oversight

Problems in the Program for Rehabilitating Housing To Provide Homes for Low-Income Families in Philadelphia, PA

Published by the Government Accountability Office on 1971-03-19.

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

                                            Mr. Nelson- --_________________
                                            Mr. Lindgren -________________?6iE
                                            Mr.   Mertz~--   -------_-________I   z




                                           llllllllllllllllllllllllllllll
                                                   LM095687

Problems In The Program
For Rehabilitating Housing
To Provide Homes For       ’
Low-Income Families
In Philadelphia, Pa.        E-118718




Department of Housing and
  Urban Development ~6-a




BY THE COMPTROLLER                     GENERAL
OF THE UNITED-STATES



                                   MARCH19,1971
                      COMPTROLLER      GENERAL     OF      THE      UNITED     STATES
                                     WASHINGTON.    D.C.         20948




  B-118718




      To the    President   of the Senate      and the
      Speaker     of the House    of Representatives

               This is our report        on problems        in the Department          of
      Housing      and Urban     Development        program      for rehabilitating
      housing     to provide     homes    for low- income        families     in Phila-
      delphia,     Pennsylvania.       Our review        was made pursuant          to
      the Budget      and Accounting       Act,   1921 (31 U.S.C.         53), and the
      Housing      Act of 1954 (42 U.S.C.         1435).

          Copies   of this report     are being sent to the Director,
  Office   of Management      and Budget,     and to the Secretary    of
  Housing    and Urban    Development.




                                                    Comptroller                     General
                                                    of the United                   States




-.-                         SOTH ANNIVERSARY                     1921-       1971
I
i
I
I
I
I                              COMPTROLLERGENERAL'S                  PROBLEMSIN THE PROGRAMFOR REHABILITATING
I
I                              R'EPORT
                                     TO Th'ECONGRESS                 HOUSINGTO PROVIDEHOMESFOR LOW-INCOME
I                                                                    FAMILIES IN PHILADELPHIA, PA,
 I
 I                                                                   Department of Housing and Urban Development
 I                                                                   B-118718
  I
  I
    I                          DIGEST
    I                          ------
    I
    I
    I
    I                          WHYTgE REVIEWWASMADE
    I
                                      To help provide decent housing for low-income families,     the Department


                                  I
    I
    I                                 of Housing and Urban Development (HUD) furnishes financial      aid to local
    I                                 housing authorities for acquiring and rehabilitating    individual   houses
    I
     I                                for rent or resale.
     I
     I
                                      As of December 1968, about 60 percent of the dwelling units being ac-
        I                             quired and rehabilitated under the HUD program consisted of houses; the
        I
        I
                                      remaining units were in hotels or apartment buildings.   About 75 per-
        !                             cent of the houses being acquired throughout the country were in Phil-
         I                            adelphia, Pennsylvania.
         I
         I
                                      Philadelphia   Housing Authority   project PA 2-4 was selected for review
         I
                                      because it represented a significant      portion of the HUD program and was
                                      advanced sufficiently    to permit an evaluation   of HUD's effectiveness in
             I
                                      achieving the objectives    of its program.
              I
              I

             I                 FINDINGSANDCONCLUSIONS
             I
              I
              I                       The Philadelphia    project provided for rehabilitation   of 3,300 dwelling
              I                       units at an estimated cost of $44 million.       Although benefits resulted,
              I
                                      some goals of the project had not been fully achieved and HUD had not
               I                      effectively   enforced compliance with the prescribed requirements for
                  I                   the project.
                  I
                  I
                   I                  Plans called for 79 percent of the rehabilitated     houses to be for sin-
                   I
                   I                  gle families  and 21 percent to be for two or three families.       Only 35
                  I                   percent of the houses were rehabilitated   as single-family    houses. The
                   I
                      I
                                      remaining 65 percent were rehabilitated  as multifamily     houses, many of
                      I               which were concentrated within a few blocks.
                      I
                      I
                       I              This concentration resulted in dwelling-unit    densities considerably
                       I              higher than those recommended in Philadelphia's    comprehensive redevelop-
                       I
                       I
                                      ment plan.
                       I
                        I             The goal of promoting private ownership through the resale       of rehabili-
                        I
                        I             tated houses was impa ired ser iously because the conversion     of large
                         I
                         I
                         I     Tear Sheet
                         I
                         I
                         I
                          I
                          I

                           I

                           I
                                                                                       I
                                                                                       I
buildings  to multifamily   use greatly reduced the possibility of low-
income families'    owning their uwn homes. (See pp. 13 and 14.)                   '   i

Many of the rehabilitated     dwellings--single   and multifamily--are  lo-
cated near industrial     and commercial sites,   normally not desirable as
living areas.   (See pp. 14 to 17.)

The authority  generally did not renew enough dwellings in blocks that
contained many vacant and dilapidated  structures  to encourage restora-
tion by adjacent private property owners. (See pp. 18 to 22.)

HUD knew of many of the conditions     cited above, repeatedly notified     the
authority  that it had failed to comply with the approved development
plan, and urged the authority     to remedy the situation.     There was no
indication  that the authority    had made any effort   to correct the matters
brought to its attention.      (See pp. 23 and 24.)

Many of the rehabilitated  dwelling units      contained important deviations
from HUD's minimum standards of livability       and construction  or from
contract specifications.   For example:

  --Required insulation  of roofs and exterior frame walls        had not been
    made in 11 of 17 units inspected.   (See p. 28.)

  --Sizes of rooms were in many cases smaller        than standards   allowed.
     (See pp. 29 and 30.)

  --Of 50 units inspected, 36 did not have the closets         required   by
     HUD's minimum standards. (See p. 30.)
  --Of the 50 units, 26 had a cheaper grade of copper pipe than re-
    quired by the contract specifications   and 40 had l/2-inch, instead
    of 3/4-inch,  pipe.   (See pp. 30 and 31.)

An unusual deviation was uncovered by the district     attorney of Phila-
delphia.    He found a number of instances in which contractors,.paid     to
replace the exterior walls of structures,    had merely coated the existing
walls with stucco.     The authority then employed a private firm to in-
vestigate.    On the basis of reports submitted by the firm, the General
Accounting Office (GAO) estimated that about $87,000 had been paid to
the contractors    for exterior wall work not done. (See pp. 31 and 32.)
The authority   informed GAO that funds hxbeen    withheld from the con-
tractors who had failed to replace unsound walls.

In GAO's opinion, the deviations      from minimum standards of livability
and construction    and from contract specifications        resulted mainly from
weaknesses in planning and control requirements;           namely, deficiencies
in the construction    specifications    and architectural      drawings and
weaknesses in the inspection process.        (See pp. 34 to 37.)




                                  2
   * GAO found a need to improve specifications     for materials  used in the
     rehabilitation work. Differences were noted between certain material
     requirements for the Philadelphia   project and material requirements
     under other HUD programs, private construction,     and materials  recom-
     mended by HUD for use in the project.      (See pp. 40 and 41.) i


RECOMMENDATIONS
            ORSUGGESTIONS
       The Secretary         of Housing and Urban Development should

             --assign the number of construction   inspectors sufficient for
                ensuring that acquisition and rehabilitation  programs are being
                carried out in accordance with approved plans and procedures (see
                P* 39);
             --require     that   corrective action be taken by local   authorities   when
                deficiencies      are noted (see p. 39 ); and
             --require     that only materials   recommended by HUD be used in reha-
                bilitation     projects,  unless the use of substitute material can be
                justified     (see p. 42).


