History of the Economic and Market Analysis Division (EMAD): Part 1 (1934-1999)

History of the Economic and Market Analysis Division (EMAD): Part 1 (1934-1999)

Pamela Sharpe, Economic & Market Analysis Division Director

A copy of the author’s FHA Techniques of Housing Market Analysis, also known as the Green Book. The Green Book describes the foundational methodology that EMAD still uses today.

The federal government’s analysis of local housing market conditions has its roots in the Federal Housing Administration (FHA), which Congress created in 1934 with the passage of the National Housing Act. The act included a statutory requirement mandating that the federal government monitor housing market conditions. Section 209 of the National Housing Act states the following:

The Secretary shall cause to be made such statistical surveys and legal and economic studies as he shall deem useful to guide the development of housing and the creation of a sound mortgage market in the United States and shall publish from time to time the results of such surveys and studies. (National Housing Act of 1934, as amended)

The responsibility for carrying out this mandate fell to the economists in the Market Analysis and Research Section within the FHA’s Research and Statistics Division. These economists, known as FHA market analysts, were tasked with monitoring local housing market conditions and forecasting expected future demand for sales and rental housing from a market-wide perspective.

FHA became part of the newly formed Home and Housing Finance Agency (HHFA) in 1947. At various points in HHFA’s existence, the agency also included the Public Housing Administration; the Federal Home Loan Bank Board; the Federal National Mortgage Association (Fannie Mae); the Community Facilities Administration; the Urban Renewal Administration; and, as a constituent unit, the Federal Flood Indemnity Administration. Several of these entities engaged in their own housing market analysis efforts, hiring economists and creating their own methodologies. Although HHFA also had some economists based at its 10 Regional offices, most economists were based at HHFA headquarters. For more information about HHFA, please see “Prequel to PD&R” from the March 2023 edition of PD&R Edge.

By 1964, FHA’s Market and Analysis Research Section had been renamed the Economic and Market Analysis Division (EMAD). In 1964, EMAD published FHA Techniques of Housing Market Analysis, also known as the Green Book, which was reprinted and revised in August 1970. The Green Book described the methodology EMAD used for its Comprehensive Housing Market Analyses (CHMAs), which also launched in 1964. EMAD staff selected the areas featured in these analyses based on requests from FHA insuring office directors and EMAD’s study of housing markets nationwide. At this point, most CHMAs were internal reports, although parts of them were released to the public. EMAD also provided the overall national analysis to other parts of the federal government, including Congress.

When President Lyndon Johnson signed the Housing and Urban Development Act of 1965 into law, Robert Weaver, the administrator of HHFA at that time, became the first HUD Secretary. He was charged with combining the federal agencies and authorities in HHFA into one functioning department, or “One HUD.” As part of this reorganization, FHA became part of HUD’s Office of Housing. EMAD’s duties at the time included providing analytical support for the Rent Supplement Program. When the economists from the Public Housing Administration merged into EMAD, they were also required to review applications for new public housing units and establish the income limits that governed the public housing program.

In 1970, a separate field economist organization with expanded responsibilities was created in HUD’s Field Policy and Direction (now known as Field Policy Management) to provide economic advice and analytic support to Regional administrators and Area Office managers (now called Field Office directors). The original objective for having economists in the field was to establish a formal link between headquarters policy and economic analysis and Field Office program operations and to incorporate the local analysis perspective of the field economists. This new field economist organization was also created to respond to the rising rate of defaults in the FHA multifamily housing insurance program. HUD tasked the field economists with providing detailed recommendations for individual program applications to prevent overbuilding. Between 1970 and 1972, most of the EMAD economists in headquarters were reassigned to a HUD Regional or Area Office and became part of the Economic & Market Analysis Staff (EMAS).  Under this new field organizational structure, the economists reported directly to the Regional administrators and Area Office managers while the Office of Housing continued to provide technical supervision/oversight of the function through the supervisory economists in the Regional Offices.

The new structure expanded the role of field economists, many of whom developed expertise in the major HUD programs in addition to supporting EMAD headquarters. By the mid-1970s, EMAD’s headquarters staff was overseeing the allocation of all public housing and Community Planning and Development (CPD) funds; still supporting the Section 23/8 and Rental Supplement programs and income limits; and providing technical guidance and oversight to the field economists, who played a major coordinating role in approving Housing Assistance Plans under the Community Development Block Grant program and completing reviews of single-family subdivisions. At this point, the field economists became increasingly concerned about how this reporting structure affected their ability to make independent determinations for FHA, CPD, and Public Housing at the local level.

In 1975, the field economists petitioned then-Secretary Carla Hills and HUD’s chief economist, John Weicher, to move their function from FHA to the newly created Office of Policy Development and Research (PD&R). In 1976, the EMAD headquarters counterpart organization to the field economists was transferred to PD&R, but the field economists themselves remained part of the Field Office management structure under the Field Operations and Management’s budget line, which created problems for EMAD over the next 23 years. 

