Single-Family Housing

The Department of Housing and Urban Development (HUD) lacks an adequate system to assess oversight of real estate asset management contractors, and the three HUD field offices GAO visited varied greatly in their efforts to monitor these contractors' performance. None of the offices adequately performed all of the functions needed to ensure that the contractors met their obligations to maintain and protect HUD-owned properties. GAO's physical inspection of properties for which the contractors in each location were responsible identified serious problems, including vandalism, deficient maintenance, and safety hazards. These conditions may decrease the marketability of HUD properties; decrease the value of surrounding homes; increase HUD's holding costs; and, in some cases, threaten the health and safety of neighbors and potential buyers. As part of HUD's effort to reduce its staff by 29 percent (from 10,500 to 7,500) by the year 2002, HUD's single-family property disposition operations, including the real estate asset management function, are in a state of transition. Among other things, HUD plans to (1) reduce property disposition staff and consolidate all field offices' single-family housing operations into four homeownership centers and (2) sell the rights to properties before they are assigned to HUD's property disposition inventory so that they can be disposed of quickly once they are available. Although HUD anticipates that these changes will limit the need for real estate asset management contractors' services, there will continue to be properties in need of such services, even if on a smaller scale. As a result, HUD oversight of these contractors will continue to be important.

GAO noted that: (1) HUD does not have an adequate system in place to assess oversight of real estate asset management contractors, and the three HUD field offices that GAO visited varied greatly in their efforts to monitor these contractors' performance; (2) none of the offices adequately performed all of the functions needed to ensure that the contractors meet their contractual obligations to maintain and protect HUD-owned properties; (3) GAO's physical inspection of properties for which the contractors in each location were responsible identified serious problems, including vandalism, maintenance problems, and safety hazards; (4) these included such things as broken windows, graffiti, leaking roofs, and broken steps; (5) these conditions may decrease the marketability of HUD's properties; decrease the value of surrounding homes; increase HUD's holding costs; and, in some cases, threaten the health and safety of neighbors and potential buyers; (6) in connection with HUD's plans to reduce staff by about 29 percent by the year 2002, HUD's single-family property disposition operations, including the real estate asset management function, are in a period of transition; (7) these changes are closely linked to HUD's agencywide 2020 Management Reform Plan; (8) they include: (a) a reduction in property disposition staff and the consolidation of all field offices' single-family housing operations into four homeownership centers; (b) plans to sell the rights to properties before they are assigned to HUD's property disposition inventory so that they can be quickly disposed of once they become available; and (c) to some degree, the use of contracts similar to a pilot program started in September 1996 to test the approach of contracting out all marketing and management functions associated with acquired properties; and (9) while HUD envisions that these changes will eventually limit the need for real estate asset management contractors' services, there will continue to be properties in need of such services for the foreseeable future, even if on a smaller scale.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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