AGENCY
     ACTIONSANDLJNRESOL?%'D
                        ISSUES
       HUD agreed with most of GAO's findings           concerning construction defi-
       ciencies and informed GAO of corrective           actions taken or to be taken.
       (See p. 38.)
       HUD disagreed with GAO's contention that additional     construction  in-
       spectors should have been assigned to the Philadelphia     project.   That
       would have been contrary,    HUD said, to its policy of placing responsi-
       bility    for the execution of the program on the local agency, would
       have invited duplication    of effort,  and would have been beyond the staff
       capability    of HUD.

       GAO agrees that responsibility    for execution of the program rests with
       the local agency. HUD, however, has the responsibility        for seeing that
       Federal funds are expended in the most efficient       and economical manner.
       Since inspections   by HUD construction  representatives    serve as a con-
       trol over the operations of local authorities,      GAO believes that those
       inspections   must be adequate to enable HUD to meet its responsibilities.
       (See pm 39);
       HUD did not comment on GAO's recommendation regarding the use of
       materials advocated by HUD for rehabilitation     projects.  GAO believes
       that the use of HUD-advocated materials     is necessary to make sure that
       maximum benefits are obtained for the Federal funds expended. (See
       p. 42.)
Tear Sheet

                                               3
                                                                            I
IUTTERSFORCONSDERATION
                     BY Th!ECO.VGl?ESS                                      I
                                                                            I
                                                                            I
    GAO is providing this report to the Congress in view of the improve-    I
    ments needed to achieve program goals and to correct deficiencies  in   I
                                                                            I
    HUD's rehabilitation  program to provide housing for low-income fam-    I
    ilies.                                                                  I
                                                                            I
                                                                            I
                                                                            I
                                                                            I
                                                                            I
                                                                            I
                                                                            I
                                                                            I




                                                                            I




                                                                            I
                        Contents
                                                           Page

DIGEST                                                       1
CHAPTER

   1      INTRODUCTION                                       5
              Rehabilitation  methods                        6
              Philadelphia's  acquisition   and rehabil-
                itation program                              6
   2      CERTAINDESIRABLEHOUSINGGOALSNOTBEING
          FULLY ACHIEVED                                    10
              Decisions affecting attainment of goals
                under the used-house project                11
             Occupancy of large dwelling units re-
                sulted in high dwelling-unit    densi-
                ties                                        13
              Emphasis on rehabilitation   of large
                dwelling units impeded sales to low-
                income families                             13
              Dwelling units rehabilitated   in loca-
                tions undesirable for family living         14
              Rehabilitated housing did not encour-
                age others to improve adjacent prop-
                erty                                        18
              HUDefforts to obtain compliance with'
                the approved development program            23
              HUDcomments                                   24
              Conclusion                                    26
   3      REHABILITATEDDWELLINGUNITS DO NOTMEET
          CONSTRUCTION ANDLIVABILITY STANDARDS              27
             Results of inspections of rehabilitated
               units                                        27
                 Insulation                                 28
                 Room size
                 Coat and/or linen closets                  3':
                 Water supply pipe                          30
                 Replacement of exterior walls              31
                 Laundry tubs                               32
                 Other construction deviations              33
                                                                  Page
CHAPTER

                   Weaknesses in used-house rehabilita-
                       tion requirements      and controls        34
                   Construction     specifications                34
                   Architectural     drawings                     35
                    Inspections                                   36
               Agency comments                                    38
               Conclusions                                        39
               Recommendations to the Secretary          of HUD   39

  4        NEED TO IMPROVE MATERIAL SPECIFICATIONS                40
              Agency comments                                     41
              Recommendation to the Secretary of HUD              42
   5       SCOPE OF REVIEW                                        43
APPENDIX

       I   Letters   dated July 13, 1970, and August 12,
              1970, with enclosure,    from the Assistant
             Secretary    for Housing Production  and
             Mortgage Credit and Federal Housing Com-
             missioner,     Department of Housing and Ur-
             ban Development                                      47
  II       Letters  dated June 8, 1970, with attach-
             ment, and September 1, 1970, from the
             Deputy Executive Director,  Philadelphia
             Housing Authority  to the Department of
             Housing and Urban Development                        56
  III      Principal   officials  of the Department of
              Housing and Urban Development respon-
              sible for the administration   of ac-
              tivities  discussed in this report                  64

                          ABBREVIATIONS

GAO        General Accounting Office
HUD        Department of Housing and Urban Development
LHA        local housing authority
PHA        Philadelphia  Housing Authority
                                                                                     ,,.


  COMPTROLLER
            GENERAL'S                PROBLEMSIN THE PROGRAMFOR REHABILITATING
. REPORT
       TO THE CONGRESS               HOUSINGTO PROVIDE HOMESFOR LOW-INCOME
                                     FAMILIES IN PHILADELPHIA, PA.
                                     Department of Housing and Urban Development
                                     B-118718


 DIGEST
 ------

 WHYTHEREVIEWWASMADE
     To help provide decent housing for low-income families,     the Department
     of Housing and Urban Development (HUD) furnishes financial      aid to local
     housing authorities for acquiring and rehabilitating    individual    houses
     for rent or resale.

     As of December 1968, about 60 percent of the dwelling units being ac-
     quired and rehabilitated under the HUD program consisted of houses; the
     remaining units were in hotels or apartment buildings,   About 75 per-
     cent of the houses being acquired throughout the country were in Phil-
     adelphia, Pennsylvania.

     Philadelphia   Housing Authority   project PA 2-4 was selected for review
     because it represented a significant      portion of the HUD program and was
     advanced sufficiently    to permit an evaluation   of HUD's effectiveness in
     achieving the objectives    of its program.


 FINDINGSANDCONCLUSIONS
     The Philadelphia    project provided for rehabilitation    of 3,300 dwelling
     units at an estimated cost of $44 million.       Although benefits  resulted,
     some goals of the project had not been fully       achieved and HUD had not
     effectively   enforced compliance with the prescribed requirements for
     the project.

     Plans called for 79 percent of the rehabilitated     houses to be for sin-
     gle families  and 21 percent to be for two or three families.       Only 35
     percent of the houses were rehabilitated   as single-family    houses. The
     remaining 65 percent were rehabilitated  as multifamily     houses, many of
     which were concentrated within a few blocks.

     This concentration resulted in dwelling-unit    densities considerably
     higher than those recommended in Philadelphia's    comprehensive redevelop-
     ment plan.

     The goal of promoting private ownership through the resale       of rehabili-
     tated houses was impaired seriously because the conversion       of large
buildings   to multifamily             use greatly reduced     the possibility  of                       low;        .
income families'      owning         their  own homes.     (See pp. 13 and 14.)

Many of the rehabilitated     dwellings--               single       and multifamily--are                 lo-
cated near industrial     and commercial                sites,       normally    not desirable                  as
living areas.    (See pp. 14 to 17.)

The authority     generally      did not renew enough dwellings         in blocks     that
contained     many vacant     and dilapidated      structures    to encourage    restora-
tion by adjacent      private     property    owners.      (See pp. 18 to 22.)

HUD knew of many of the conditions                cited above,    repeatedly     notified    the
authority       that   it had failed      to comply with the approved         development
plan,      and urged the authority          to remedy the situation.         There was no
indication        that   the authority      had made any effort      to correct     the matters
brought       to its attention.        (See pp. 23 and 24.)

Many of the rehabilitated    dwelling    units                   contained    important           deviations
from HUD's minimum standards     of livability                      and construction            or from
contract  specifications.    For example:

   --Required      insulation    of      roofs    and exterior         frame         walls   had not         been
      made in     11 of 17 units         inspected.      (See        pm 28.)

