Donovan attended Harvard University, where he earned a B.A. in engineering (1987) and master's degrees in architecture (1995) and public administration (1995). After graduating, he worked as an architect in New York and Italy before joining a community-based nonprofit group that developed affordable housing in New York City. He entered public service as a special assistant at HUD in 1998. In 2000 he was named deputy assistant secretary for multifamily housing, a role that involved the management of a federal housing subsidy program that assisted nearly two million people. During the transition between the administrations of Presidents Bill Clinton (Clinton, Bill) and George W. Bush (Bush, George W.), Donovan remained at HUD as acting commissioner of federal housing.

After leaving HUD in 2001, Donovan became a consultant to the Congressional Millennial Housing Commission and researched federally assisted housing as a visiting scholar at New York University. In 2002 he returned to the private sector, working as director of Prudential Mortgage Capital Co.'s federal lending and affordable-housing division. In 2004 New York Mayor Michael Bloomberg (Bloomberg, Michael) appointed Donovan to lead the city's housing department. While there, Donovan created an affordable-housing plan that preserved some 165,000 homes and apartments. He closed loopholes in zoning ordinances and created a public-private partnership that rewarded developers who provided low-cost, sustainable housing. In 2008 Donovan was nominated secretary of HUD by Obama, and he was confirmed by the Senate in January 2009.