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Julian Castro was 40 years old in 2014 when he took over HUD for President Barack Obama.
Julian Castro was 40 years old in 2014 when he took over HUD for President Barack Obama.
Gage Skidmore/Wikimedia Commons

Julian Castro for President? Then He Needs to Explain his Dallas Decision.

If former San Antonio mayor Julian Castro really wants to be president of the United States, maybe he’ll come back to Dallas and tell us why, when he was President Barack Obama’s secretary of Housing and Urban Development, he killed our best shot at overcoming racial segregation.

Castro is testing the waters for a 2020 presidential bid. On his website he says, “Today, more than ever, we must work together to build an America where everyone — no matter who we are or where we come from — can thrive.”

But his best chance to do something concrete for equality came barely four months into his two-year tenure as the boss at HUD. HUD had been investigating racial segregation in Dallas for four years and was just about to bring down the hammer when Castro took office.

In a sweetheart deal with Dallas’ mayor, Castro deep-sixed the investigation, threw his own investigators at HUD under the bus and let Dallas off with a kiss instead of a hammer.

The HUD finding in Dallas was exactly the kind of case Castro’s predecessor at HUD, Shaun Donovan, had vowed to begin going after for a change. Donovan, Obama’s second HUD secretary, promised early on to pursue the deceptively benign-sounding policy of “affirmatively furthering fair housing,” which you and I might more readily recognize under its real name, racial desegregation.

For these purposes, it doesn’t matter too much whether we are for that or against it. Federal law says if a city takes federal money intended to promote desegregation, it can’t spend that money to promote segregation. Think of it like taking federal dollars intended to decrease pollution and using the money instead to buy tanker trucks to dump poison into rivers. Just not right.

But that’s just what the four-year federal probe said Dallas had been doing for a decade. Citing national research and court law, the report said so-called “affordable housing” in American cities actually comes down to housing for black and Hispanic working class and poor people and people with disabilities.

A city that uses HUD money to encourage the development of apartment projects must ensure that a majority of those apartments will go to people in certain specified categories. The way things work in the world today, the lion’s share of those people are going to be nonwhite.

In case anybody was unclear where the city wanted its more white and less white apartments, HUD investigators found city officials had drawn an official map dividing the city into southern and northern hemispheres, with downtown in the northern half.

The report said: “The evidence shows that there was a pattern of negative reactions to projects that would provide affordable housing in the Northern Sector of Dallas and that those decisions were inconsistent with the goals required by HUD program obligations.”

At one point, Dallas city officials discovered that a new federal bond program for housing threatened to mess up their map. City Hall had counted on using the new bonds to spur redevelopment of downtown.

But after accepting hundreds of millions of dollars in new bond authorization, the city learned to its dismay that the bonds, called Housing and Economic Recovery Act or HERA bonds, carried an ironclad requirement that any multifamily housing projects funded with the HERA bonds had to include at least 51 percent affordable units.

HUD money was always supposed to carry that requirement, but Dallas and many other cities for decades had been able to skate out of the requirement by getting HUD to grant waivers. With backing from Obama, Donovan had decreed a new no-more-waivers policy, and the rules for the HERA bonds were the first hard incursion of that policy.

Once Dallas found out that the HERA bonds wouldn’t allow waivers, the city couldn’t get rid of them fast enough. The HUD report on Dallas said, “The City did not use any of the HERA Bonds that were allocated to it. In April 2010, the City voted to return at least $75 million to the State for use by a group out of Austin, TX. The remainder of the bonds was allowed to expire.”

The investigation of Dallas was spurred by two real estate developers, Curtis Lockey and Craig MacKenzie, who in 2010 accused Dallas of sabotaging their proposed renovation of a downtown office tower, launched in 2007. Backed by recordings of meetings and other evidence, Lockey and MacKenzie said city officials pulled the rug out from under their deal, effectively killing their funding, because city officials were afraid their renovated downtown tower would become home to too many minorities.

The city told HUD investigators that it had rejected Lockey and MacKenzie because of problems with their financing. But after going through deal after deal between the city and other downtown developers, the HUD investigators decided they didn’t believe the city’s story.

