Today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, released a statement on a new Government Accountability Office (GAO) report titled, “Rental Assistance Demonstration: HUD Needs to Take Action to Improve Metrics and Ongoing Oversight” (GAO-18-123). The GAO report was requested in 2015 by Ranking Member Waters to review the first component of the Rental Assistance Demonstration (RAD) – a voluntary demonstration program at the U.S. Department of Housing and Urban Development (HUD) that allows for the conversion of public housing to the Section 8 housing platform, often with new private ownership replacing the traditionally publicly-owned model.
Despite numerous questions and concerns raised by Members of Congress and housing advocates, Congress has dramatically expanded the number of public housing units that can be converted under the demonstration program in recent years.
Ranking Member Waters called on the GAO to investigate her longstanding concerns about RAD’s potential impact on tenants and the long-term affordability of the units.
The GAO found that HUD has failed to fully assess the impact of the program on tenants, misreported the program’s amount of private sector investment, and neglected to fulfill its commitment to develop policies and procedures to ensure long-term affordability of housing after conversion.
“Public housing is critical to the lives of low-income Americans, including seniors, veterans, people with disabilities, and families with children,” said Ranking Member Waters.
“Importantly, this vital resource is publicly owned and must remain affordable. I have long expressed concerns that the conversion of public housing, under RAD, will risk the long-term affordability of this important housing resource and this GAO report serves as confirmation that RAD is in desperate need of reform.
“The failures GAO has identified in this program must be addressed. I stand ready to engage in a meaningful dialogue with my colleagues in Congress about a more appropriate and resident-centered approach to revitalizing public housing.”
The GAO report found that:
- Despite RAD’s potential to have serious, negative impacts on tenants (such as changes in rent or relocation), HUD is failing to adequately track these impacts and monitor potential violations of resident rights under relevant statutes and HUD policies. In particular, HUD cannot provide a complete picture of the status of existing residents pre-and post-RAD conversion due to complications with HUD’s databases, which are “not designed to track the impact of RAD conversion on residents.” As a result, the GAO could not determine, for example, why over 10,000 RAD residents saw rent increases post-conversion. HUD has indicated that they will instead rely upon resident logs maintained locally by housing authorities and owners to track the status of residents, but HUD has no clear process in place for reviewing these logs to ensure compliance with program rules and to better understand the impacts to residents. Without a comprehensive review of household information and procedures for fully monitoring compliance with resident rights, the GAO concluded that HUD cannot fully assess the effects of RAD on residents.
- The RAD authorizing legislation and the program’s contracts with property owners contain provisions intended to ensure long-term affordability of the units, but the strengths of those provisions are unknown, and HUD does not have procedures in place to address those risks. HUD officials stated that the agency intends to develop procedures to identify and respond to potential risks to long-term affordability, including default or foreclosure in RAD properties. However, HUD has not yet done so. This means that since September 2017, nearly 75,000 units of public housing have been converted through RAD with no clear plan from HUD on how to ensure those properties maintain long-term affordability.
- HUD has been inflating RAD’s private-sector leveraging -- the share of private versus public funding for construction or rehabilitation of assisted housing -- with GAO concluding that very little private funding is in fact going into these deals. The law requires that HUD report the amount of private sector investment in RAD deals. However, HUD’s leverage ratio counts some public sources of funding as leveraged private-sector investment. It also uses data from early in the conversion process instead of final (post-completion) data. As a result of these methodological inaccuracies, HUD recently reported a private leverage ratio of 19:1, while the GAO calculated a more accurate ratio of 1.23:1. In other words, while RAD has been touted as a solution to public housing revitalization needs through private investment, the demonstration program is more accurately putting increased pressure on existing public resources that are already oversubscribed. Additionally, these public sources of funding, including the Low Income Housing Tax Credit, are often more expensive to administer than simply funding the public housing program through the annual appropriations process, as Congress originally intended.
The GAO has made five recommendations to HUD, intended to improve leveraging metrics, monitoring of the use and enforcement of resident safeguards, and compliance with RAD requirements.
To view the full report, click here.