1 for a breakdown by fiscal year). Such conversions  allow PHAs to better position themselves to access additional capital to  address future rehabilitation or construction plans. HUD’s Metric for Financial Outcomes—the RAD Leverage Ratio—May Not Be Accurately Calculated, Partly because Final (Postcompletion) Financial Information Is Not Used

			The RAD Leverage Ratio Does Not Reflect the Amount of Private-Sector Leveraging

The RAD authorizing statute requires HUD to assess and publish findings  regarding the amount of private capital leveraged as a result RAD  conversions. HUD uses  various quantitative, qualitative, and processing and efficiency metrics to  measure conversion outcomes. Recalculation of private-sector leveraging. HUD Has Not Systematically Analyzed Household- Level Data on Residents in RAD Conversions or Monitored Implementation of Some Resident Safeguards

HUD has not systematically tracked or analyzed household data on  residents in RAD-converted units that are available from its public  housing or Section 8 databases or from PHAs or other postconversion  owners—the main sources of resident data for the RAD program. HUD officials told us they are developing procedures  for performing compliance reviews—such as developing a mechanism to  review a sample of logs on a periodic basis—but they have not yet done  so because they have been focusing on developing procedures for  activities that present a high risk to the program as described in the  following section. Standards for Internal Control in the Federal  Government require agencies to use quality information to achieve their  objectives, and obtain and evaluate relevant and reliable data in a timely  manner for use in effective monitoring. Without a comprehensive review of household information—one based  on information in HUD data systems as well as resident logs—HUD  cannot reasonably assess the effects of ongoing and completed RAD  conversions on residents and compliance with resident safeguards, as  discussed in the next section. HUD Has Been Developing Procedures to Monitor Some RAD Resident Safeguards

HUD has not yet developed monitoring procedures for certain resident  safeguards under the RAD program. For example, owners must  certify the number of residents who exercised their right to return to a  converted property compared with the number of residents who did not  return. In each RAD conversion, HUD and the property owner execute a use  agreement, which specifies affordability and use restrictions for the  property. According to HUD officials, as of  October 2017 no RAD properties had entered foreclosure. HUD Does Not Have Procedures in Place to Identify and Respond to Preservation Risks

HUD has not yet developed procedures to monitor RAD projects for risks  to long-term affordability of units, including default or foreclosure. According to Standards for Internal Control in the Federal Government,  agencies should design procedures to achieve goals and objectives, such  as the preservation of unit affordability, and respond to risks, in this case  the risk of default or foreclosure or noncompliance with program  requirements. Furthermore, without such monitoring HUD would be limited in its ability  to identify and assist with properties at risk of foreclosure. Conclusions

RAD was created to demonstrate the feasibility of converting public  housing units to other rental assistance programs to help preserve  affordable rental units and address the significant backlog of capital  needs in the public housing program. HUD has an opportunity  to improve the demonstration’s metrics. In its comment letter, HUD stated that it agreed with our findings that  HUD can improve metrics used to assess program impact and build on  existing oversight structures. HUD described actions it intends to take to  implement our recommendations to the extent possible and consistent  with resource limitations. More specifically, this report addresses (1) HUD’s assessment of the  physical and financial outcomes of RAD conversion to date; (2) how RAD  conversions affected residents and what safeguards were in place to  protect them, including while temporarily relocated and during conversion;  (3) what challenges, if any, public housing agencies (PHA) faced in  implementing RAD; and (4) the extent to which RAD provisions are  designed to help preserve the long-term affordability of units. Council of Large Public Housing Authorities  2. Public Housing Authorities Directors Association  5. To describe safeguards for  residents and help ascertain how HUD implemented protections, we  reviewed legal protections and requirements in HUD notices, reviewed  selected conversion files, and interviewed HUD officials about monitoring  and compliance processes. Appendix II: HUD’s Reported Leverage Ratios and Our Recalculation Estimates

The Department of Housing and Urban Development’s (HUD) Office of  Recapitalization collects financial sources and use data from Rental  Assistance Demonstration (RAD) participants. GAO examines the use of public  funds; evaluates federal programs and policies; and provides analyses,  recommendations, and other assistance to help Congress make informed  oversight, policy, and funding decisions.
Why GAO Did This Study

HUD administers the Public Housing program, which provides federally assisted rental units to low-income households through PHAs. In 2010, HUD estimated its aging public housing stock had $25.6 billion in unmet capital needs. To help address these needs, the RAD program was authorized in fiscal year 2012. RAD allows PHAs to move (convert) properties in the public housing program to Section 8 rental assistance programs, and retain property ownership or transfer it to other entities. The conversion enables PHAs to access additional funding, including investor equity, generally not available for public housing properties.
GAO was asked to review public housing conversions under RAD and any impact on residents. This report addresses, among other objectives, HUD's (1) assessment of conversion outcomes; (2) oversight of resident safeguards; and (3) provisions to help preserve the long-term affordability of units. GAO analyzed data on RAD conversions through fiscal year 2017; reviewed a sample of randomly selected, nongeneralizable RAD property files; and interviewed HUD officials, PHAs, developers, academics, and affected residents.

What GAO Found

The Department of Housing and Urban Development (HUD) put procedures in place to evaluate and monitor the impact of conversion of public housing properties under the Rental Assistance Demonstration (RAD) program. RAD's authorizing legislation requires HUD to assess and publish findings about the amount of private-sector leveraging. HUD uses a variety of metrics to measure conversion outcomes. But, the metric HUD uses to measure private-sector leveraging—the share of private versus public funding for construction or rehabilitation of assisted housing—has limitations. For example, HUD's leveraging ratio counts some public resources as leveraged private-sector investment and does not use final (post-completion) data. As a result, HUD's ability to accurately assess private-sector leveraging is limited.
HUD does not systematically use its data systems to track effects of RAD conversions on resident households (such as changes in rent and income, or relocation) or monitor use of all resident safeguards. Rather, since 2016, HUD has required public housing agencies (PHA) or other post-conversion owners to maintain resident logs and collect such information. But the resident logs do not contain historical program information. HUD has not developed a process for systematically reviewing information from its data systems and resident logs on an ongoing basis. HUD has been developing procedures to monitor compliance with some resident safeguards—such as the right to return to a converted property—and begun a limited review of compliance with these safeguards. However, HUD has not yet developed a process for monitoring other safeguards—such as access to other housing voucher options. Federal internal control standards require agencies to use quality information to achieve objectives, and obtain and evaluate relevant and reliable data in a timely manner for use in effective monitoring. Without a comprehensive review of household information and procedures for fully monitoring all resident safeguards, HUD cannot fully assess the effects of RAD on residents.
RAD authorizing legislation and the program's use agreements (contracts with property owners) contain provisions intended to help ensure the long-term availability of affordable units, but the provisions have not been tested in situations such as foreclosure. For example, use agreements between HUD and property owners specify affordability and use restrictions that according to the contract would survive a default or foreclosure. HUD officials stated that HUD intends to develop procedures to identify and respond to risks to long-term affordability, including default or foreclosure in RAD properties. However, HUD has not yet done so. According to federal internal control standards, agencies should identify, analyze, and respond to risks related to achieving goals and objectives. Procedures that address oversight of affordability requirements would better position HUD to help ensure RAD conversions comply with program requirements, detect potential foreclosure and other risks, and take corrective actions.

What GAO Recommends

GAO makes five recommendations to HUD intended to improve leveraging metrics, monitoring of the use and enforcement of resident safeguards, and compliance with RAD requirements. HUD agreed with our recommendations to improve metrics and build on existing oversight.