   --Sizes    of rooms were in           many cases       smaller         than   standards          allowed.
      (See   pp. 29 and 30.)                "

   --Of 50 units   inspected,            36 did not       have      the    closets       required       by
      HUD's minimum standards.              (See p.       30.)

   --Of the 50 units,       26 had a cheaper          grade of copper pipe than re-
      quired    by the contract     specifications          and 40 had l/2-inch, instead
      of 3/4-inch,    pipe.     (See   pp.    30   and   31.)

An unusual         deviation      was uncovered        by the district        attorney       of Phila-
delphia.         He found a number of instances                 in which contractors,            paid to
replace       the exterior        walls    of structures,         had merely      coated     the existing
walls     with stucco.           The authority       then employed       a private       firm    to in-
vestigate.          On the basis         of reports     submitted     by the firm,         the General
Accounting        Office       (GAO) estimated       that   about $87 , 000 had been paid to
the contractors             for exterior     wall work not done.             (See pp. 31 and 32.)
The authority           informed     GAO that     funds h&-been        w i thheld     from the con-
tractors        who had failed         to replace      unsound walls

In GAO's opinion,       the deviations          from minimum standards         of livability
and construction      and from contract            specifications     resulted      mainly    from
weaknesses     in planning     and control         requirements;     namely,     deficiencies
in the construction        specifications          and architectural       drawings      and
weaknesses     in the inspection          process.        (See pp. 34 to 37.)
  ' GAO found a need to improve specifications     for materials  used in the
    rehabilitation work. Differences were noted between certain materi al
    requirements for the Philadelphia   project and material requirements
    under other HUD programs, private construction,     and materials  recom-
    mended by HUD for use in the project.      (See pp. 40 and 41.)

RECOMiWNDATIONS
            ORSUGGESTIONS
   The Secretary      of Housing and Urban Development should

      --assign the number of construction  inspectors sufficient  for
         ensuring that acquisition and rehabilitation programs are being
         carried out in accordance with approved plans and procedures (see
         P* 39);
      --require     that   corrective action be taken by local   authorities   when
         deficiencies      are noted (see p. 39 ); and

     --require     that only materials   recommended by HUD be used in reha-
        bilitation     projects,  unless the use of substitute material can be
        justified     (see p. 42).


AGENCY
     ACTIONSANDUNRESOLVED
                       ISSUES
    HUD agreed with most of GAO's findings        concerning construction defi-
    ciencies and informed GAO of corrective        actions taken or to be taken.
    (See p. 38.)
   HUD disagreed with GAO's contention that additional     construction in-
   spectors should have been assigned to the Philadelphia     project.  That
   would have been contrary,    HUD said, to its policy of placing responsi-
   bility    for the execution of the program on the local agency, would
   have invited duplication    of effort,  and would have been beyond the staff
   capability    of HUD.

    GAO agrees that responsibility  for execution of the program rests with
    the local agency. HUD, however, has the responsibility      for seeing that
    Federal funds are expended in the most efficient     and economical manner.
    Since inspections by HUD construction  representatives    serve as a con-
    trol over the operations of local authorities,    GAO believes that those
    inspections must be adequate to enable HUD to meet its responsibilities.
    (See p. 39).
    HUD did not comment on GAO's recommendation regarding the use of
    materials advocated by HUD for rehabilitation     projects.  GAO believes
    that the use of HUD-advocated materials     is necessary to make sure that
    maximum benefits are obtained for the Federal funds expended. (See
    p. 42.)


                                         3
MATTERS
      FORCONSlDERdTION
                     BY THECONGRESS
   GAO is providing this report to the Congress in view of the improve-
   ments needed to achieve program goals and to correct deficiencies    in
   HUD's rehabilitation  program to provide housing for low-income fan+
   ilies.




                                   4
                               CHAPTER 1

                             INTRODUCTION

      The General Accounting   Office has reviewed certain  as-
pects of the acquisition    and rehabilitation  program for pro-
viding low-rent   public housing, administered   by the Depart-
ment of Housing and Urban Development.

       HUD statistical     information    available     at the time of
our review showed that, as of December 31, 1968, about
60 percent of the dwelling units being rehabilitated                  and ac-
quired under HUD's acquisition          and rehabilitation        program
consisted   of used houses at scattered          sites;    the remaining
dwelling   units were in hotels or apartment buildings.                 Of
the dwelling     units being acquired at scattered            sites
throughout    the country,     about 75 percent were in the city
of Philadelphia.       We selected Philadelphia         Housing Authority
(PUA) project      PA 2-4 for comprehensive review because it rep-
resented a significant        portion   of the program effort         in the
city and was sufficiently          advanced to permit an evaluation
of its effectiveness        in achieving program objectives.

       Authority     for undertaking    an acquisition     and rehabilita-
tion program is contained in the Housing Act of 1937, as
amended (42 U.S.C. 14011, which provides for Federal finan-
cial assistance        to eliminate   unsafe and unsanitary      housing
conditions;      eradicate    slums; and provide decent, safe, and
sanitary    dwellings      in a wholesome living     environment   for
families    of low income.

      The objective   of the acquisition    and rehabilitation
program is to provide low-rent      housing at sites located
throughout   the program area (scattered      sites),   to achieve
social and economic neighborhood mix, to provide anonymity
for occupants who are public-housing       tenants,    and to provide
housing units available     for sale to tenants,      pursuant to
section 15(9) of the Housing Act of 1937.           (42 U.S.C.
1415(g)).

      HUD conducts its low-rent-housing     assistance  activi-
ties at its headquarters     in Washington,  D.C., and at 10 re-
gional offices   in Atlanta,   Boston, Chicago, Denver,

                                       5
Fort Worth, Kansas City, New York, Philadelphia,          San Fran--
cisco, and Seattle.        The development and administration     of
federally    assisted   low-rent  housing is primarily    the re-
sponsibility     of local housing authorities     cIBAs>, which are
independent legal entities       established  pursuant to State
legislation    to develop, own, and operate low-rent       public
housing.

       Federal financial       assistance    under the acquisition      and
rehabilitation     program is provided to LHAs by HUD in the
form of preliminary       loans for surveys and planning and in
the form of subsidies under annual contribution               contracts
with LHAs. The HUD contributions,              at their maximum allow-
able amounts, are intended to be sufficient              to pay the prin-
cipal and interest       on bonds and notes sold by IHAs to ob-
tain funds for acquiring          and rehabilitating     housing.     HUD's
maximum allowable       contributions     are reduced by the amount
of residual    receipts     from project     operations.

REHBILITATION      METHODS

       Under HUD8s acquisition       and rehabilitation  program,
LH&s acquire   houses either        before or after they have been
rehabilitated.

        For houses acquired by l.JX.Asbefore they are rehabili-
 tated,    the required     rehabilitation    work can be done by LHA
employees or under competitive-bid            contracts   awarded by
LH& on the basis of drawings and construction                specifica-
tions.       For houses to be acquired after they have been re-
habilitated      (turnkey    rehabilitation),     LHAs contract     with
private     developers    to purchase, at specified       prices,    one or
more dwellings       that have been rehabilitated       to agreed spec-
ifications      and standards.

PHILADELPHIA'S ACQUISITION AND
REHKDILITATION PROGRAM

      In 1957 a joint   committee formed by the Philadelphia
Housing Association    and the Citizens'     Council on City Plan-
ning proposed that the housing needs of low-income families
be met by using existing     dwelling  structures    in conjunction
with new construction.     The proposal was evaluated by


                                     6
I?ederal and local officials,        and in 1958 HUD authorized         PHA
to rehabilitate   200 dwelling       units.

