The U.S. Department of Housing and Urban Development (“HUD”) touts its Home Investment Partnership Program (“HOME”) as “the largest Federal block grant to State and local governments designed exclusively to create affordable housing for low-income households.” Each year, HOME allocates roughly $3.2 billion to states and localities for a wide range of activities, from home purchase finance assistance to the construction of new housing. From its inception, HOME was intended to provide partnering jurisdictions with flexibility, and relatively few restrictions have traditionally been placed on the federal grants. Recently, however, this flexibility has proven to be one of the program’s greatest weaknesses.
In 2011, The Washington Post released the results of a yearlong investigation of the HOME program demonstrating widespread mismanagement of HOME funds by participating jurisdictions and a shocking lack of oversight by HUD. The Post’s original report revealed that of the 5,100 “major projects” funded through the HOME program at the time of the investigation, 700 had been “idling for years,” some for over a decade. In total, these idle projects represented $400 million of federal investment. The Post identified five major problems with the use of HOME funds for low income housing construction and renovation, including:
(1) funding awarded to inexperienced developers for shoddy work;
(2) funding awarded to developers without land, financing, or permits in hand;
(3) a failure of local and state housing agencies to cancel bad projects or keep HUD informed;
(4) HUD’s failure to impose additional requirements on participating jurisdictions despite knowing of the widespread problems, and
(5) HUD’s lack of authority to demand repayment from participating jurisdictions of wasted or mismanaged funds.
In November of 2011, the Post released an article adding 75 idle HOME-funded housing projects to the list of 700 discover earlier in the year. The newspaper also identified severe problems with HUD’s traditional method of tracking the success of the program. The Post’s reporting led to a Congressional probe and a cut in HOME funding for 2013 by nearly 38 percent, generating protests from housing groups across the country. HUD officials also vigorously denied the paper’s findings, although the department quickly began a process to introduce new, tighter regulations to oversee HOME program spending.
According to HUD, in addition to improving the department’s data collection and reporting system, the new regulations would:
(1) Require state and local governments to adopt policies and procedures to improve their oversight of projects, develop a system for assessing the relative risk of projects, and more closely monitor their HOME-funded sub-recipients;
(2) Require state and local governments to assess a developer’s capacity and the long-term viability of the project, before they commit HOME funds to a project;
(3) Require more frequent reporting by state and local ‘participating jurisdictions’ to enable HUD to more closely track projects once they’re under way; and
(4) Set a higher ‘performance bar’ by establishing specific timeframes for taking appropriate corrective actions against participating jurisdictions who fail to complete what they started.
A subsequent article in the Post called the monitoring required under the new rule “unprecedented,” and noted a number of additional requirements, including a four year limit on construction, after which a project will be automatically terminated. The proposed rule is significant in size, running nearly forty pages in the Federal Register. Public comments on the rule were due in February of 2012. If the rule is adopted by HUD, it should address many of the problems identified in the Post investigations and ensure that future federal dollars are more wisely spent in constructing and rehabilitating low-income housing.
Guest Contributor: Nick Dumais