectors have sought ways to revitalize distressed communities. The federal government alone
operates well over 100 programs that offer to communities various grants, loans, loan guarantees, and special tax incentives
that are designed to assist distressed areas. For example, the Community Development Block Grant program provides assistance
for a variety of infrastructure and capacity-building needs and the Empowerment Zone program is intended to encourage investment
in targeted areas. Despite these efforts, no simple answer has been found to the question of how best to revitalize America’s
distressed communities, in part because of the difficulty of measuring the factors that actually cause communities to improve.
Also, the issue of how best to deliver aid is complicated by the need to strike a balance between the goals of the federal
government and those of state and local governments and nonprofit organizations, which administer a large share of federal
dollars for community and economic development. Small businesses, which employ more than half the nation’s workforce, are
crucial to economic growth in many communities. The Small Business Administration (SBA)—the nation’s single largest financial
backer of small businesses—guarantees over $61 billion of business loans and provides management and technical assistance
to about 1 million small business owners annually. SBA also has oversight responsibility for federal contracting goals for
small and minority-owned businesses. Because SBA has undertaken numerous initiatives to address management issues that affect
the agency’s performance, the Congress needs up-to-date assessments of its performance. To promote homeownership, a key element
of a vibrant community, the federal government assists home financing in several ways. VA and the Department of Housing and
Urban Development’s (HUD) Federal Housing Administration provide mortgage guarantees and insurance, while HUD’s Government
National Mortgage Association (Ginnie Mae) guarantees securities backed by these mortgages. Three government-sponsored enterprises
(GSE)—the Federal National Mortgage Association (Fannie Mae), the Federal Home Loan Mortgage Corp (Freddie Mac), and the Federal
Home Loan Banks—support the mortgage market and are also responsible for promoting homeownership among underserved households.
In recent years, the effectiveness of the regulatory structure for the GSEs has been questioned. The federal government also
promotes homeownership through tax incentives and requirements placed on mortgage market participants. It must balance the
benefits of increasing home ownership, especially among the underserved, against the financial risk taken on directly (through
mortgage guarantees) or indirectly (through GSEs). The federal government—principally HUD and the Department of Agriculture’s
Rural Housing Service—spends some $30 billion annually on numerous programs to help rental households with lower incomes reside
in safe, decent, and affordable housing. HUD has made substantial progress addressing long-standing management weaknesses
that placed its rental housing assistance programs at risk of waste and abuse. However, in recent years, legislative and administrative
actions have changed HUD’s biggest programs—Section 8 and public housing—in ways that may call for different oversight approaches.
Further, both HUD and the Department of Agriculture’s Rural Housing Service, which oversees rural housing programs, face challenges
in ensuring that federally assisted properties are maintained in a physically and financially sound manner, are administered
in a way that best serves the needs of low-income households, and remain available to lower-income tenants to the extent practicable.
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