HUD Single-Family Property Disposal Practices for Properties Transferred to Cities at Less-Than-Market Values or Small Dollar Amounts

GAO reported on the results of a survey of Department of Housing and Urban Development (HUD) single-family property disposal programs. Under these programs, properties are transferred, at less-than-market values or small dollar amounts, to cities. HUD anticipated that a substantial portion of the transferred properties would be used to provide needed housing for low- and moderate-income families. The program management in the city of Chicago was of particular interest.

Both HUD and Chicago housing officials acknowleged problems with past practices of selling large numbers of single-family properties, at less-than-market values or small dollar amounts, to not-for-profit corporations. The city was selling property without assuring that the corporations had sufficient capability to rehabilitate and resell the projects. This resulted in delays in getting rehabilitated projects back on the market or could have resulted in windfall profits and speculation. The officials believe that recent decreases in the number of properties transferred and new procedures for screening not-for-profit corporations have reduced the potential for speculation and other problems. The Chicago housing authority will review all not-for-profit corporation charters to ensure legality and authority to participate in housing and real estate activities under local and state laws. In addition, not-for-profit corporations will be allowed to obtain only five properties at one time, and property titles will be held in a trust until the properties are rehabilitated and inspected. Although HUD has not recently transferred many single-family properties under these programs to other cities, HUD is going to advise its area offices and local communities of the problems that have occurred in the past to avoid problems in the future. In addition, HUD has recently terminated one of its programs to transfer single-family properties to cities.