Inquiry Into Status of Housing Construction for Cuyahoga Metropolitan Housing Authority (Ohio)

CED-81-147: Published: Jul 30, 1981. Publicly Released: Sep 1, 1981.

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GAO was requested to review the status of a proposal submitted by the Dillon Company to construct 16 single-family detached homes for rental to lower income persons for the Cuyahoga Metropolitan Housing Authority (CMHA) in Cleveland, Ohio. The proposed construction is sponsored by the Department of Housing and Urban Development (HUD) under its low-rent housing program. The review centered on the status of the proposal, actions that must be taken before the proposal is approved by HUD, and costs proposed by the developer, Dillon Company, to construct the units.

The proposed project is in the early development stage and must go through a lengthy HUD review process before costs are finalized. This process, which may take several months, can result in the price going either up or down. Before HUD tentatively approves the project, it will have to determine whether: (1) the Dillon Company's proposal is responsive to the CMHA invitation for proposals; (2) the site looks suitable; and (3) preliminary costs appear reasonable. Final approval would be given after final plans are prepared and agreement on a final price is reached among the developer, CMHA, and HUD. On June 24, 1981, CMHA forwarded the developer's proposal to HUD for preliminary approval. While the invitation for proposals for this project called for three-bedroom duplexes and rowhouses and four-bedroom semidetached or single-family detached homes, the proposal accepted by CMHA is only for three-bedroom, single-family detached units. Because detailed plans by the Dillon Company's proposal will not be available until later in the development stage, a firm conclusion on the reasonableness of the project's preliminary costs cannot be made at this time. The dwelling construction costs proposed by the developer are within the cost limits of HUD for Cleveland. However, the cost estimates made by a local appraiser average $12,000 a home less than that proposed by the developer. The difference is mostly estimates for land costs and other costs which include profit, overhead, and financing costs.

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