Revision of HUD Guidelines

Published by the Government Accountability Office on 1971-07-09.

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


                                 UNITED STATES GENERAL ACCOUNTING QFFICE
                                           WASHINGTON,   D C   20548

                                                                                   Jul. 9   1971


                Dear Mr. Jackson:
                       The General Accounting Office has made a survey of federally-assisted
                relocation   activities,  including those activities    under programs adrmnistered
                by the Department of Housing and Urban Development (HUD). Our field work
                relating   to HUD-assisted programs was carried out at local public agencies
                (LPAs) in Oakland and San Jose, California,       HUD Region IX offices in San
                l?rancisco, and HUD Headquarters in Washington, D. C.
                       During the survey we noted a problem related to relocation  payments
                made to certain displaced families   and individuals who rent or lease replace-
                ment housing. We found that the method used by the LPAs in computing these
                payments often resulted in relocatees receiving monthly payments which were
                in excess of the amount required to assure residency in decent, safe, and
                sanitary    dwellings.
                BACKGROUND                ,

                      Prior to January 2, 19'71, authority      for relocation payments was
                contained in Section lU, of the Housing Act of 1949, as amended. Section lL!+.
                provided for relocation     payments to certain displaced tenants, and owner-
                occupants of single or two-family      dwellings,   to obtain decent, safe, and
                sanitary housing.     Section 13-4 also provided that these payments should be
                based on the "average" rental or "average" price of a replacement dwelling
                of modest standards, adequate in size to accommodate the displaced individual
                or family.
                      For displaced families and elderly or handicapped individuals    who rented
                or leased replacement housing, HUD regulations     provided for payments to be
                based on the difference    between 20 percent of a relocatee's  income, and the
                average rental reqrured for a replacement dwelling as computed by the LPA.
                Payments were made monthly for up to 24 months and could not exceed $500 per
                year.   Payments to displaced owner-occupants who repurchased within 1 year
                were based on the difference,    up to $5,000, between the amount received for
        -       the acquured dwelling and the average price required for a replacement dwel-

                                         50TH ANNIVERSARY      1921- 1971
       The Uniform Relocation Assistance and Real Property Acquisition
Policies Act of 1970, dated January 2, 1971, resulted in several changes
in relocation    provisions, including  (1) substantial increases in the amounts
of payments available to relocatees and (2) an expansion of eligibility        for
such payments to all displaced persons.      The 1970 Act also clearly identified
the intended purpose of the relocation     payments for tenants, by statrng that
the authorized payments shall be:
     '** g * the amount necessary to enable such displaced    person to
     lease or rent for a period not to exceed four years,     a decent,
     safe, and sanitary dwelling ++* *I1
     We noted that a number of displaced tenants had moved to decent, safe,
and sanitary replacement dweltigs     and were paying rent substantially   lower
than the HUD-approved averages developed by LPAs. Despite their lower rents,
these displaced persons still   received the full relocation    payment based on
what the LPA determined their rent should have been. Although the payments
were calculated within the constramts     of Section XL!+., the full amounts were
not needed to ensure adequate housing.     For example:

     Ekample 1
           An individual was relocated to a decent, safe, and sanitary
     one-room apartment in the early part of 1969. His adjusted annual
     income was $3,160 and his actual annual rent was $516.
           Despite his rent being well below 20 percent of his adjusted
     income, the LPA paid -this relocatee relocation  payments totaling
     ?I%~2 er year, for 2 years.    The $482 was computed by deducting
     f&32 720 P ercent of his adjusted income) from $l,lU,  (the LPA estab-
     lished average annual rental for a one-bedroom unit).     If the reloca-
     tee's actual annual rent of $516--rather than the #l,ll+had        been
     used in the computation he would not have received a relocation      payment
     for replacement-housing.
     Exemple 2 -
           A farmly was relocated to a decent, safe, and sanitary two-
     bedroom apartment.     The annual gross rental cost for this unit was
     $1,246.    Twenty percent of the family's   adjusted annual income amounted
     to $1,159.
           In this case the LPA computed a relocation   payment of $372 per
     year for 2 years.    This figure was derived by relating  $1,531, the
     average rental cost in the area, to $1,159. The actual rental cost
     of the decent, safe, and sanitary housing obtained by thzs fmly       was
     not considered in computing the amount of the payments, If the actual

    rental cost had been used in the computation,       the family   would
    have received only $87 per year for 2 years.
     Example 3.
            'Two individuals relocated into a one-bedroom unit with an
     annual rent of $1,200. Twenty percent of the incomes of the indx-
     viduals at the time they relocated were $340 and $334, a total of
           The LPA approved relocation      payments of the maximum $500 per
     year to each of the individuals,       based on the difference between the
     average annual rental of $1,276 for a one-bedroom unit, and 20 percent
     of each relocatee's     income. In determining the amount of the payments,
     no consideration    was given to the fact that the individuals     were sharing
     a dwelling,   and that the actual annual rental cost to each individual
     was only $600. If the actual annual rental cost to each lndlvidual         had
     been used in the computation, the individuals       would have received $260
     and $266, respectively,      per year.
       In reviewing HUD's recently issued relocation    regulations which ample-
ment the statutory provisions     of the Uniform Relocation Assistance and Real
Property Acquisition   Policies Act of 1970 (Public Law 91-646), we noted that
the payment made to an owner-occupant who repurchases has been limited       to
the difference--up   to $15,000--between the amount received for the acquured
dwelling and the actual cost of the replacement dwelling.
      Also, payments in amounts of up to $4,000 over a 4-year period may be
made to relocatees who rent or lease replacement housing at rates higher
than their previous "base monthly rentals" as computed in accordance with HUD
regulations.    However, in contrast to the payments made to owner-occupants,
payments to tenants have not been limited by the actual rental costs of replace
ment dwellztgs.    Rather, the amounts of such payments have been established
using LPA-computed rental costs for replacement housing in the area surround-
ing the dwellings to which the tenants are relocated.
      Recognizing that HUD was in the process of developing guidelines for
use by LPAs in carrying out the new relocation       regulations,   we brought this
inconsistency    to the attention   of your staff during a meeting on June 2, 1971.
It is our understandmg that, as a result of this meeting, the new HUD guide-
lines will make it clear that actual rental costs incurred by relocated
tenants for replacement housing are to be limiting        factors in LPAsrcalcula-
tions of rent differential      payments to those tenants.
       Subsequent to the June 2 meeting, we discussed the effectiveness    of
relocation   payments with officials  of the LPAs visited,and they generally
agreed that in many instances payments were in excess of that necessary to
obtain decent, safe, and sanitary housing.     It was their position,   however,

that they are required to continue to make payments based on average rental
costs until such time as the new relocation guidelines are issued.
      Considering the LPAs' position, we recommend that interim instructions
be issued to the LPAs as soon as possible to preclude their continuing to
make payments based on the existing method of computation.     If such action
is not taken, a substantial  amount of excessive payments may be made prior
to the formal issuance of the new guidelines.

       We would appreciate being informed of any action taken on this matter
and any comments you might have regarding our observations.    A copy of this
letter report is also being forwarded to the Assistant Secretary for Adminis-
      If you have any questions or would like to discuss our observations       in
greater detail we would be happy to meet with you or your staff.
                                                Sincerely   yours,

                                                B. E. tirkle
                                                Assistant Dzector
Ihe Honorable Samuel C. Jackson
Assistant Secretary for Community
   Plannmg and Management
Department of Housing and Urban