       Three pilot  programs, PA Z-58, PA Z-59, and PA Z-60,
providing    for the rehabilitation     of 200 dwelling    units
started with the purchase of 40 houses.           The houses were
acquired at an average price of $5,960 and rehabilitated           at
a reported average development cost of $10,142.            Some of
the higher priced houses in this group were in good condi-
tion and required    little    more than painting    and minor re-
pairs.     Other houses needed more extensive       improvements,
such as new heating systems, doors, windows, porches, and
roofs.

       The rehabilitation       work under these pilot       programs was
done by individual        contractors,     groups of contractors,        or
PHA. Individual        specifications      had to be prepared for each
house, and the need for detailed            inspections    and appraisals
made execution      of the program slow and cumbersome.              Because
of funding limitations,only            180 of the 200 dwelling       units
originally    authorized      were rehabilitated       and acquired.

         During the period 1963-69,HUD authorized             PHA to reha-
bilitate       6,400 additional      dwelling    units under four acqui-
sition     and rehabilitation        programs.      Project PA 2-67,
started      in 1963, provided for the rehabilitation            of 500
dwelling units.           Initially,    94 units were rehabilitated      by
the PHA labor force supplemented by craftsmen from local
trade unions.         As in the earlier       pilot   programs, execution
of the program was found to be slow and cumbersome.                  An ad-
ditional       294 units were completed under the turnkey reha-
bilitation        method.

        Project  PA 2-69, started  in 1965, provided for the re-
habilitation     of 1,000 dwelling   units. By use of the turn-
key rehabilitation      method, about 950 units were rehabili-
tated at an average cost of $12,868.

       Project   PA 2-4, started  in September 1967, provided for
the rehabilitation      of 3,300 scattered   dwelling units at a
total   estimated   cost of about $44 million.       Project PA 2-52,
started    in January 1969 while our review was in process,
provided for the rehabilitation       of 1,602 dwelling units at a
total   estimated   cost of about $23 million.       October 1969

                                       7
plans provided for the rehabilitation   of an additional
5,000 units at an estimated   cost of about $70 million.

       With HUD's approval,     PHA established    standard prices
for contractors      for the rehabilitation     of houses under the
PA 2-4 project.       According to a HUD study, the standard-
pricing    procedure was used to expedite volume production
and eliminate     the need for individual     cost estimates.

       PHA's standard prices for the PA 2-4 project          were es-
tablished   through negotiations      with a contractors'      commit-
tee and HUD and were approved by HUD on January 28, 1968.
The prices cover 12 types of single-family          structures    and
28 types of multifamily     structures.     Examples of the prices
are shown below.

          Number of            Number of             Standard
        family units        bedrooms per         rehabilitation
        per structure        family unit              price

                1                  3                 $10,050
                1                  5                  13,300
                2               2 and 6               23,100
                2                  3                  20,500
                3                  3                  30,800
                3                  4                  34,100

       Most of the contractors  were paid $1,600, the maximum
amount allowable,    for the acquisition of a structure  in ad-
dition   to the standard price for the rehabilitation   work.
They were also reimbursed for real estate settlement     costs.

        As of February 19, 1969, PHA had approved 87 private
contractors      for participation     in the used-house program.
These contractors       locate suitable     houses in designated areas
of the city and enter into agreements for PHA's purchase of
the houses upon completion          of the rehabilitation       work.    The
program provides for stripping           a house to a shell,      which en-
tails    removing interior       components and leaving only the ex-
terior,     because houses acquired by contractors           have exten-
sive structural      deterioration.       In rehabilitating      such a
house, it is necessary to install           new floors,     roof covering,
partitions,     windows, stairs,      doors, electrical       and heating
systems, plumbing fixtures,          and kitchen equipment.

                                     8
        Principal    officials    of HUD responsible  for the admin-
istration      of activities     discussed in this report are listed
in appendix III.




                                      9
                               CXAPTER2

                CERTAIN DESIRABLE HOUSING GOALS

                     NOT BEING FULLY ACHIEVED

      PHA's used-house acquisition        and rehabilitation       pro-
gram in the city of Philadelphia        for providing      low-rent
housing is the largest   scattered-site       housing rehabilitation
program in the Nation.    The program in Philadelphia            has re-
sulted in benefits,   such as

      --providing   a substantial number of units in the cen-
         tral parts of the city in shorter time than would
         have been possible by other methods,

      --allowing     LHA   to obtain,  for an equivalent capital
         outlay,    more   dwelling units than would have been pos-
         sible had it      confined its program entirely  to new
         construction,       and

      --utilizing  the inventory  of derelict houses in the
         city by converting  them to usable houses.

        Our review of PHA acquisition  and rehabilitation     proj-
ect PA 2-4, which provided for the rehabilitation         of 3,300
scattered    dwelling units at an estimated cost of about $44
million,    showed, however, that some of the desirable      goals
of its housing development program, approved by HUD, were
not being fully      achieved.

       Before an LHA can undertake an acquisition    and rehabili-
tation   project, its development program, outlining    the goals
for the project   and the means for accomplishing    them, must
be approved by HUD. HUD's approval of the development pro-
gram constitutes    approval of the LHA's goals.

      We believe that certain decisions    by the Philadelphia
city council and PHA affected   attainment   of the goals under
PHA project   PA 2-4. These goals are discussed in the fol-
lowing section.




                                   10
DECISIONS AFFECTING ATTAINMENT OF GOATS
UNDER THE USED-HOUSE PROJECT

        PI-IA's approved development program designated certain
geographical      areas, containing  many various-sized      vacant and
dilapidated      houses, where the acquisition      and rehabilitation
project     was to be accomplished.    The development program es-
timated that 79 percent of the houses to be rehabilitated                in
those areas would be for single-families         and 21 percent would
be for two or three families.        However, only 35 percent of
the houses were rehabilitated       as single-family     houses.       The
remaining 65 percent were rehabilitated         as multifamily
houses.

      The development program for project        PA 2-4 was based
mainly on the experience gained from earlier         projects   which
generally   were carried   out in areas where two-story       houses
predominated.     The city council determined that project
PA 2-4 was to be carried      out in the midtown areas of the city
where larger,   three- and four-story   structures    predominated.

      An example of the structures      originally     built   as single-
family units and rehabilitated      as multifamily      dwelling units
is shown in the following     photograph.




 1900 block North Franklin       Street. (This block contains         36
 dwelling units purchased       by PHA at a cost of $430,000.)
                                    11
       The blocks subject to rehabilitation        were selected by'a              .
coordinating      committee composed of representatives      of city
agencies.      It was estimated   that 6,000 to 9,000 eligible
families     were in dire need of housing.       A HUD study showed
that Philadelphia      had about 28,000 uninhabitable      houseso
most of which were 60 or more years old,           PHA emphasized the
rehabilitation      of the larger structures     to provide housing
for more families      as quickly   as possible.

        We believe that the two decisions--to               restrict   rehabili-
tations    to midtown areas which consisted predominantly                  of
three- and four-story       structures     and to emphasize the rehabil-
itation    of structures      which would furnish        housing as quickly
as possible-- resulted        in short-term      benefits;      however, some
of the desirable       objectives     of the development program were
not achieved.       The objectives      sacrificed,       in whole or in
part * are discussed in the following             subsections.,




                                      12
OCCUPANCYOF LARGE DWIZLLING UNITS FtESULTED
IN HIGH DWELLING-UNIT DENSITIES

       Many of the multifamily       structures    were concentrated
within certain    blocks and resulted         in dwelling-unit    densi-
ties of 64 to 84 units an acre.            This density is consider-
ably higher than the recommended density range of 20 to 59
dwelling units an acre specified           in Philadelphia's    compre-
hensive redevelopment     plan for the area where the acquisi-
tion and rehabilitation      project     was being carried     out.

