Summary

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.

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.

Recommendations

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

Recommendations for Executive Action