HUD Should Improve Its Management of Acquired, Formerly Subsidized Multifamily Projects

Gao ID: CED-80-31 December 19, 1979

The Department of Housing and Urban Development (HUD) has changed the way it charges rent at, and sells, its inventory of formerly subsidized multifamily housing projects. It charges lower income tenants no more than 25 percent of their income for rent in HUD-owned projects. It then provides rental assistance after the projects are sold. The changes have resulted in substantial additional costs to the Government.

Losses incurred during the operation of acquired, formerly subsidized projects were not separately accounted for by HUD. As a result, useful information on cost was not readily available. Operating costs at these projects was relatively high compared to other multifamily projects because HUD lacked the financial information necessary to control costs, had no cost standards for personnel to use to evaluate the reasonableness of costs, and did not adequately monitor operations. Project managers failed to verify tenant incomes. Underreporting of income often went undetected because the project managers often had no means to identify unreported income and had little incentive to accurately verify incomes because of the way HUD set management fees. HUD had not adequately monitored certifications and verifications.


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