HUD Multifamily Housing:

Improved Follow-up Needed to Ensure That Physical Problems Are Corrected

GAO-01-668: Published: Jun 21, 2001. Publicly Released: Jul 30, 2001.

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The Department of Housing and Urban Development (HUD) assists nearly 30,000 privately owned and operated multifamily properties to provide affordable housing for low and moderate income persons. HUD is responsible for ensuring that the owners of HUD-assisted properties provide housing that is decent, safe, sanitary, and in good repair. HUD began its Real Estate Assessment Center (REAC) in 1998 to inspect multifamily properties, and rate their condition. This report addresses whether: (1) HUD field offices are complying with the procedures HUD established to ensure that the physical deficiencies at these properties are corrected, (2) all physical deficiencies have been corrected at properties that HUD classified as repaired, and (3) HUD staff and property owners are meeting the Department's timeliness goals and requirements for addressing physical deficiencies. GAO found that HUD's field offices often did not follow the Department's procedures for ensuring that property owners are correcting all physical deficiencies. GAO visited properties that HUD said had been repaired and found that about half of them had not been corrected. Furthermore, HUD's staff and property owners are not meeting timeliness goals and requirements for addressing physical deficiencies.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: On June 12, 2001, HUD contracted with a property inspection firm to verify owners' certifications of repairs at properties that had been inspected by HUD's Real Estate Assessment Center. In addition, on May 24, 2001, HUD issued guidance to its multifamily field offices that sets forth enforcement procedures and options in cases where property owners submit false certifications of repairs. Finally, in June, 2001, HUD revised its inspection follow-up letters to owners of HUD-assisted multifamily properties. The revised letters inform owners that submission of a false certification of repairs could result in ineligibility to participate in HUD programs.

    Recommendation: To improve the effectiveness of the Department's process for ensuring that owners of properties in substandard condition correct all physical deficiencies and to ensure the accuracy of HUD's information on the status of repair work at these properties, the Secretary of Housing and Urban Development should ensure property owners' compliance with HUD's property standards by (1) developing and implementing a system of on-site reviews to verify the completion of repairs at samples of properties in substandard physical condition that HUD's field offices classify as repaired, (2) informing property owners and managers about the penalties they may face for providing false certifications of repairs to HUD, and (3) developing policies and procedures for the multifamily field offices to follow in pursuing administrative and legal sanctions against owners who provide false certifications.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: HUD disagreed with GAO that it should retroactively remove the "repaired" classification from properties that GAO found not to be fully repaired. They said to do so would be "counterproductive," and that subsequent inspections would show the true repair status of the properties. In its response on page 31 of the report, GAO disagreed with their "counterproductive" argument, but basically said that it's okay to remove the "repaired" classification as part of subsequent inspections. Since the "repaired" classification has always been automatically removed from a property after each inspection, HUD did not have to do anything it wasn't already doing to implement GAO's recommendation. On the second issue, HUD did issue guidance to its field offices on how to apply the "repaired" classification to a property.

    Recommendation: To improve the effectiveness of the Department's process for ensuring that owners of properties in substandard condition correct all physical deficiencies and to ensure the accuracy of HUD's information on the status of repair work at these properties, the Secretary of Housing and Urban Development should improve the accuracy of the Department's data on the status of repair work at multifamily properties by (1) removing the "repaired" classification in the Real Estate Management System from properties for which the field offices did not receive a certification letter stating that all of the physical deficiencies identified by REAC's inspection and the owner's physical survey had been corrected and (2) issuing guidance to the field offices on how to apply the "repaired" classification to a property using data input screens in HUD's Real Estate Management System.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Implemented

    Comments: On May 24, 2001, HUD issued guidance to its multifamily housing field offices stating that HUD's headquarters, through Quality Management Reviews and other site visits, will assess the field offices' compliance with inspection follow-up procedures. The guidance indicates that the reviews will include an examination of required file documentation (e.g., certifications of repairs and repair plans) and inspection close-out data in HUD's Real Estate Management System. According to officials from HUD's Office of Multifamily Housing, several field offices were subject to these reviews in fiscal year 2001.

    Recommendation: To improve the effectiveness of the Department's process for ensuring that owners of properties in substandard condition correct all physical deficiencies and to ensure the accuracy of HUD's information on the status of repair work at these properties, the Secretary of Housing and Urban Development should strengthen oversight of the inspection follow-up process by using the Department's quality management review process to assess the extent to which the multifamily housing field offices are (1) complying with guidance pertaining to property owners' certifications of repairs, detailed repair plans, physical survey results, and progress reports and (2) properly classifying properties as repaired in the Real Estate Management System.

    Agency Affected: Department of Housing and Urban Development

  4. Status: Closed - Implemented

    Comments: In June 2001, HUD revised its inspection follow-up letters to owners of HUD-assisted multifamily properties to more clearly communicate HUD's requirements for certifications of repairs and repair plans. Specifically, the letters contain standard, required certification language stating that all of the physical deficiencies identified by HUD's inspection and the owner's physical survey have been repaired. In addition, the letters require that property owners' repair plans address all of the deficiencies uncovered by HUD's inspection and the owner's physical survey.

    Recommendation: To improve the effectiveness of the Department's process for ensuring that owners of properties in substandard condition correct all physical deficiencies and to ensure the accuracy of HUD's information on the status of repair work at these properties, the Secretary of Housing and Urban Development should improve compliance with procedures for following up on REAC's inspections by informing property owners that (1) certifications of repairs must explicitly state that all of the deficiencies identified by REAC's inspection and the owner's physical survey have been corrected and (2) repair plans should address all of the physical deficiencies identified by REAC's inspection and the owner's physical survey.

    Agency Affected: Department of Housing and Urban Development

  5. Status: Closed - Implemented

    Comments: On May 24, 2001, HUD issued guidance to its multifamily field offices that incorporates GAO's recommended improvements in the Department's inspection follow-up process. Among other things, the guidance contains specific requirements for property owners' certifications of repairs and repair plans, provides directions and options for verifying the completion of owners' repair work, and contains instructions for pursuing sanctions against owners who submit false certifications of repairs.

    Recommendation: To improve the effectiveness of the Department's process for ensuring that owners of properties in substandard condition correct all physical deficiencies and to ensure the accuracy of HUD's information on the status of repair work at these properties, the Secretary of Housing and Urban Development should issue guidance to the multifamily housing field offices that incorporates GAO's recommended improvements in HUD's inspection follow-up process, including specific requirements for owners' certifications of repairs and repair plans, on-site verification of repair work, and procedures for pursuing sanctions against owners who submit false certifications.

    Agency Affected: Department of Housing and Urban Development

 

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