Progress of Capital Improvements and Support Services Varies

Progress in completing capital improvements and implementing community and support services varies at HOPE VI sites. Although the rate of spending for capital improvements has increased, the vast majority of the grant funds have yet to be disbursed. HUD has established measures of performance for capital improvements and has begun to collect baseline data for use in measuring the results of community and support services. 3.) Starting with the grants awarded in fiscal year 1997, HUD changed the allocation for community and support services from up to 20 percent of the grant funds to up to $5,000 per unit. These sites have to overcome complex structural, social, and management challenges that require time to resolve. Legal issues and legislative and administrative changes to the program’s requirements have also added time to developments. The use of leveraged financing has also introduced time-consuming requirements for coordinating the different funding sources’ procedures and schedules. Financial Leveraging Is Expected to Increase

Even though leveraging is more complex than relying on grant funds alone, according to HUD’s data, the majority of the 81 HOPE VI sites funded to date are planning to mix public and private financing, primarily by combining low-income housing tax credits or loans from private lenders with the HOPE VI grants. 9). Although HUD has hired contractors to provide some additional oversight and recently decided to add 11 positions, the new staff will need time to become familiar with the program. In 1997, efforts to streamline HUD’s field structure left few employees in the field with knowledge of HOPE VI issues. In 1997, HUD hired outside contractors to help develop management systems and oversee the HOPE VI program. As requested, we reviewed (1) the progress in completing capital improvements and implementing community and support services at HOPE VI sites, (2) the primary reasons why progress at some HOPE VI sites has been slow, (3) the extent to which leveraging is planned to be used at HOPE VI sites, and (4) HUD’s capacity to oversee the program. Furthermore, during our site visits, we gathered additional information on capital improvements and community and support services. According to a HUD official, the total development costs were higher at Ellen Wilson than at most other HOPE VI sites. The housing authority plans to apply for future HOPE VI grants and leverage funds from private developers. Some progress is now being made at the new site. GAO Comments

1. 2. 4. 6.
Why GAO Did This Study

Pursuant to a legislative requirement, GAO reviewed the: (1) progress in completing capital improvements and implementing community and support services at HOPE VI sites; (2) primary reasons why progress at some HOPE VI sites has been slow; (3) extent to which financial leveraging is used at HOPE VI sites; and (4) Department of Housing and Urban Development's (HUD) capacity to oversee the program.

What GAO Found

GAO noted that: (1) progress in completing capital improvements and implementing community and support services varies at HOPE VI sites; (2) overall, the rate of spending on capital improvements is increasing, but the vast majority of the grant funds remain to be disbursed; (3) although housing authorities could spend up to 20 percent of the grant funds awarded in fiscal years 1993 through 1996 for community and support services to help residents find jobs and become self-sufficient, the average expenditure was about 12 percent; (4) to track the progress of capital improvements and community and support services, HUD has established measures of performance for capital improvements and has hired a contractor to collect baseline data on community and support services; (5) at the HOPE VI sites visited, progress in implementing capital improvements and community and support services has varied with structural, social, and management issues specific to each site; (6) legal issues covering the preparation of grant agreements, legislative and administrative changes in unit replacement and demolition policies, and limited HUD staffing have also delayed progress at HOPE VI sites; (7) more complex redevelopment plans have created major opposition among groups of residents at several sites and produced delays; (8) using HOPE VI grants to leverage funding from public and private sources has introduced time-consuming requirements for coordinating the different sources' procedures and schedules; (9) financial leveraging has increased over time, and this trend is expected to continue; (10) a 1998 HUD policy limiting a property's total development costs to industry averages is also expected to encourage leveraging; (11) because HOPE VI developments are more complex and costlier than most multi-family housing developments, the new policy will require the use of leveraging in the future; (12) reorganizing and downsizing have left HUD with fewer resources for overseeing HOPE VI grants; (13) streamlining has also left few employees in the field with knowledge of HOPE VI issues; (14) HUD has hired contractors to provide some additional oversight and has restored 11 positions to the HOPE VI program; and (15) although these additions will offset some of the staffing cuts, the new staff will need time to acquire expertise in the program.