What Is HUD And What Does It Do?

If you’re in the process of buying a house, you’ve likely come across several acronyms that you may be unfamiliar with. One of these acronyms that’s especially important to know about is HUD. But what is HUD and what does it do? We’re here to tell you everything you need to know about HUD and how it can help you as a home buyer.

The HUD, which is shorthand for the U.S. Department of Housing and Urban Development, is a federal government agency that’s responsible for ensuring that everyone, especially individuals in urban areas, have fair and equal access to affordable housing. HUD is led by a member of the current U.S. President’s cabinet – a HUD Secretary who is appointed by the President and confirmed by the Senate.

HUD: A Brief History

Before we get too far into what HUD does, let’s take a quick look at the history of this agency. HUD was established on September 9, 1965, by President Lyndon B. Johnson.

The creation of HUD consolidated five separate agencies – the Federal Housing Administration, the Public Housing Administration, the Federal National Mortgage Association (Fannie Mae), the Urban Renewal Administration and the Community Facilities Administration – in an effort to help the federal government tackle the issues of substandard and deteriorating housing.

Over the last several decades, HUD has insured mortgages, created housing, funded community development projects and committed other tasks for millions of Americans.

HUD's mission is to "create strong, sustainable, inclusive communities and quality affordable homes for all.” There are several ways HUD aims to achieve its mission, including:

• Fighting housing discrimination
• Making homeownership more accessible and affordable
• Create safe and affordable rental housing
• Provide homes for the unhoused
• Supporting minority and vulnerable communities

In 2023, the President requested a budget of $71.9 billion to support HUD in its initiatives.

To achieve its goal of providing housing support and uplifting communities, HUD oversees several different programs and initiatives.

One important job that HUD has is overseeing the Fair Housing Act. Passed in 1968, the Fair Housing Act prohibits housing discrimination and ensures equal opportunity housing. When renting/buying a home, getting a mortgage, applying for housing assistance or participating in other housing-related activities, the Fair Housing Act outlaws housing discrimination on the basis of:

• Race
• Color
• Sex
• Religion
• National origin
• Disability
• Familial status

The Fair Housing Act also empowers HUD to take and investigate complaints if a customer feels they have been subjected to discriminatory housing practices.

Federal Housing Administration

HUD’s Federal Housing Administration (FHA) is best known for providing mortgage insurance on FHA loans. Thanks to the FHA, lenders are protected if borrowers default on their FHA loan. This protection enables lenders to write mortgages for home buyers who may not have been able to qualify for a different type of mortgage, whether it be due to low credit score, low income or other financial issues. 

Community Development Block Grant

The Community Development Block Grant Program provided annual grants to cities, states and counties to aid in community development. Primarily, the grant money is used to develop safe housing and to provide economic opportunities for low- and moderate-income individuals in the community. 

HUD Housing

HUD also benefits home buyers by providing the opportunity to purchase HUD homes. Essentially, HUD homes are houses in foreclosure that were originally purchased with an FHA loan and have been taken back by HUD. Then, HUD sells these homes to cover the loss of the foreclosure. Often HUD homes are sold at a lower price and come with additional benefits, such as prepaid closing costs. This means HUD homes are often more affordable for low-income home buyers. 

Housing Choice Voucher Program (Section 8)

Another one of HUD’s initiatives is the Housing Choice Voucher Program, also known as Section 8. Authorized under the Housing Act of 1937, this program provides low-income, elderly and disabled individuals with safe and sanitary housing. They accomplish this by way of a monthly subsidy for up to 15 years. Individuals must qualify and apply for Section 8 housing in order to receive assistance through the program.

Section 8 Criticism

Critics of HUD and its Section 8 program argue that it allows low-income families to be concentrated into impoverished neighborhoods. Additionally, the program has long waiting lists in some locations due to high demand.

In addition to Section 8, HUD offers other incentives and assistance for home buyers. Some of these include:

• Good Neighbor Next Door Program: Thanks to this program, public servants including police officers, firefighters, EMTs and teachers can get 50% off a home’s purchase price if the home is located in a revitalization area. Under this program, home buyers must remain in the home for at least 3 years.
• One Dollar Program: The One Dollar Program makes it possible for local governments to buy certain HUD homes for $1. Eligible homes must have been on the market for more than 6 months. Once purchased, the homes can be fixed up and sold to low- and moderate-income families.
• HUD $100 Down Program: Owner-occupant buyers, or those who will use the home as their primary residence, can buy a home with a $100 down payment, which can make homeownership much more affordable.
• Nonprofit Program: This program allows nonprofit organizations to buy HUD homes at 30% off so that the homes can be fixed up and sold to first-time and low-income home buyers.

Still looking for more information on HUD and how it works? Here are the answers to some frequently asked questions about HUD.

Why was HUD created? 

The Department of Housing and Urban Development (HUD) was created to help the federal government better manage the country’s housing needs, uplift communities and prevent housing discrimination.

What’s the difference between HUD and FHA?

The Federal Housing Administration (FHA) is an agency that falls under the jurisdiction of HUD. The FHA was launched in 1934 but was incorporated into HUD upon its founding in 1965. The FHA insures mortgages to make homeownership a more affordable and attainable goal for home buyers.

What’s an HUD home?

As mentioned, a HUD home is a foreclosed home that was originally purchased using an FHA loan and is now up for resale. HUD claims these properties after they have gone into foreclosure and then sells them to recoup the loss of the foreclosure.

The U.S. Department of Housing and Urban Development is a government agency that works to ensure safe and affordable housing for all Americans. To do this, HUD oversees several programs and initiatives, including the FHA, Section 8 and Community Development Block Grant. Through these and other programs, HUD benefits millions of Americans by strengthening the housing market, providing affordable rental housing and preventing housing discrimination.

Are you interested in purchasing a HUD home? If so, start your mortgage application online today with Rocket Mortgage® as the first step in the home buying process.