Single-Family Housing:

Stronger Measures Needed to Encourage Better Performance by Management and Marketing Contractors

RCED-00-117: Published: May 12, 2000. Publicly Released: May 16, 2000.

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Stanley J. Czerwinski
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Pursuant to a congressional request, GAO provided information on the Department of Housing and Urban Development's (HUD) management and marketing contracts of single-family housing, focusing on HUD's: (1) experience with the contractors who manage and market these properties; and (2) progress in reducing its single-family property inventory.

GAO noted that: (1) the central focus of HUD's management and marketing contracts is on getting properties sold; (2) in response, contractors have been increasingly aggressive at selling properties by using the Internet and other mechanisms to publicize the properties; (3) however, HUD has experienced problems with these contractors on a number of fronts; (4) since the contracts became effective in April 1999, 6 of the 7 contractors have had significant problems with carrying out their responsibilities particularly in regard to securing and properly maintaining the properties assigned to them; (5) for example, Intown Management Group, which had 7 of the 16 contracts involving about 40 percent of the properties, had problems with meeting almost all of HUD's performance requirements; (6) after trying unsuccessfully to secure better performance from Intown, HUD terminated all seven of the firm's contracts; (7) HUD selected three replacement contractors from among the remaining firms to absorb most of Intown's workload; (8) however, two of the three contractors that HUD selected were already having performance problems under their existing contracts; (9) HUD staff have limited contractor incentives or tools available--short of terminating contracts--to enforce contractors' compliance and improve performance; (10) HUD's inventory of acquired single-family properties at the end of fiscal year (FY) 1999 was 32 percent higher than it was a year earlier and over 100 percent higher than it was at the end of FY 1996; (11) HUD's new management and marketing contractors increased the total number of properties sold from the inventory during FY 1999, and the total number of properties in the inventory has now begun to decline; (12) however, the contractors have made relatively little progress disposing of older properties--properties in the inventory 6 months or longer; (13) in fact, as of February 2000, about 20,000 of HUD's properties were in the inventory 6 months or longer--up from 13,000 properties in April 1999, the first month of the contracts; and (14) while HUD encourages contractors to sell properties quickly, it does not provide incentives for the contractors to focus on properties that have been in the inventory for a long period of time.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: HUD substantially changed its methodology for evaluating management and marketing contractor performance. Its new methodology does not provide for penalties directly tied to performance in reducing the aged property inventory. However, its system for scoring contractor performance reduces the contractor's score where more than five percent of the properties have been in inventory over 12 months. This approach gives greater visibility to the contractor's efforts to sell aged properties and thus provides an incentive for the contractor to address sales of its aged property inventory.

    Recommendation: To improve the effectiveness of HUD's property disposition program, the Secretary of Housing and Urban Development should direct the Assistant Secretary for Housing-Federal Housing Commissioner to develop more effective methods, such as specific incentives or penalties, to encourage contractors to reduce the number of properties that are in the inventory longer than 6 months.

    Agency Affected: Department of Housing and Urban Development


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