Summary

Pursuant to a congressional request, GAO evaluated the Department of Housing and Urban Development's (HUD) procedures for controlling rents and management fees at multifamily housing projects.

As part of its oversight role in housing programs, HUD reviews and approves rent and management fee increases for multifamily rental housing projects. GAO found that inadequate controls resulted in excessive rents, higher management fees, and possible overpayment of HUD subsidies. Three HUD field offices processed or approved rent increases without receiving supporting documentation. Approved rents were overstated by about $510,000 at 17 projects, including overstatements of capital improvements, commercial income, expenses associated with providing rent-free apartments to management personnel, and calculation errors. GAO also found that: (1) capital improvements and commercial income were overstated because HUD personnel did not follow procedures; (2) current HUD instructions were unclear regarding the value of rent-free apartments; (3) in some cases, there was no evidence that supervisors reviewed the work of personnel who processed rent increases; (4) management fees were being approved under different criteria and rationales; and (5) field offices were not comparing the payment of management fees with approved fees. HUD is in the process of developing new procedures for the review of both rent increases and management fees.