       The development program for project          PA 2-4 estimated
that 79 percent of the rehabilitated           dwelling units re-
quired should consist      of single-family      houses but did not
specifically    limit   the dwelling-unit      density.      Had PHA con-
centrated    on acquiring   and rehabilitating        single-family
houses, however, a lower dwelling-unit           density could have
been achieved.

         The city council subsequently   removed the geographic
restrictions      on the used-house rehabilitation   program and
now permits a citywide      selection  of structures  for rehabil-
itation.

        In commenting on our draft report,       PHA informed us
that,     of the 3,221 rehabilitated   dwelling    units acquired
under project     PA 2-4, 2,097, or 65 percent were, in multi-
family structures.       PHA also stated that it no longer re-
habilitated     two- or three-family   structures.

EMPHASIS ON REHABILITATION OF
LARGE DWELLING UNITS IMPEDED
SALES TO LOW-INCOME FAMILIES

       In the interest     of promoting neighborhoods       of mixed oc-
cupancy, the approved development program provided that pri-
vate individuals     have the opportunity      to purchase rehabili-
tated dwelling units as an alternative           to renting    them from
PHA.     This was  consistent    with  the objective    of  promoting
home ownership as advocated in the Housing and Urban Devel-
opment Act of 1968. However, none of the rehabilitated
dwelling units acquired under project          PA 2-4 have been sold
to private    purchasers.


                                    13
       We believe that converting      large structures        for multi-     .
family use,     as was done   under &is    project,    greatly     reduces
the possibility     of low-income familiess       purchasing the
structures,

       HUD, in commenting on our draft report,      stated that
there was no plan for private      ownership at the time the de-
velopment program was prepared and that such ownership did
not become an earnest concept until       December 1968. We ac-
knowledge that ownership was not emphasized in the early
periods of the acquisition     and rehabilitation    program.   We
nevertheless   believe that, had PHA acquired rehabilitated
structures   mainly for single-family     occupancy, the possibil-
ity of home ownership would have increased.

DWELLING UNITS RMAEKCLITATED IN
LOCATIONS UNDESIRABLE FOR FAMILY LIVING

       Many of the rehabilitated       structures acquired under
project    PA 2-4 were located     adjacent to or near undesirable
locations,    such as industrial     and commercial sites.

        The approved development program for project         PA 2-4
contained limitations        intended to preclude the rehabilitation
of houses located in close proximity         to nuisances,     such as
junkyards,     or  sites   being  used for purposes   considered   of-
fensive or hazardous to family living.           Further,   houses to
be rehabilitated       were to be those located in areas predom-
inantly    residential     and expected to remain so.

      The following  photograph shows a rehabilitated  two-.
family structure,   acquired at a cost of $24,500, adjacent              to
a lot used as an automobile junkyard.




                                   14
                            North   8th Street
       The following      photograph shows a commercial area sub-
stantially    lacking     in residential    characteristics.        The
area contains only        six residential     structures.       PHA pur-
chased three of the         structures,   containing      a total of five
dwelling   units,    at   a cost of $64,000.




                                      15
                           North   7th Street
        As previously     noted, areas scheduled for rehabilitation
 should be expected to remain residential.              However, 65 dwell-
 ing units selected for rehabilitation           were located in areas
which the city's       planning commission had proposed for indus-
trial,    commercial,     or institutional    use.    If the proposals
of the commission are put into effect,             the PHA-acquired re-
habilitated     dwelling    units in those areas will be in an en-
vironment not considered,          in the approved development pro-
gram, to be desirable         for family living.

       Under another Federal program, the Philadelphia               Rede-
velopment Authority      has under consideration          the renewal of
areas containing     structures    recently     rehabilitated     under the
PHA's acquisition     and rehabilitation        program.      The Philadel-
phia Redevelopment Authority         originally    had planned to demol-
ish 50 of the rehabilitated        dwelling units.          As a result   of
HUD's urging,    the Philadelphia       Redevelopment Authority         has
modified   its plans and will demolish only 14 of the dwelling
units.    The 14 rehabilitated      units scheduled for demolition
were recently    purchased by PHA for $162,000.


                                     16
    '. PHA officials,    in commenting on this matter,      noted that
 the small number of rehabilitated        structures   scheduled for
 demolition   was indicative   of careful     planning and coordina-
$tion on the part of city agencies.

      HUD, in commenting on our draft report,   informed us
that only a few dwelling units acquired were adjacent to
commercial sites with somewhat objectionable    features,    Our
review, however, though limited  to only a portion     of the pro-
gram, showed that 79 dwelling units were located on sites
whi.ch, in our opinion, were not suitable   for family housing.




                                   17
REHABILITATED HOUSING DID NOT ENCOURAGE
OTHERS TO IMPROVE ADJACENT PROPERTY

       An important     objective      of the acquisition        and rehabili-
tation    program is the conservation            or improvement of resi-
dential    neighborhoods.        Although PHA acquired and rehabili-
tated structures       in areas that contained many vacant and
dilapidated     structures,       it did not renew enough structures
to cause a wave of building            restoration      by private   owners of
adjacent property.          PHA's    policy   was  to   limit  the  acquisi-
tion and rehabilitation          to 20 percent of the houses situated
in any given block.          This policy was based on a desire to
give anonymity to public-housing              tenants and on the belief
that rehabilitations         started by PHA would be continued and
expanded by private         owners of property        in the area and by
other housing programs.             We believe that the following         draw-
backs are inherent        in this policy.

      1. There is little    assurance that other housing programs
         or private   owners will complete the rehabilitation
         work begun by PI%       The investment      in a given block,
         therefore,   eventually   may   be  lost  since   the dilapi-
         dated portions    of the neighborhood are likely         to gov-
         ern the appearance,     safety,    and structural    condition
         of the neighborhood.

      2. There is little   assurance that other housing              programs
         will consider rehabilitation      to be the best           method of
         improving a block.      Subsequent  redevelopment           deci-
         sions might result    in demolishing    rehabilitated
         dwellings  with a consequent loss of housing                resources.
       Rehabilitation     of only a small number of scattered
structures     in dilapidated    neighborhoods    results,    in our opin-
ion9 in minimal benefits       with respect to upgrading the ap-
pearance of the neighborhood and does not provide incentive
for private     owners to rehabilitate      their properties,

       The following    four   photographs      each illustrate  the lim-
ited effect     of a single    rehabilitation      in a predominantly
dilapidated     area.




                                      18
         West side of 1600 block   North   7th Street

       The west side of the 1600 block of North 7th Street
contains one house acquired by PHA for $15,300, six vacant
houses in dilapidated   condition,  one commercial garage, and
vacant lots.




                              19
West side of 1200 block North        Pennock Street.   (View of en-
tire block looking south.)




West side of 1200 block North Pennock Street.    (View of PHA-
owned structure and adjacent  structures looking south.)

                                20
West side of 1200 block of North         Pennock Street.    (View of
PHA-owned structure  and adjacent        structures  looking north.)

       North Pennock Street is narrow and contains           only nine
structures,    one of which is a rehabilitated        structure     pur-
chased by PHA for $11,100.         In  addition to  the   rehabilitated
house, the block contains       six dilapidated    houses--five       are
vacant--a   dilapidated    garage, and a three-story        structure
used by a paste-manufacturing         company.  The vacant houses
at the north end of the block have been placarded with city
notices designating     them public nuisances.

