Survey of Mortgage Insurance Program for Rehabilitation of Housing Projects, Boston Area Office, Region 1, FHA

Published by the Government Accountability Office on 1971-02-12.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                                ROOM     1903 JOHN    F KENNEDY     FEDERAL    BUILDING
                                                 GOVERNMENT       CENTER
                                       BOSTON,MASSACHU~~S                     02203

Dear     Mr.   Barry:

         iOe have surveyed            selected         aspects         of mortgage insurance      for
rehabilltatlon            of houszng          projects       at      the Housing   and Urban Development
(HUD) Area Office,               Boston,        Massachusetts.             The survey   concerned     the
HUD feasibility             determinations             whach       are designed    to assure    that
proposed       rehabllrtation            protects         are      economxcally    sound and that
lnspectlon        policxes        and practices            are      adequate.

          The results       of our survey              were discussed     with            the   Deputy Director
of     the HUD Area        Office  and are             summarized    below.

          1. In addition       to the basac purpose          of providing        decent,     safe,
and sanitary        housing    for families       of low and moderate          incomes,      the
rehabilitation         program    under the various         sections    of the National
Housxng Act is anmed at conserving                 or Improving      residential         neaghbor-
hoods.         The Boston drea Offxce         PIS approving      for rehabilxtatron          row
house properties          in blocks      that contain      many vacant      and dilapidated
structures.         It generally      does not require         that  a number of the row
house properties          be contiguous.

        We believe       there      are certaan         drawbacks     inherent       In thrs practice.
There     is no guarantee           that     other    properties      wnll be rebabllatated               through
other    housnng      programs        or by the private            owmers,      and therefore,        the
Lnvestment       in a given         block     may be eventually           lost.      There      is no
guarantee      that other          housing      programs      will   consider      rehabrlltatlon
as the best method            of xmproving           a block      and subsequently          may demolish
the structures.            Finally,        the cost for the rehabilitation                    of scattered
structures       is .not economical             and has been estimated             to cost from
$2 to $3 per square              foot more than projects              containing        a number of
contiguous       structures.

         The appearance          of an area 1s usually             governed        by the condition            of
the majority         of structures           it contazns.        Rehabilitation            of a small
number of structures               scattered      throughout       a neighborhood            where the
majority       of the housing is dilapidated,                   we believe,         will     result      m
a lesser       beneficial        effect      than rehabzlitating            a number of contiguous
row houses.           Bacausa of this,           we belleve      that     the Boston Area Office
should      consrder      requirang        sponsors     to ancfude a sufftcient                 number of
contiguous        row house or dwellxng              properties       when proposing            rehabrlltation
proJects.         Also,     the Boston Area Office              should      assist      project      sponsors
in collaboratnon      wxth loca% redevelopment    authorltaes    and local code
enforcement     departments   to acquxre the interspersed     properties   for

       While the Aeslstant    Director      of Technicah gervaces agreed with
our observations,     he beLaeved that stract adherence to this policy
1s mpractxcal     and would inhxbxt the development          of rehabilztated
housing unxts.     We bebmve that the potentmE           benefxlal      effects
are suff;bclent   to warrant the estabbasbment of specific           polzcy
guidance along these Lanes. Such a po%iey need not be excessively
rigid,   but it should be such that demmstrablle          results,    i.e.,
an mcrease m rehab&latatbon            proJests for contiguous     row houses,
does ensue.

       2.   A reviewof 2 rehabilitatLon    proJects disclosed     that   17
requests    for              changes h
                  construction             been su    tted    for approval
after the work had been performed.        he Multi    ily Rehabilltatron
Processing Guzde acovides that aspy work changes which affect          the
     truction    co      Lity of COnstrUCtPOn,       deral Housing
     ni8tratlcan         quirmeats,     or the co    tment condxixons,
       be approve         przor to the perbo        ce of the work involved.

      The Assastant Director    for TechnxaL Bervaces agreed that requests
fOK COIlStrra6tlOn Ch   es should and must be submitted to HUD for
approval   prior to t   atart of the work.    e have been mfomed     that
al% Bufl personnel concerned and generab contractors     have been advrsed
88 to the pmper approval     procedures for construction    changes.

       3. On 15 rehabibitated       propertxes,   programs or plans for
homemaker trainmg       of anhabitants     were nonexistent.       The MuLtifamly
Wehabilbtat~on     $rosessing   Guxde provndes that a reallstic         plan be
developed for residents       of rehabllxtated    properties     for provldxng
hommaker training       and other social and related human services.
A.fter we discussed this mattes with the h&SiStant ihrector              for
Technical   Services,    we were advxsed that a homemaker training
program would be developed for residents          of rehabilitated      propertaes.

       4, Required anma% physical     inspections    of completed rehabilitation
proJects generally   were not accomplished.       PLso, controbs for required
annual physical mspections    have not been implemented.          Ue reviewed the
rnspectlon  fales for 21 compfeted rehabllatatron       projects     and noted that
8 fl%es d-&d not contain the required     annual mspectxon       report.    For 2
other proJects p a lapse of 19 months occurred smce the last rnspectlon.
**-   --.

                  The Assastant Director    for Technical     Services advised that
            scheduling   lnspectrons  are done by the Property Management Section
            and that 1x1 the past, mspectlons       have been performed,        as requested,
            by Technical    Service’s Inspectors.     He further     advised that In view
            of the present staff limitations       and workload,     conslderatlon     might
            be given to having lnspectaons       made by Property Management Section

                   5. In the past, formal appraisals      of properties      had been obtained
            and documented in the proJect files       but current   regulations    do not
            contain this requirement.     We believe,    however, that the I?rodect
            Income Analysis and Apprazsal,     FHA Form 2264, should contain a notation
            that the ‘“as lsg* value of acquired property      did not exceed the fair
            market value as determaned by studies of comparable properties.
            We also believe   that support for such determinations         should be retained.

                  The Assistant    Director   for Technl;caL Services advised that
            appropriate    comments will be included in the future on the l3U
            Form 2264 and that support for such comments will be included          in
            the data files    contalnrng    comparable sales lnformatlon.

                   6. For 5 of 12 completed rehabalitation                   projects   reviewed,
            the Statements of Profit                and Loss, FHA Form 2410, were m~sbng
            for one or more fiscal             years 11967 and 19681. Also, the 12 selected
            rehabllltation         project      files did not contarn Income and Operating
            Expense Analysis,           FIL& Form 2558, with current          expense data.     The
            FHA Manual provides            that the Form 2410 1s to be submitted by
            sponsors mthrn 60 days followzng                   the cLose of the proJects fiscal
            year.      Insuring     office     directors     are responsible     for endeavoring
            to obtain financial            statements on a timely basis and for es?%blrshing
            appropriate       follow-up       procedures     to assure receipt      of the data.
            Form 2558 1s to be updated with current                  income and expense data
            within     90 days after the end of each prolect                fzscaL year.      These
            matters were discussed with the Director,                   Housing Management and
            Tenant Services Branch.                 He stated that action would be taken to
            comply mth the FEiA Manual requrrements.

                 We wish to acknowledge the cooperation  given our representatives
            by the Area Office personnel during this survey.   We will appreczate
            your comments as to the final action taken on the above matters.

      Copies of this letter  are being sent to the Assistant  Secretary
for Administration   and to t&e Assistant Secretary for Housing
Product%on and Mortgage Credit,

                                           Sincerely   yours,

Mr. James J. Barry
Regional Administrator
Department of Housing and Urban Development,     Region   I
Room 800, John F. Kennedy Federal Bulldlng
Boston, Massachusetts 02203