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Julian Castro's going to run HUD, but HUD doesn't really run federal housing policy

With San Antonio mayor Julian Castro apparently set to join the Obama cabinet as Secretary of Housing and Urban Development (current HUD Secretary Shaun Donovan will move to the White House and head the Office of Management and Budget, while current OMB Chief Sylvia Matthew Burwell will replace Kathleen Sebelius at the Department of Health and Human Services) most attention is on what this means for Castro's political career rather than on what it means for American housing policy.

And for once, the focus on politics over policy is absolutely correct. The basic fact of the matter is that the HUD chief is not very important to housing policy.

That's not just because housing is more of a local issue than a federal one. The federal government is in some ways a bigger actor in housing policy than people realize. But as one now-departed senior member of Donovan's team at HUD told me years ago, the problem is that HUD has nothing to do with the most important federal housing policy initiatives — the subsidies to owner-occupied housing that are built into the tax code.

There are two big tax subsidies here and their total cost dwarfs all HUD spending:


Thanks to the tax treatment of housing, buying a house that you live in is a smart savings strategy for most people. This is the most important fact about American housing policy both because it's important in its own right and because almost everything else that happens in housing policy follows from the extent to which owner-occupied housing is a normative ideal in American society.

All of this isn't just outside the HUD Secretary's control in the sense that cabinet secretaries have limited autonomy. It simply doesn't fall under the category of "housing policy" in the United States at all. The Treasury Department has the relevant analytical expertise and the tax-writing committees in congress run the show legislatively. The programs HUD does run are important, but in terms of the housing experience of the typical American household they're much less important than what's run through the tax code.