      As can be seen from the photographs of the North              Pen-
neck Street block, the dilapidated      structures   dominate         the
appearance of the block,     We question    whether  placing        a
tenant in the rehabilitated    dwelling unit fulfills       the       pro-
gram objective  of providing   safe and decent housing.

     In commenting on our draft report,   HUD stated that GAO
had explained the 20-percent   limitation as being an outcome
of PHA's desire to give anonymity to public-housing    tenants.
However, as we explained on page 18, this policy was

                                    21
based also on PHAps belief that the area rehabilitation     it '   .
started would be continued by private owners and by other
housing programs. HUD stated also that, unfortunately,      the
planned-for rehabilitation    by others had not attained the
volume expected and that most blocks had been left with
only the houses rehabilitated    by PHA. HUDstated further
that PM had obtained additional single-family     houses to
expand the rehabilitation    in these blocks.
      In commenting on our draft report, PHA stated that, in
some areas of Philadelphia, a ZO-percent, or less, rehabili-
tation of a block would encourage private rehabilitation   and
that, in other areas, a more significant  investment was
needed to stimulate private investment.   PHA noted that
there was no guarantee that private owners would complete
renewal of the areas.




                              22
HUDEFFORTSTO OBTAINCOMPLIANCE
                            WITH
THE APPROVED
           DEXELOPMENT
                     PROGRAM
     We noted that HUDrepeatedly had brought to the atten-
tion of P?U the fact that the structures being rehabilitated
under project PA 2-4 did not conform to requirements of the
approved development program.
      HUD's annual contribution   contract provides that proj-
ects be developed in accordance with their applicable devel-
opment programs and with plans and documents modifying the
programs. In addition, HUD's Low-Rent Housing Preconstruc-
tion Handbook provides that, if a major change occurs in
the development concept, the development program be revised
and resubmitted to HUDfor approval.       The handbook de-
scribes a significant  modification    to a building or a change
in structure type as a major change.
      In our opinion, approval by HUDof the development
program is an essential control over the expenditure of Fed-
eral funds. We believe that completion of the program as
approved would help to ensure that program objectives are
achieved.
       Many of the program weaknesses cited in the preceding
section of this report were known to HUD from its reviews
of the program and from its other contacts with PHA. We
found, for example, that HUD's first periodic review of the
PA 2-4 project had indicated that about 40 percent of the
units to be rehabilitated    under contracts awarded before
February 29, 1968, were, or would be, in multifamily     struc-
tures.    Its report recognized that difficulties   might be en-
countered in trying to adhere to the approved rehabilita-
tion program because of the predominance of multifamily
structures in the areas to be rehabilitated.      The report
advised PHA to make a strong effort to bring housing units
in line with the approved program.
      HUDbrought the fact that the project did not conform
to the approved program to PHA's attention in a letter dated
July 25, 1968, in which HUD stated that its analysis of
2,038 units under contract as of April 30, 1968, showed that
about 50 percent of the units were, or would be, in multi-
family structures and that about 10 percent of the

                               23
2,038 units would be single-family    three-bedroom    structures.       .
HUD recommended that PHA place emphasis on acquiring         single-
family units, especially  the two-story    three-bedroom     type
of structure.

       HUD again advised PHA on September 25, 1968, that, of
the units under contract         through April 30, 1968, about
1,020 were multifamily        units,   whereas only 700 were autho-
rized.    HUD stated that PITA's failure         to adhere to the ap-
proved number of multifamily          units could produce harmful ef-
fects,   including    increased population       density;  nonachieve-
ment of program goals for obtaining           dispersed single-family
units;   and creation     of undesirable     social conditions    by
producing structures       with common halls conducive to loiter-
ing, molestation,       and property    damage.

       HUD requested PHA not to contract    for any additional
multifamily    units under project  PA 2-4, except where commit-
ments in force could not be revoked, and not to plan any
multifamily    units under a new l,OOO-unit    used-house program
being planned.

        On September 30, 1968, HUD advised PHA that,    since no
reply had been received to its letter      of July 25, 1968, HUD
was becoming increasingly     concerned about the lack of sig-
nificant    progress and of compliance with the approved devel-
opment program.      HUD also repeated its recommendation that
more emphasis be placed on acquiring      single-family  dwelling
units rather than multifamily      units.

        Although HUD repeatedly      notified  PTU that it was not
adhering to the approved development program and urged PHA
to remedy the situation,        we could find no indication   that
PJ3A had initiated    corrective     action on the matters brought
to its attention.      It appeared that HUD did not employ ef-
fective     means, such as suspending Federal support for the
program as provided for by the approved development program,
to induce PHA to initiate        corrective   action.

HUD COMMENTS

      In commenting on this    portion   of our draft   report,   HUD
stated that:


                                 24
      "The deficiencies        cited by the GAO are not as
      prevalent     or significant     as would appear from
      the report,      nor do they have a detrimental        ef-
      fect on the program.          The used-house rehabili-
      tation    program was new. Every step could not be
      foreseen.      It is only through experience        that
      the operation       of a program can be refined       and
      progressively       improved.    This has generally      been
      done as the result        of HUD recommendations      and
      the effort     will   continue."

        In our opinion,      HUD's comment that the deficiencies             in
project     PA 2-4 did not have an effect           on the results     of the
project     understates    the significance       of the deviation      from
a major objective       of the project--the         objective    of acquiring
more rehabilitated       single-family      structures      than multifamily
structures.       Also, we are of the view that HUD's comment is
inconsistent      with its persistent       efforts     to induce PHA to
comply with the approved development program for the project.

       With respect to HUD's comments that project              PA 2-4 was
new and that every step could not be foreseen,               it should be
noted that PHA had conducted several pilot              projects,   start-
ing in 1958, under which 180 houses were rehabilitated.
Further,     PM, under projects           in 1963 and 1965, acquired an
additional     1,338 rehabilitated          houses.  (See p, 7.1 PHA'S
previous experience,           therefore,    should have provided it
with substantial         insight     into the problems related    to ac-
quiring    rehabilitated        housing.

       HUD also advised us that,         in the opinion of PHA offi-
cials,     the used-house program in Philadelphia           had been
highly     successful    in accomplishing     the limited     goals of
providing     decent, safe, and sanitary         housing quickly     and at
relatively     low cost in areas where it was urgently             needed
for families      living   in deplorable    conditions.      We agree that
many units were quickly produced under the various projects.
We believe,      however, that, over the long term, greater bene-
fits might have been achieved in relation               to resources   ex-
pended had the approved development program for project
PA 2-4 been complied with.                l




                                       25
CONCLUSION

      Certain desirable    goals of the used-house acquisition
and rehabilitation    project   PA 2-4 were not fully          achieved.
HUD was aware that the rehabilitated          houses acquired con-
sisted mainly of multifamily      structures       rather than single-
family structures   and that this deviation           from the approved
development program had resulted        in the acquisition         of
houses that were not particularly         suitable      for sale to low-
income families.

       HUD stated that the used-house acquisition          and rehabili-
tation   program in Philadelphia     had resulted    in making avail-
able a significantly     large number of dwelling       units for low-
income families.     HUD's comments indicate      that,    in view of
such accomplishments,      it does not consider the deviations
from the approved development plan for project           PA 2-4 to be
of such importance    as to have warranted      suspending Federal
assistance    for the project   although suspension was provided
for in the development program.

         Because of the dire need for housing for low-income
families     in Philadelphia,     HUD's decision      to not suspend Fed-
eral assistance       under the PA 2-4 program may have been ap-
propriate.      Since the PA 2-4 program is substantially             com-
pleted,     we are not making any recommendation regarding             this
program.      We  believe,    however,  that,   before   entering   into
future commitments to provide Federal assistance,                HUD should
critically     evaluate the objectives        contained in development
programs from the viewpoint          of whether there are reasonable
assurances that such objectives          will be achieved.




