The HOME program provides federal block grants to state and local governments and is designed to produce affordable housing exclusively for low-income families. Local jurisdictions select and supervise individual contractors to build affordable housing. The May 15 Washington Post article contains concerning examples of problems at a small number of HOME projects. HUD takes its responsibility as a steward of taxpayer funds very seriously, and agrees that the circumstances described in many of the cases in the article are unacceptable. Indeed, since well before the article appeared, HUD has undertaken a range of oversight and remedial actions with respect to local jurisdictions highlighted in the article and others that receive HOME funds. HUD will continue to work with Congress and other stakeholders to ensure that the HOME program continues to provide vital, cost-effective housing assistance to low-income Americans.
At the same time, it is crucial to separate media claims from actual facts and to set the record straight on the HOME program. In many respects, the Post’s claims are false or misleading and exaggerate the extent of delay or other problems. The following is a discussion of the specific areas in which the article inaccurately described HOME or HUD’s enforcement actions.
POST: HUD has “largely looked the other way” when local housing departments mismanage their federal HOME funds.
FACT: This claim is false. HOME is a block grant program in which the local governments that receive federal funds have the responsibility for tracking and ensuring construction progress by developers. But HUD has taken vigorous action to remedy misuse of federal funds. These actions have accelerated since 2009. Specifically:
- In June, 2010, HUD notified HOME grantees that HUD would begin automatically cancelling projects that fail to get under way and draw down funds within a year. Since January, 2011, using that system, HUD has cancelled 1,778 activities, freeing up $290 million of HOME funding to be re-committed to viable projects.
- Beginning in mid-2010, HUD has been sending additional regular reports on delayed projects to HUD field offices so that they can work more aggressively with local agencies to push for completion. This includes lists of “stalled” projects, as defined by HUD’s Inspector General, with more than 50% of the funds disbursed and no funds drawn in more than five years and, beginning in January, lists of projects in “final draw” where all HOME funds have been spent but the projects have not been reported as completed within 120 days of the final draw. This is in addition to lists of “open” HOME projects that have been made public since 2005. This effort has already produced results. The inventory of “stalled” projects has already been reduced to zero, with 35 projects completed, 20 with construction underway, 17 cancelled with repayment of $283,000, and requests for repayment pending on 36. 1,890 “final draw”projects have been closed, a reduction of 25%. The total number of “open” projects dropped by 17.5%, from 28.000 in November, 2010 to 23,000 in March,2011.
- Far from ‘looking the other way,’ HUD aggressively seeks repayment of HOME funds that are uncommitted, unspent or misspent. Such actions are underway concerning a number of the local agencies mentioned in the Post article. HUD produces monthly “Deadline Compliance” status reports to track compliance with statutory HOME funds commitment and expenditure deadlines. A total of $60.1 million has been de-obligated and reallocated for failure to meet those deadlines, including $9.3 million since 2009. In addition, HUD has recovered $190 million from communities for spending HOME funds improperly, including for ineligible costs. In total, local governments have repaid or forfeited over $250 million when they failed to meet deadlines, misspent HOME dollars, or failed to produce affordable housing using HOME funds.
POST: “Even when HUD learns of a botched deal, federal law does not give the agency the authority to demand repayment” and “can only ask agencies to voluntarily return money.”
FACT: This claim is false. Although HUD rules state that HUD should begin by seeking remedies voluntarily from local government grantees, HUD has specific legal authority to take different types of mandatory remedial action depending on the circumstances. This includes, for example, requiring repayment by reducing future block grant funds or mandating payments from non-federal funds. In fact, HUD always requires repayment when it learns of a botched project or misspending by a local agency and has been repaid one hundred percent of the time. Overall, HUD has received more than $250 million dollars in repayments and forfeitures.
POST: “Nearly one in seven projects shows signs of significant delay” in the HOME program
FACT: This claim is false and reflects significant factual errors. Initially, the Post reviewed data on all 28,000 HOME developments that were pending as of November last year. The Post’s total of approximately 700 projects that showed signs of delay actually represents only about 2.5% of the total HOME projects, not one in seven. In addition, the Post’s analysis of these specific projects is not borne out by the facts, which demonstrate that many of the “delayed” projects counted by the Post are not delayed at all. HUD has analyzed 797 projects that appear to meet the Post’s criteria for delayed projects. Overall, 434 of the 797 “delayed” units, more than 54%, are actually completed and occupied. Another 27 are nearly complete and 154 are in progress. Only 85 projects, less than 11% of the total, genuinely appear delayed, and the majority of those are delayed due to market conditions, such as unavailability of financing and inability to sell completed units. By comparison, over 2007-10, 34% of all new U.S. housing starts have not been completed within three years of permitting.