The investigators found too many cases in which other developers had come to the table with much less robust financing than Lockey and MacKenzie but with a much greater willingness to finesse away minority tenants. The investigators said Dallas bent over backward — almost couldn’t do enough — to help the complicit developers while pulling shady tricks to shut down Lockey and MacKenzie.

It was the perfect case. For Donovan. But suddenly in July 2014 Donovan was out, for reasons never fully disclosed, and Castro was in.

The handsome then-40-year-old twin of a congressman was a neophyte on the national stage. The highest office to which he had been elected — still today the only one — was mayor of San Antonio, where his mother had been a prominent and beloved civil rights activist.

He arrived in office at HUD to find the agency just about to bring down the hammer on Dallas. Dallas faced a draconian possibility. If Dallas didn’t do everything HUD was demanding in its proposed settlement, HUD could cut off all HUD funding to the city, an amount never counted but believed to be in the theoretical neighborhood of hundreds of millions of dollars annually.

As the current president might say, bad.

And HUD wanted a lot. It wanted the city to aggressively pursue the development of 51-percent affordable projects downtown. It wanted an end to affordable housing projects being stuffed into already segregated tough neighborhoods. It wanted those projects shifted out into whiter, more affluent areas instead.

Curtis Lockey and Craig MacKenzie planned to turn the old LTV Tower office building downtown into apartments.
Curtis Lockey and Craig MacKenzie planned to turn the old LTV Tower office building downtown into apartments.
Jim Schutze

But the big one was this: HUD demanded that the Dallas City Council enact an ordinance requiring all multi-family landlords in the city to accept federal Section 8 housing vouchers. To the Dallas real estate establishment, that was and still is anathema.

Castro had been in office mere months when he was called by Dallas Mayor Mike Rawlings. Nominally a Democrat but really a DINO, Rawlings is a wealthy former advertising executive and investor selected to be mayor by the private and powerful Dallas Citizens Council.

Rawlings said later he had spoken to Castro about the Dallas case three times on the phone. Apparently the third call was the charm. Castro caved.

The brand-new secretary decreed his agency's own investigators had screwed up their investigation, looked at all the wrong things and left out key evidence. Castro said he didn’t agree with the proposed settlement.

Dallas was off the hook. Mayor Rawlings thanked Castro publicly and effusively for killing the case. “His commitment on this was remarkable, to be this hands-on,” Rawlings said.

Now, if people look closely at all of this history — and, if Castro runs for president, people will — they’re going to find some anomalies I haven’t necessarily reflected here. One is that in Dallas the old black establishment is and has always been opposed to integration.

That’s a long story, perhaps for another lifetime, but the significant upshot here is that black leaders in Dallas have never wanted to see affordable housing exported to white neighborhoods. Therefore there was no black constituency here to support the HUD report or to decry Castro’s gutting of it.

Only very recently have the youngest Latino elected officials in Dallas shown an interest in government-backed affordable housing initiatives. So Hispanics were not in this fight, either.

There is a liberal/left axis of lawyers and community activists in Dallas who have long been committed to desegregation and affordable housing. They have achieved major victories, even leading national policy with their court victories.

But as either a shrewd tactical maneuver or a deal with the devil, the housing activists have focused mainly on pushing affordable housing out of the city proper into the suburbs. That left downtown Dallas, where HUD built its case, as a kind of segregation no-man’s land.

Lockey and MacKenzie kicked the dust of Dallas off their boots years ago.

This is all to say that journalists and oppo-researchers, mad bloggers and policy wonks who come to Dallas to research this case are basically going to find one person in town who’s pissed off about it. Me. Everybody else is fine. And everybody else will say, “Oh, well. Him. Yeah. He’s never happy.” And that’s true.

I am never happy with racial segregation, even if people want to be segregated. Especially if people want to be segregated.

A very wise and influential person in this field with significant national experience tried to talk me down from my tree branch a few years ago by telling me there’s nothing unique in how this all wound up in Dallas. “Look, Jim,” she said, “housing is just the wall that the whole national civil rights movement ultimately ran into.”

When she told me that, I thought to myself, “Is she trying to get me to jump?”

This is all I know. Castro is a Democrat. He presents himself as a big equal rights and equal opportunity person. If he wants to be president of the United States, he should explain his Dallas decision. I’m all ears. I hope my ears will not be alone.

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