                                    26
                                CHAPTER 3

           REHABILITATED DWELLING UNITS DO NOT MEET

              CONSTRUCTIONAND LIVABILITY          STANDARDS

       Many of the rehabilitated        dwelling units acquired under
PHA's acquisition      and rehabilitation       project     PA 2-4 con-
tained what we considered to be important               deviations   from
the minimum standards of livability            and construction      estab-
lished by HUD and incorporated          by PHA into its acquisition
and rehabilitation      contracts.      The results      of our inspections
of 50 dwelling units,       selected on a scientific           random basis,
indicated    widespread deviations        from the construction        stan-
dards.    Similar   deviations     are likely    to exist in most of
the 2,558 dwelling units acquired by PHA by April 1969 at a
cost of about's32 million.

      The deviations     from minimum standards of livability
and construction     which we observed during our physical          in-
spection of dwelling       units were, in our opinion,       due mainly
to deficiencies     in the construction      specifications,    inade-
quate architectural      drawings,    or inadequate inspections       of
the rehabilitated     dwelling    units.

        The standard    prices being paid by PHA to contractors
for rehabilitated       dwelling     units are based on the premise
that all contract       specifications,       including   the minimum
property    standards    established      by the Federal Housing Admin-
istration    of HUD,    will be adhered to.          As shown in the table
on page 8 of this       report,     the prices vary, depending on the
number of dwelling       units and number of bedrooms in the
structure.

RESULTS OF INSPECTIONS OF REHABILITATED UNITS

         Rehabilitated    dwelling     units were approved, accepted,
and paid for at the established             standard prices even though
there were important        deviations      from HUD's minimum standards
and PHA's contract        specifications.        The results   of our in-
spection of a scientific          random sample of 50 rehabilitated
dwelling     units,    as well as an inspection        performed by the
district     attorney    of Philadelphia       of units approved and ac-
cepted by PHA under project            PA 2-4, are discussed below,
                                     27
Insulation

        Contract    specifications       required    insulation      of roofs,
exterior     frame walls,       and bays.      We inspected 17 of the 50
dwelling     units to determin, p w!-lether insulation             had been in-
stalled    as required       by the contract       specifications.        Because
inspection      for insulation       entailed    breaking into existing
walls and ceilings,          we limited      our inspection      to only 17
dwelling units.        This limited        test showed, however, that, of
the 17 dwelling       units,     11 (65 percent) were not insulated.
Our inspection       was prompted by a tenant*s            complaint    to our
staff that a bedroom was too cold for sleeping.                      Our subse-
quent inspection       showed that the bedroom was not insulated.

       At the time of our inspection,      PHA had purchased 1,900
dwelling   units requiring    insulation.    If the results    of our
test hold true for all the 1,900 dwelling units,          about 1,200
of these units probably are not insulated.         On this basis,
we estimate     that the cost of insulation    work that was paid
for but not performed would amount to $150,000.

       We discussed the results     of our insulation    inspection
with HUD officials    who then notified    PHA of the deficiencies
by letter    dated May 12, 1969. A HUD official       informed us
that, as of November 25, 1969, PHA had not taken any action
to determine the number of dwelling units so affected            nor
required   the responsible   contractors   to take corrective       ac-
tion.

        In   commenting on our draft report in August 1970, HUD
informed       us that it agreed with our finding    regarding     the
absence      of insulation    in roofs and window bays.     HUD stated
that the       PHA's attorney   was exploring  the matter of securing
redress.        PHA informed us that it was currently      reinspecting
all units       purchased within    the last year and that, where de-
ficiencies       were found, the contractors    would be required      to
correct      the deficiencies    under the l-year warranty.

      Both HUD and PHA stated that inspection    procedures had                     f
been revised to ensure that units presently     being acquired
are insulated.     The revised procedures were not in effect   at
the time of our fieldwork,     and therefore we cannot comment
on their   adequacy.


                                       28
tioom size

      Most acquired houses had deviations         from established
standards of livability   that constituted        potential   viola-
tions of city codes.

       Contract    specifications     recommended a minimum square-
foot area for each room in multifamily          structures;  however,
single-family      structures     were required only to be restored
to their    original     floor plan, except for the specific     re-
quirement that no bedroom was to have less than 70 square
feet.

        We measured each room in the multifamily       and single-
family structures     among the 50 dwelling     units included in
our sample.     After making allowances for a smaller bedroom
in each single-family     structure     due to unavoidable  design
limitations,    we found that 42 of the dwelling units had at
least one room with an area smaller than that established
for rooms in multifamily      structures.

      The use of dwelling units will violate   the city's   hous-
ing code if the units are rented to families     of the size
for which they were intended.   The city's   housing code estab-.
lished 70 square feet as the minimum area of a bedroom to be
occupied by one person and 100 square feet as the minimum
area of a bedroom to be occupied by two persons over 12
years old.

      Of the 50 dwelling units in our sample, four had bed-
rooms ranging from 55 to 67 square feet.    Therefore    certain
bedrooms cannot be used without violating    the city's   housing
code, even though, at the price PHA paid for the properties,
all rooms should have been usable.    In addition,    72 bedrooms
in the dwelling units included in our sample contained be-
tween 70 and 99 square feet and their use constituted       poten-
tial violations  of the housing code since PHA intended that
these bedrooms accommodate two persons.

       In commenting      on our draft report,      HUD stated that some
of the bedrooms in        structures     that had been.accepted    prior
to completionofour         fieldwork     had less than 70 square feet.
HUD attributed     the    acceptance of these structures        to the
pressing need for        dwelling    units,   the scarcity  of structures

                                     29
suitable   for rehabilitation,   and the constraints    imposed by.
the original   layouts of the structures.     HUD informed us
that PHA's revised specifications     would set minimum floor
areas.

       PHA informed us that,      in each single-family  structure
currently    being rehabilitated,     the smallest bedroom had at
least 70 square feet of space, the master bedroom had at
least 125 square feet, and all other bedrooms had at least
100 square feet.

Coat and/or    linen   closets

       Of the 50 dwelling units we inspected,          36 did not have
coat and/or linen closets.          We believe that the lack of
closets may be attributable,          in some part, to the lack of
a specific    requirement     for coat and linen closets      in single-
family structures.        This deficiency     also existed in multi-
family structures,      but   to  a lesser   degree.   In addition,   11
closets    did not have doors, although doors were required.

        Contract    specifications       required a coat closet and a
linen closet in each multifamily-structure               dwelling  unit;
however, the specifications            did not require    these types of
closets    in single-family        structures.    Such closets    are re-
quired,    however, by the minimum property           standards for res-
idential     structures     of HUD's Federal Housing Administration.

       HUD has informed us that coat and linen closets are now
being provided.      PHA stated that single-family       structures
currently    being rehabilitated      would have closets even when
the structures     as originally     laid out did not.    PHA pointed
out, and our review confirmed,          that the Federal Housing Ad-
ministration     and PHA specifications      were not consistent    re-
garding coat, bedroom, and linen closets,

Water supply    pipe

        Contract   specifications      required   that pipe of L-grade
copper and of 3/4-inch          diameter be used for carrying     the
main water supply to each dwelling unit.               Of the 50 dwelling
units inspected,       the main water supply pipe in 26 units was
of M-grade copper, which is a cheaper grade that is not rec-
ommended for pressure applications,             and in 40 units was of
l/2-inch     diameter.
                                    30
       On the basis of a projection       of the results      of our
sample, we estimated      that contractors     had reduced their
costs by a total     of about $11,700 by not installing           the
specified    water supply pipes in many of the single-family
dwelling units completed at the time of our review.                 This
amount did not include the cost reductions            for similar      de-
ficiencies    that existed in multifamily       structures,      because
the variations     in design layouts precluded'our          considering
any one structure     as being typical     for purposes of determin-
ing how many feet of water supply pipe should have been used
and of computing the estimated cost reductions.

