Rental Assistance Demonstration: HUD Needs to Take Action to Improve Metrics and Ongoing Oversight
Highlights
What GAO Found
The Department of Housing and Urban Development (HUD) put procedures in place to evaluate and monitor the impact of conversion of public housing properties under the Rental Assistance Demonstration (RAD) program. RAD's authorizing legislation requires HUD to assess and publish findings about the amount of private-sector leveraging. HUD uses a variety of metrics to measure conversion outcomes. But, the metric HUD uses to measure private-sector leveraging—the share of private versus public funding for construction or rehabilitation of assisted housing—has limitations. For example, HUD's leveraging ratio counts some public resources as leveraged private-sector investment and does not use final (post-completion) data. As a result, HUD's ability to accurately assess private-sector leveraging is limited.
HUD does not systematically use its data systems to track effects of RAD conversions on resident households (such as changes in rent and income, or relocation) or monitor use of all resident safeguards. Rather, since 2016, HUD has required public housing agencies (PHA) or other post-conversion owners to maintain resident logs and collect such information. But the resident logs do not contain historical program information. HUD has not developed a process for systematically reviewing information from its data systems and resident logs on an ongoing basis. HUD has been developing procedures to monitor compliance with some resident safeguards—such as the right to return to a converted property—and begun a limited review of compliance with these safeguards. However, HUD has not yet developed a process for monitoring other safeguards—such as access to other housing voucher options. Federal internal control standards require agencies to use quality information to achieve objectives, and obtain and evaluate relevant and reliable data in a timely manner for use in effective monitoring. Without a comprehensive review of household information and procedures for fully monitoring all resident safeguards, HUD cannot fully assess the effects of RAD on residents.
RAD authorizing legislation and the program's use agreements (contracts with property owners) contain provisions intended to help ensure the long-term availability of affordable units, but the provisions have not been tested in situations such as foreclosure. For example, use agreements between HUD and property owners specify affordability and use restrictions that according to the contract would survive a default or foreclosure. HUD officials stated that HUD intends to develop procedures to identify and respond to risks to long-term affordability, including default or foreclosure in RAD properties. However, HUD has not yet done so. According to federal internal control standards, agencies should identify, analyze, and respond to risks related to achieving goals and objectives. Procedures that address oversight of affordability requirements would better position HUD to help ensure RAD conversions comply with program requirements, detect potential foreclosure and other risks, and take corrective actions.
Why GAO Did This Study
HUD administers the Public Housing program, which provides federally assisted rental units to low-income households through PHAs. In 2010, HUD estimated its aging public housing stock had $25.6 billion in unmet capital needs. To help address these needs, the RAD program was authorized in fiscal year 2012. RAD allows PHAs to move (convert) properties in the public housing program to Section 8 rental assistance programs, and retain property ownership or transfer it to other entities. The conversion enables PHAs to access additional funding, including investor equity, generally not available for public housing properties.
GAO was asked to review public housing conversions under RAD and any impact on residents. This report addresses, among other objectives, HUD's (1) assessment of conversion outcomes; (2) oversight of resident safeguards; and (3) provisions to help preserve the long-term affordability of units. GAO analyzed data on RAD conversions through fiscal year 2017; reviewed a sample of randomly selected, nongeneralizable RAD property files; and interviewed HUD officials, PHAs, developers, academics, and affected residents.