Although EMAD headquarters staff continued to provide technical guidance and oversight to the field economists through the Regional supervisory economists (now known as EMAD Regional directors), under this new structure, the Regional administrators and Area Office managers made all hiring decisions for the field economists and completed their performance appraisals. The EMAD headquarters director initially was invited to participate in hiring interviews, but their input was largely ignored in later years as the Regional administrators and Area Office managers hired replacements who served primarily as special assistants. By the late 1970s, field economists were producing few CHMA reports because of their heavy program-related workloads along with their special assignments from the Regional administrators and Area Office managers. The responsibilities of EMAD headquarters staff expanded in the mid-1980s to include overseeing the Fair Market Rent (FMR) program as well as providing technical support to the major program offices at HUD’s headquarters. Among other new duties, such as reviewing Urban Development Action Grants for CPD, the field economists were tasked by EMAD headquarters with completing FMR Exception Rent review recommendations and providing local PHAs with technical support for the completion of their surveys as a part of the appeals process.

The importance of the field economists’ independent review of FHA multifamily market-rate applications under the Section 220, 221(d)(3), 221(d)(4), and 231 programs was reinforced in the 1980s as HUD became plagued with scandals under the Reagan administration. During this period, the field economists, who were mandated to support FHA in limiting risks to the FHA General Insurance Fund, were intentionally removed from this review process. The Assistant Secretary for Housing at the time directed the field economists to determine a rental market as soft only if the vacancy rate was greater than 10 percent. FHA’s newly created coinsurance program, particularly when applied to independent retirement service centers for tenants over age 65, was even more problematic. Despite the field economists’ mostly negative recommendations, FHA insured many of these projects, and the mortgages quickly went into default. 

The role of the field economist was energized in the early 1990s under then-Secretary Jack Kemp, who was tasked with reforming HUD following the scandals of the previous administration. John Weicher, PD&R’s assistant secretary at the time, summoned at least one field economist from every office to Washington, DC in 1989, for the first EMAD counterpart meeting in years. Secretary Kemp addressed the group, emphasizing EMAD’s importance in the agency’s reform efforts.

The first quarterly U.S. Housing Market Conditions (USHMC) report was published in the fourth quarter of 1994. Reportedly, the publication came into being following a lunch between Secretary Henry Cisneros and members of the Federal Reserve Board about the Federal Reserve’s Summary of Commentary on Current Economic Conditions, better known as the Beige Book. Secretary Cisneros left the lunch wondering why PD&R, with its considerable housing market intelligence, was not publishing a similar report, and PD&R Assistant Secretary Michael Stegman responded by launching the USHMC report series. The field economists, coordinated by EMAD headquarters staff, completed the regional narratives and spotlights for local areas that are now known as Housing Market Profiles, which are available on HUD User.

The number of field economists steadily declined in the 1990s as the field economists who initially trained in headquarters before 1972 retired and were replaced by individuals who were not required by most of the Regional Administrators or Field Office Directors to complete formal training in FHA housing market analysis.  The quality of the work products being produced in the field became increasingly disparate. In the late 1980s, HUD had 40 Field Offices with more than 90 field economists. The number of field staff positions declined in the 1990s, however, from 72 positions in more than 40 offices in 1994 to 56 positions (and 7 vacancies) in 25 offices in 1998. This decline was largely attributable to a decision by the deputy under secretary for field operations and management to use field economists and labor relations vacancies to absorb the administrative cuts that the Office of Management and Budget directed. At that point, several Field Offices had no economists. Fred Eggers, deputy assistant secretary for the Office of Economic Affairs and David Shenk, EMAD director, increased their advocacy efforts for the field economist organization to be transferred to PD&R.

In 1998, HUD introduced a proposal to reorganize certain functions that cut across program lines, including economic and market analysis, labor relations, environmental review, relocation assistance, and lead hazard control. The plan would consolidate budget authority and headquarters’ supervision of all these functions under PD&R, and the day-to-day supervision of the field staff assigned to all of these functions would reside with the Regional administrators. In a May 1998 memorandum, Larry Thompson, who was then the general deputy assistant secretary for policy development and research, suggested an alternative plan in which PD&R would assume budget line authority over the economic and market analysis staff (EMAS) only. Thompson argued that PD&R’s functional supervision of EMAS over the years left it well equipped to give EMAS the leadership and direction it required. However, he also outlined the reasons why PD&R was ill-equipped to take on the administration of the other cross-cutting functions covered in the proposed reorganization.

In October 1998, HUD’s Administration Division formally recommended a reorganization plan that would transfer the field economists to PD&R. The division acknowledged that HUD management had not given field economist staff adequate attention in recent years and that the field economists needed a strong advocate in headquarters that could influence key budget and personnel decisions as well as provide the management and functional guidance that their changing circumstances required. PD&R, which had served as the field economists’ informal advocate for years, had already proven that it had the interest and the ability to excel in this role.

HUD formally transferred the field economist staff to PD&R in March 1999. The proposed reporting lines and management structure remained somewhat convoluted, however, because the Secretary’s representative and senior community builders (now known as Field Office directors) were initially still directing the work of the regional supervisory economists and were responsible for 40 percent of their performance rating. The regional supervisory economists, in turn, were initially responsible for 60 percent of the performance rating of the economists in the Field Offices; senior community builders handled the remaining 40 percent of the rating. At this point, 47 economists staffed 29 HUD Field Offices.

After a turbulent and frustrating history with the field economists, PD&R was finally positioned to stabilize and rebuild the organization. Part 2 of this story will focus on this rebuilding effort from 1999 to the present.