POST: HOME is a “dysfunctional system.”
FACT: This claim is false and ignores the overall success of the HOME program. Far from being “dysfunctional,” HOME has achieved significant results, including:
- HOME has produced 381,883 rental units, assisted 428,373 homebuyers, rehabilitated 197,780 owner-occupied units, and helped 242,768 tenants since 1992, producing a total of more than one million homes for low income families.
- All HOME funds must be used to help low-income families. More than 96% of families who receive HOME-funded tenant-based rental assistance and over 80% of fanilies in rental units developed with HOME funds have incomes below 50% of area median income.
- HOME funding is cost-effective. Each dollar of HOME funds on rental and homebuyer projects leverages almost $4 of private and other public investment. Over the life of the program, HOME has leveraged more than $80 billion of other funds for affordable housing for lower income families.
- In 2005, HOME was a finalist in the prestigious “Innovations in American Government Awards.” The Council for Excellence in Government, which makes the awards, found that “HOME has successfully expanded the inventory of rental housing and increased homeownership opportunities for low-income families.”
POST: “Checks were cut even when projects were still on the drawing boards, without land, financing or permits to move forward. In at least 55 cases, developers drew HUD money but left behind only barren lots.”
FACT: We agree that many of those checks should never have been written by the participating jurisdictions. Local jurisdictions are required to do the front end due diligence and underwriting to make certain they don’t draw funds on projects that aren’t ready to get under way and HUD can and does take action when it learns of such problems. However, the HOME statute specifically authorizes the use of a limited amount of HOME project funds (for most jurisdictions, no more than 1.5%) for predevelopment loans to Community Housing Development Organizations (CHDOs). These loans are intended to provide seed money to community-based nonprofit development groups to do feasibility studies, architectural and engineering studies, environmental assessments or to place purchase options on properties to be used for affordable housing projects. The statute specifically permits these loans to be forgiven if the project does not go forward, as happened in the Montgomery County case cited in the Post article. Given the extremely limited amount of such loans and the fact that such predevelopment work is inherently necessary in private and public real estate development projects of this nature, it is misleading for the Post to suggest that this constitutes a serious problem.
Where jurisdictions improperly provide funds to CHDOs, however, HUD takes action. For example, HUD has disallowed the costs associated with the Karios CHDO predevelopment loans by Prince George’s County (cited in the Post) because Karios did not meet the capacity requirements for a designated CHDO, and the amount provided to Karios significantly exceeded the maximum amount that the County could provide as predevelopment loans.
POST: HUD has enforcement lawyers who can pursue remedies before an administrative law judge or through a “criminal case in federal court,” but HUD has only pursued five cases administratively leading to $19 million.
FACT: This is wrong. In fact, HUD does not have authority to bring criminal cases, but always makes clear to local jurisdictions that it can and will pursue administrative and other civil remedies if necessary, as it has done effectively in many other areas. HUD has never actually needed to litigate against a participating jurisdiction with respect to HOME because, sometimes after threat of such action, local agencies have forfeited or paid HUD $250 million – more than thirteen times the $19 million figure reported by the Post.
POST: Developers are “tapping HUD’s program for easy money and then escaping even rudimentary oversight from local and federal authorities.”
FACT: This claim is false. Under the HOME block grant system, as designed by Congress, local governments select and contract with developers and are supposed to monitor construction progress and completion, while HUD’s authority is to oversee the local jurisdictions. HUD may not know at the precise moment a particular project runs into problems, but problematic projects are uncovered through reporting and monitoring, and the jurisdiction must then repay the HOME investment. HUD agrees that more effective monitoring of individual developers by local government should take place in some areas, and is increasing its efforts to assist and encourage jurisdictions to do so, including by requiring repayment or other action when they do not. But it is wrong of the Post to lead readers to believe that no oversight is happening.