Housing Authorities Are Leveraging Additional Funds

According to our analysis of HUD data, housing authorities expect to leverage, for every dollar received in HOPE VI revitalization grants awarded through fiscal year 2001, an additional $1.85 in funds from other sources. Our analysis of all mixed-finance proposals HUD approved through fiscal year 2001 indicates that 79 percent of the budgeted funds came from federal sources, when low-income housing tax credit funding was included. Leveraged Funds Comprise an Increasing Percentage of Funds Budgeted for Community and Supportive Services

Overall, housing authorities that received revitalization grants in fiscal years 1993 to 2001 have budgeted a total of about $714 million for community and supportive services—$418 million in HOPE VI funds (59 percent) and $295 million (41 percent) in leveraged funds. This policy, as specified in the Act, limits the amount of public housing funds, including HOPE VI funds, that housing authorities can spend to construct public housing units. HUD Has Not Complied with the Annual Reporting Requirement

HUD has been required to report leveraging and cost information annually to the Congress since 1998; however, it has not done so. Section 535 of the Quality Housing and Work Responsibility Act of 1998 requires HUD to submit an annual report to the Congress on the HOPE VI program. As provided by the Act, this annual report is to include, among other things, the cost of public housing units revitalized under the program and the amount and type of financial assistance provided under and in conjunction with the program. In June 2002, HUD submitted a report to the House and Senate appropriation committees as directed by House Conference Report 107- 272. It also includes some of the information required in the annual report, such as the extent of leveraging. However, neither HUD’s most recent budget justification nor its most recent performance and accountability report contains detailed information on leveraging or the cost of public housing units developed under the HOPE VI program. Recommendation for Executive Action

We recommend that the Secretary of Housing and Urban Development provide annual reports on the HOPE VI program to the Congress as required by law and include in these annual reports, among other things, information on the amounts and sources of funding used at HOPE VI sites, including equity raised from low-income housing tax credits, and the total cost of developing public housing units at HOPE VI sites, including the costs of items subject to HUD’s development cost limits and those that are not. Appendix I: Objectives, Scope, and Methodology

Our objectives were to describe the extent to which housing authorities with HOPE VI revitalization grants have (1) leveraged funds from other sources, particularly other federal sources; (2) leveraged funds specifically for community and supportive services; and (3) complied with HUD’s funding limits for developing public housing units and budgeted additional funds not subject to these limits. We also determined the extent to which HUD has reported cost information to the Congress. Moreover, we used this data to identify trends in the use of leveraged funds for supportive services. To determine the extent to which grantees have complied with HUD’s funding limits for developing public housing units and have budgeted additional funds not subject to these limits, we reviewed HUD’s total development cost policy and established what costs are subject to the policy and what costs are excluded.
Why GAO Did This Study

The Department of Housing and Urban Development (HUD) requested that we review the HOPE VI program. Because of the scope of the request, we agreed with the office of the Chairman, Senate Subcommittee on Housing and Transportation, Committee on Banking, Housing, and Urban Affairs, to provide the information in a series of reports. This first report focuses on the financing of HOPE VI developments. We describe the extent to which grantees have (1) leveraged funds from other sources, particularly other federal sources; (2) leveraged funds specifically for community and supportive services; and (3) complied with HUD's funding limits for developing public housing units and budgeted additional funds not subject to these limits. Because the Quality Housing and Work Responsibility Act of 1998 requires HUD to report HOPE VI cost information to Congress, we also discuss the extent to which HUD has complied with this requirement.

What GAO Found

Housing authorities expect to leverage, for every dollar received in HOPE VI revitalization grants awarded through fiscal year 2001, an additional $1.85 in funds from other sources. HUD considers this amount to be slightly higher because it treats as "leveraged" both (1) HOPE VI grant funds competitively awarded for the demolition of public housing units and (2) other public housing capital funds that the housing authorities would receive even in the absence of the revitalization grants. Our analysis of the mixed-finance proposals HUD approved through fiscal year 2001 indicates that, when low-income housing tax credit funding is included, 79 percent of the budgeted funds are from federal sources. The remainder of budgeted funds are from nonfederal sources, including private sources and state and local governments. Housing authorities that have received revitalization grants expect to leverage $295 million in additional funds for community and supportive services and have budgeted a total of about $714 million in HOPE VI revitalization grant funds and leveraged funds for community and supportive services. Leveraging for community and supportive services increased dramatically after 1997, when HUD instituted incentives to encourage this practice--from 22 percent in FY 1997 to 59 percent in FY 2001. Housing authorities have complied with HUD's total development cost policy when developing public housing units at HOPE VI sites. However, housing authorities have often budgeted additional funds that are not subject to the funding limits in the policy. HUD's policy applies only to the use of public housing funds, and it excludes some costs from counting against the limits. Although HUD has been required to report leveraging and cost information to Congress annually since 1998, it has not done so. Section 535 of the act requires HUD to submit an annual report to Congress on the HOPE VI program. This annual report is to include the cost of public housing units revitalized under the program and the amount and type of financial assistance provided under and in conjunction with the program. HUD has not issued these required annual reports to Congress. However, in June 2002, HUD submitted a report to the House and Senate appropriation committees as directed by House Conference Report 107-272. This report includes some of the information required in the annual report, such as the extent of leveraging. However, neither HUD's most recent budget justification nor its most recent performance and accountability report contains detailed information on the amount of leveraged funds or the cost of public housing units revitalized under the HOPE VI program.