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 rehabilltatlon. 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 engineers. 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. -3- 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
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)