Recommendations
GAO makes five recommendations to HUD intended to improve leveraging metrics, monitoring of the use and enforcement of resident safeguards, and compliance with RAD requirements. HUD agreed with our recommendations to improve metrics and build on existing oversight.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Housing and Urban Development | HUD's Assistant Secretary for Housing should include provisions in its postclosing monitoring procedures to collect comprehensive high quality data on financial outcomes upon completion of construction, which could include requiring third-party certification of and collecting supporting documentation for all financing sources and costs. (Recommendation 1) |
HUD has implemented this recommendation. HUD now requires owners of completed, post-construction RAD conversions to submit a RAD Completion Certification which collects final, updated information regarding sources and uses, among other data . Additionally, if the final scope of work exceeded an average of $2,000 per unit, the RAD Completion Certification must include a third-party certification regarding completion of the scope of work. By collecting more robust data for postclosing oversight, HUD can better assess the feasibility of converting public housing units to other rental assistance programs to help preserve affordable rental units.
|
| Department of Housing and Urban Development | HUD's Assistant Secretary for Housing should improve the accuracy of RAD leverage metrics--such as better selecting inputs to the leverage ratio calculation and clearly identifying what the leverage ratio measures--and calculate a private-sector leverage ratio. (Recommendation 2) |
HUD has implemented this recommendation. In response to our recommendation, HUD completed an evaluation of the RAD program in 2019 that included an examination of different approaches for calculating financial leverage. In the report, HUD outlines 5 leverage ratios, including one that measures the amount of privately held funding provided relative to publicly held or subsidized funds. HUD established multiple concepts of leverage because various audiences are interested in understanding the leverage generated by different contributions of financial input. In its evaluation, HUD calculated the 5 leverage ratios using data from 956 public housing conversions completed through October 2018 using all RAD funding sources. By expanding approaches to calculate leverage for RAD and using additional program data, HUD has taken steps to improve the accuracy of its leverage metrics.
|
| Department of Housing and Urban Development | HUD's Assistant Secretary for Housing should prioritize the development and implementation of monitoring procedures to ensure that resident safeguards are implemented. (Recommendation 3) |
HUD has implemented this recommendation. HUD has updated its RAD resident information notice template, which includes information for tenants regarding their rights, such as the prohibition on rescreening for rent amount, the phase-in of tenant rent increases, the right to establish and operate a resident organization, and the availability of funding for resident participation. HUD has revised the RAD Completion Certification review items to confirm the fulfillment of right to return requirements. Finally, HUD revised relocation compliance oversight standard operating procedures. The revised procedures include additional detail regarding agency actions in response to situations of potential non-compliance with the relocation requirements. As a result of these actions, HUD can more reasonably ensure that required resident safeguards will be implemented in RAD conversions.
|
| Department of Housing and Urban Development | HUD's Assistant Secretary for Housing should determine how it can use available program-wide data from public housing and Section 8 databases, in addition to resident logs, for analysis of the use and enforcement of RAD resident protections. (Recommendation 4) |
HUD has implemented this recommendation. In response to our recommendation, in 2019-2020, the agency examined the program-wide data from public housing and Section 8 databases and determined that existing data could be used for oversight to improve the RAD program's watch list or red-flag warning system that triggers program staff to explore situations for possible enforcement action. As a result, HUD subsequently developed a methodology by which the data can be pulled, and aggregated into a new database, to examine compliance and enforcement issues and to attempt to track residents through the various HUD systems. For example, HUD can now identify the move-out and move-in rates of units proposed for conversion under RAD, relative to those rates prior to RAD. HUD notes the data can help indicate situations that require further assessment for enforcement of resident protections at the individual unit level, but does not allow for direct enforcement actions without additional follow up. By determining how it can use existing program data to flag potential issues of concern, HUD has taken steps to improve the oversight of resident protections in the RAD program.
|
| Department of Housing and Urban Development | HUD's Assistant Secretary for Housing should prioritize the development and implementation of procedures to assess risks to the preservation of unit affordability. (Recommendation 5) |
HUD has implemented this recommendation. HUD included Rental Assistance Demonstration (RAD) ownership, control, and preservation of rental assistance safeguards in applicable standard operating procedures governing HUD asset management activities. HUD established a RAD-specific standard operating procedure for asset management with a listing of activities to be implemented in the event of a potential bankruptcy or foreclosure, which we have reviewed. As a result, HUD can better monitor for risks to the long-term preservation of affordable RAD converted units consistent with statutory intent.
|