Public Housing:

HUD Has Several Opportunities to Promote Private Management

RCED-99-210: Published: Jul 26, 1999. Publicly Released: Jul 26, 1999.

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Pursuant to a congressional request, GAO reviewed the use of private contractors in the public housing industry, focusing on: (1) the basis for the Office of Management and Budget's (OMB) 1998 assertion that privatizing public housing management could save $200 million annually; (2) the basis for housing practitioners' and experts' belief that adopting private management for public housing could lead to the more cost-effective use of public housing resources; (3) the extent to which housing authorities have adopted private management strategies, the experiences they have had in implementing these strategies, and the primary obstacles they have encountered in adopting private management; and (4) whether opportunities exist for the Department of Housing and Urban Development (HUD) to encourage housing authorities to make more cost-effective use of their resources by considering private management as an alternative to in-house management.

GAO noted that: (1) OMB does not have quantitative support for its assertion that allowing the private sector to bid on contracts for managing all 3,200 public housing authorities could save as much as $200 million annually; (2) however, OMB staff, private management firms, and several housing authorities told GAO that they believe private management could achieve significant savings; (3) OMB staff believe that a more cost-effective use of public housing resources could be achieved by establishing measurable performance standards and by privatizing the management of housing developments or authorities that do not meet the standards; (4) most housing authorities employ contractors to provide at least some services or perform tasks such as grounds-keeping and maintenance; (5) however, only about 18 percent of the very large and large and only a handful of the medium-sized, small, and very small housing authorities GAO surveyed have contracted with private property managers to operate entire developments; (6) for the most part, private management has increased rental revenues, operating efficiencies, and the quality of housing services; (7) before implementing private management, housing authorities have had to overcome a number of obstacles, including their historical reliance on in-house management and on centralized--rather than project-based--budgeting and accounting systems, the possibility that contractors would displace their employees, and the fears of residents about changes in their quality of life under private management; (8) HUD had multiple opportunities to encourage the more cost-effective use of public housing resources through strategies such as private management; (9) over the next few months, HUD will have occasions to encourage housing authorities to adopt cost-conscious operating strategies, including private management, as the Department develops regulations to implement public housing reform legislation enacted in 1998 and as it introduces its new public housing assessment system; (10) HUD has begun to develop outcome and output indicators for its annual performance plan that would allow it to measure whether housing authorities are adopting cost-conscious management approaches; and (11) in total, these activities would indicate to housing authorities that HUD considers the cost-effective use of resources a high priority and supports the authorities' adoption of new strategies, such as private management, to lower costs and improve quality.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In September 2000, HUD added a link for private management on the Public and Indian Housing home page. The link takes a web user directly to HUD's 1997 guidebook on private management, to a new chat room on the topic, and to HUD's best practices and technical assistance site. HUD also added a link that takes a web user interested in learning more about private management directly to GAO's July 1999 private management report.

    Recommendation: To implement provisions of the Quality Housing and Work Responsibility Act of 1998, clarify the Department's position on private management, and foster the cost-effective use of federal resources, the Secretary of Housing and Urban Development should make the 1997 guidebook on private management more readily accessible on HUD's Internet Web site and expand the site to include additional information, such as a resource bank of important private management documents, best practices, and pertinent experiences, that housing authorities can share.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: HUD added an optional asset management table for use by public housing authorities in completing required annual and five-year plans. The purpose of the annual and five-year plans is to require housing authorities to examine their existing operations and needs and to design short- and long-range strategies to address those needs. A 1999 HUD Public and Indian Housing (PIH) notice states that the table is not mandatory, but that using the table to list development specific activities such as capital improvements, demolition, and homeownership plans would be less burdensome than including the information under each element. HUD also published a proposed rule on consortia of public housing agencies and joint ventures in September 1999. The final rule was published on November 29, 2000, however, it does not specify how small Public Housing Authority's can achieve efficiencies. A Harvard study is looking into the elements involved in managing and operating a well run public housing authority.

    Recommendation: To implement provisions of the Quality Housing and Work Responsibility Act of 1998, clarify the Department's position on private management, and foster the cost-effective use of federal resources, the Secretary of Housing and Urban Development should ensure that the regulations HUD develops to implement provisions of the 1998 public housing reform legislation: (1) encourage housing authorities through their planning process to consider and adopt asset management principles, including project-based budgeting and accounting; (2) encourage small housing authorities to look for opportunities to achieve efficiencies by forming consortia or joint ventures that could include third parties; and (3) provide incentives for housing authorities to make more cost-effective use of their resources.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Not Implemented

    Comments: In a September 9, 1999 letter to GAO, HUD stated that it does not plan to develop specific outcome/output indicators. HUD believes that the new Public Housing Assessment System will allow HUD to evaluate housing authorities' financial performance.

    Recommendation: To implement provisions of the Quality Housing and Work Responsibility Act of 1998, clarify the Department's position on private management, and foster the cost-effective use of federal resources, the Secretary of Housing and Urban Development should develop outcome and output indicators in the Department's annual performance plan that can be used to measure whether housing authorities are adopting cost-conscious management approaches.

    Agency Affected: Department of Housing and Urban Development

 

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