Duplicative and Unnecessary Renovations Made in the HUD-Subsidized Concord Commons Apartments in Rockford, IL

CED-82-67: Published: Apr 15, 1982. Publicly Released: Apr 26, 1982.

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In response to a congressional request, GAO discussed duplicative and unnecessary repairs approved by the Department of Housing and Urban Development (HUD) at an apartment complex in Rockford, Illinois.

Although HUD spent about $1 million to renovate more than half of the apartments at the complex during 1978 and 1979, all of the apartments are being renovated again by the Rockford Housing Development Corporation using a HUD-insured loan for $2.9 million. In addition, all of the units will receive HUD rent subsidies which will be used in part to repay the HUD-insured loan. This obligation will total more than $14 million over the next 15 years. A GAO inspection of 20 apartments that HUD had previously renovated showed that about half of the items scheduled for replacement were still functional. GAO also observed many items that, in its opinion, needed only minor repairs to be functional. In some instances, the original items were identical to and in virtually the same condition as the replacement items. Evaluators of the renovation proposal only visited damaged apartments and did not take into account the previous repairs. GAO found that the second renovation was undertaken without adequate regard for cost-effectiveness and without sufficient indication that the marketability goals for renting the apartments could be met. Upgrading projects more than necessary results in fewer housing units being made available to needy persons, because renovation costs must be recovered through rents. HUD procedures for repair of multifamily properties are vague and permit considerable latitude in determining the extent of needed repairs. GAO also identified a number of deficiencies in contracting procedures and practices used during the previous renovations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Housing and Urban Development should notify HUD area offices nationwide of the need to coordinate renovation work performed by their Property Disposition Branch and Housing Development staffs when HUD-owned multifamily properties are sold to private buyers. Similar to the coordination procedure designed by the Chicago Area Office in August 1981, such coordination could be certified by a joint memorandum prepared by the responsible officials in both groups concurring in nonduplicative renovation work.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Housing and Urban Development should direct the appropriate offices of HUD to determine if the problems disclosed regarding the renovation of Concord Commons are of sufficient magnitude elsewhere to warrant nationwide corrective actions. In this determination, the Secretary should direct that outstanding policies, guidelines, and standards for the renovation of multifamily projects sold with HUD-insured loans and subsidies be reviewed to determine if further clarification is needed for: (1) controlling renovation work, including approval of repairs beyond those necessary to provide decent, safe, and sanitary housing; and (2) evaluating the reasonableness of proposed renovation work, including requirements for conducting cost-effectiveness and marketing studies as part of the decisionmaking process.

    Agency Affected: Department of Housing and Urban Development

 

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