Housing for the Elderly:

HUD's Cost Containment Program Could Be More Effective

RCED-86-106: Published: Sep 9, 1986. Publicly Released: Oct 9, 1986.

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In response to a congressional request, GAO: (1) reviewed the effectiveness of the Department of Housing and Urban Development's (HUD) initiatives to control elderly housing program costs; (2) assessed whether additional opportunities existed for further cost control; and (3) identified the beneficiaries of the program.

GAO found that: (1) HUD projects, under its cost-containment initiatives, were more modest and had 16-percent lower average unit costs than projects built before HUD implemented the initiatives; (2) HUD would have needed $100 million more to fund the housing units in 1985 if it had not reduced its costs; (3) HUD could have further reduced its costs by requiring that the supplemental cost-containment provisions be applied to all projects, selecting projects with the most modest designs, and increasing the number of less-costly efficiency units in projects; and (4) the majority of the program beneficiaries were individuals who were single and who had very low incomes.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: HUD disagreed with this recommendation and GAO discussions have not changed its opinion. HUD believes that it can meet the intent of this recommendation through normal on-site field office reviews, which GAO considered in the report, but pointed out that they were too infrequent to ensure consistency in its cost containment program.

    Recommendation: To provide greater consistency in the application of cost containment, the Secretary, HUD, should select a sample of projects for compliance review from each of its field offices.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: HUD stated that it reexamined its policy of allowing waivers to its efficiency requirement and believes that the requirement should be continued. HUD believes that it needs the flexibility to waive efficiencies, if in certain market areas efficiencies are difficult to rent. The GAO position is that HUD should be evaluating whether such market areas have a genuine need for subsidized housing.

    Recommendation: The Secretary, HUD, should reexamine whether the HUD policy of allowing waivers to its efficiency requirement should be continued.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Not Implemented

    Comments: HUD disagreed with this recommendation, stating that it believes that basing unit rent on actual construction costs could lead to inflated rents. GAO continues to believe that this recommendation is sound and it would improve the financial feasibility and marketability of efficiencies.

    Recommendation: To further control and reduce the cost of the section 202/8 program, the Secretary, HUD, should adjust rents for efficiencies to make these units more financially feasible for sponsors to construct and operate.

    Agency Affected: Department of Housing and Urban Development

  4. Status: Closed - Not Implemented

    Comments: HUD agreed that consideration of cost is extremely important, but did not support the recommended two-tiered approach. HUD cited several presumed negative site effects of a two-tiered approach, none of which GAO found convincing to dissuade GAO from this recommendation.

    Recommendation: To further control and reduce the cost of the section 202/8 program, the Secretary, HUD, should change the project selection process to give greater consideration to costs. Specifically, HUD should elevate the importance of cost-modest design in project selection by utilizing a two-tiered approach, whereby projects found acceptable in tier one on the basis of such factors as financial or operational capacities would compete for selection in tier two on the basis of modest design and project site cost, commensurate with area needs.

    Agency Affected: Department of Housing and Urban Development

 

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