Elderly Housing:

Project Funding and Other Factors Delay Assistance to Needy Households

GAO-03-512: Published: May 30, 2003. Publicly Released: Jun 17, 2003.

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According to the Department of Housing and Urban Development (HUD), the most widespread and urgent housing problem facing elderly households is affordability. About 3.3 million elderly renter households in the United States have very low incomes (50 percent or less of median area income). The Section 202 Supportive Housing for the Elderly Program provides capital advances (grants) to nonprofit organizations to develop affordable rental housing exclusively for these households. GAO was asked to determine the role of the Section 202 program in addressing the need for affordable elderly housing and the factors affecting the timeliness of approving and constructing new projects.

HUD's Section 202 program provides a valuable housing resource for very low income elderly households. Although they represent a small share of all elderly households, very low income elderly renters have acute housing affordability problems because of their limited income and the need for supportive services. The Section 202 program, which offers about 260,000 rental units nationwide and ensures that residents receive rental assistance and access to services that promote independent living, is the only federal program devoted exclusively to providing this type of housing. However, even with the program's exclusive focus, Section 202 has reached only about an estimated 8 percent of very low income elderly households. About three-quarters of Section 202 projects in GAO's analysis did not meet HUD's time guideline for gaining approval to start construction. These delays held up the delivery of housing assistance to needy elderly households by nearly a year compared with projects that met HUD's guideline. Several factors contributed to these delays, in particular capital advances that were not sufficient to cover development costs. Project sponsors reported that insufficient capital advances often forced them to spend time seeking additional funds from HUD and other sources. Although HUD's policy is to provide sufficient funding to cover the cost of constructing a modestly designed project, HUD has acknowledged that its capital advances for the Section 202 program sometimes fall short. Other factors affecting the timeliness of the approval process include inadequate training and guidance for field staff responsible for the approval process, inexperienced project sponsors, and local zoning and permit requirements.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The Director stated that Office of Housing Assistance and Grants Administration officials continue to seek the staff resources to update the handbook before staff with program expertise retire, but it does not look like they will be able to do so in the foreseeable future.

    Recommendation: In addition, to improve the performance of HUD field office and headquarters staff in processing projects in a timely manner, HUD should update its handbook to current processing procedures.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Not Implemented

    Comments: The Director stated that while he agreed that additional training for field office staff would be beneficial, but after multiple years of requesting funding, he has not received it. He does not expect to implement this recommendation in the foreseeable future.

    Recommendation: In addition, to improve the performance of HUD field office and headquarters staff in processing projects in a timely manner, HUD should provide regular training to ensure that all field office staff are knowledgeable of and held accountable for following current processing procedures.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Implemented

    Comments: Based on the results of an internal HUD study that recommended using other measures of construction costs, HUD decided to use the statutory high cost standards and the cost limits the Department established for the Section 221d3 Mortgage Insurance Program. The cost standard and limits for the 221d3 program allow for higher construction costs than those under other mortgage insurance programs. Further, the 221d3 standard will be changed by a percentage each year, based on the the Consumer Price Index.

    Recommendation: To reduce the time required for projects to receive approval to start construction, the Secretary of Housing and Urban Development should direct the Assistant Secretary of Housing to make any necessary changes to these methods, based on this evaluation, so that capital advances adequately cover the development costs of Section 202 projects consistent with HUD's project design and cost standards.

    Agency Affected: Department of Housing and Urban Development

  4. Status: Closed - Implemented

    Comments: HUD commissioned a study of Section 202 development costs to address concerns about the current methods of calculating capital advances. The study, which was completed in April 2005, confirmed GAO's finding that current calculation methods force many projects to seek additional funding and recommended a new model for calculating capital advance amounts.

    Recommendation: To reduce the time required for projects to receive approval to start construction, the Secretary of Housing and Urban Development should direct the Assistant Secretary for Housing to evaluate the effectiveness of the current methods for calculating capital advances.

    Agency Affected: Department of Housing and Urban Development

  5. Status: Closed - Implemented

    Comments: Office of Housing Assistance and Grants Administration hired a new contractor to manage the Development Application Processing (DAP) system and a staff analyst to improve the completeness and accuracy of project processing data entered in DAP. Headquarters officials now consider the data to be reliable for tracking the status and timeliness of projects. GAO verified that the April 2006 report's data on projects from two field offices were accurate. Although DAP's capacity to track processing stages has not expanded, the usefulness of the system for overseeing project timeliness has improved.

    Recommendation: In addition, to improve the performance of HUD field office and headquarters staff in processing projects in a timely manner, HUD should improve the accuracy and completeness of information entered in the Development Application Processing system by field office staff and expand the system's capabilities to track key project processing stages.

    Agency Affected: Department of Housing and Urban Development

 

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