     We advised HUD officials        by letter     dated March 12, 1969,
of the use of unspecified       materials    for water supply pipe,
and HUD subsequently     notified    PHA of this violation.       As of
November 1969, PHA had not taken any action to determine the
number of dwelling    units so affected        nor required   the respon-
sible contractors    to take corrective        action.

      In commenting on our draft report in August 1970, HUD
stated that it was requiring       that contractors     install    copper
pipe of the required     grade and size in all units currently
being rehabilitated     and that PHA was requiring        contractors
to install   the copper pipe of the required        grade and size
in all previously    rehabilitated     units where this had not
been done.         k

Replacement    of exterior    walls

      The district     attorney    of Philadelphia    brought to light
a number of instances        in which contractors,     although paid
to replace the exterior        walls of structures,     merely coated
the existing     walls with stucco.

      Many of the structures      selected for rehabilitation     had
brick exterior   walls that were not structurally         sound.  In
such cases, PHA agreed to pay the contractors         for replacing
the unsound walls,    in addition     to paying them the basic
standard price for the structures.

       'PHA employed    a private firm to determine the extent of
exterior    wall work    that was paid for but not done.    On the
basis of the data       contained in the firm's   reports, we es-
timated that about       $87,000 had been paid to the contractors
for exterior     wall   work that was not done.
                                      31
       PHA officials informed us that funds had been withheld.                     .
from the contractors    sufficient     to cover amounts paid for
exterior   wall work that was not done.        A question still     re-
mains, however, regarding       the structural   soundness of the
units since unsoundness was the reason for requiring            the
walls.

      In commenting on our draft report,    both HUD and PHA
agreed that funds had been spent for exterior       wall work that
was not done.    PHA informed  us  that it had  withheld  $65,600
from the contractors    who had failed  to replace unsound walls.

Laundry   tubs

        Contract   specifications      required     the installation        of a
laundry tub in the basement of each dwelling                 unit.     Under
certain    conditions,     however, the specifications            permitted
the installation       of a dual-purpose       kitchen    sink that would
also serve as a laundry tub.            Although the installation            of
a dual-purpose      kitchen     sink reduced the contractors'            costs
by about $100 a dwelling unit,             the contracts     did not provide
for a corresponding        reduction     in the standard price paid for
the rehabilitated        units.

      Of the 50 dwelling   units we inspected,  18 had dual-
purpose kitchen sinks rather than basement laundry tubs.
The specifications   for 10 of these 18 units had permitted
the installation   of dual-purpose  sinks in the kitchen,    but
the specifications   for the other eight units had required
the installation   of tubs in the basements.

      In the 18'dwelling    units that had dual-purpose    kitchen
sinks, hose bibs were installed       in the kitchen as water-
supply connections     for clothes-washing    machines; however,
floor   space for clothes-washing     machines generally  had not
been provided.

      In commenting on this finding,   both HUD and PHA stated
that in a dwelling  unit where the basement ceiling   is low
and the resultant  headroom is not adequate to permit laundry
work, the laundry tub is installed   in the kitchen.

      PHA stated that in these cases no adjustments are made
in the price for the unit because the prices had been

                                      32
averaged on the assumption that installation       of laundry   tubs
would be required the same number of times       in basements   as
in kitchens.

      Although it may be true that contractors        would be re-
quired to install    laundry tubs approximately      the same number
of times in the basement as they would in the kitchen,           in
eight of the 18 dwelling units where laundry tubs had not
been installed    in the basement, the specifications,       as we
pointed out, required      such installation.     Therefore  these
contractors    would be receiving     a financial  benefit  even
though the contract     prices had been averaged.

Other   construction   deviations

       Of the 50 dwelling units inspected,     eight did not have
water heaters of the required capacity       and 11 did not have
bathtubs of the required   length.     A HUD official     informed
us that the specification    requiring   marine plywood subfloor-
ing in bathrooms was not being enforced.         In addition,     30
dwelling units did not have tile mouldings around the tops
of the bathtubs to prevent water seepage and none of the
units had grab bars and soap dishes over the bathtubs.

       In commenting on our draft report,     neither    HUD nor PHA
commented on the need to adjust the contract         price as a re-
sult of substituting   cheaper exterior-grade      plywood for the
unobtainable   marine plywood for the subflooring.         HTJDin-
formed us that the other items mentioned above would be
corrected.




                                    33
WEAKNESSESIN USED-HOUSEREHABILITATION
REQUIREMENTSAND CONTROLS

       The rehabilitation        of used houses depends upon complex
construction     specifications,        detailed   architectural    drawings,
and adequate inspections          of the rehabilitation        work to en-
sure compliance with specifications              and drawings.     A dis-
cussion of the weaknesses that we found in these planning
and control    requirements       follow.

Construction     specifications

       A general construction         specification      for the rehabili-
tation   of structures      under project         PA 2-4 was prepared by
PHA and approved by HUD for incorporation                into all contracts
for rehabilitation       work.     The specifications         were deficient
in certain    respects,     and the contractors'         strict     adherence
to the specifications         therefore      offered no assurance that
the rehabilitated       structures      would comply with HUD's mini-
mum standards of livability           and construction        and with the
local building     codes.      Specifically,        the specifications

      --included     only recommended minimum room sizes for
         multifamily     dwelling units, which HUD did not con-
         sider mandatory;

      --did not include any quantitative     standards for room
         sizes in single-family  structures,    except that each
         bedroom should not be less than 70 square feet;

      --did not include requirements      for linen closets or
         coat closets    in single-family   structures--the      only
         requirement    being that the structures      be restored    to
         their original     floor plans;

      --did not include requirements   for installation of a
         bathtub grab bar and soap dishes and for tile mould-
         ings to prevent water seepage between the walls and
         the tubs; and

      --did not provide       for   floor   space for   clothes-washing
         machines.



                                      34
      As of September 1969 the construction     specifications,
although they contained numerous oversights,      were still    be-
ing included in contracts  for the rehabilitation       of over
500 dwelling  units under project PA Z-12.

Architectural    drawings

       The procedures for the acquisition           and rehabilitation
program required       that contractors     prepare and submit to PHA
architectural     drawings of all structures         to be rehabilitated
as multifamily      structures,     for determination    as to whether
the drawings conformed to HUD's standards.              Upon approval by
PHA the architectural         drawings were incorporated       into the
contracts     for the rehabilitation      work.

       During the early phases of the used-house acquisition
and rehabilitation     program, HUD and PHA personnel jointly
reviewed the architectural       drawings submitted by contrac-
tors.    Subsequently,    the full   review and approval responsi-
bility   was delegated to PHA whose personnel,        it was felt,
were knowledgeable     of HUTI requirements.     HUD  maintained
minimum surveillance      over the delegated responsibility        and
did not make any periodic       reviews of architectural      drawings,
       PHA procedures did not require          contractors       to submit
architectural    drawings for single-family            structures     on the
premise that restoring         such a structure      to its original
floor plan would provide adequate habitability.                    PHA ac-
cepted rehabilitated        single-family     structures      although they
did not conform to the logically           applicable      room-area
standards--those      for multifamily      structures,       since there
were no standards for single-family            structures.         Had PHA
obtained and adequately         reviewed architectural          drawings for
single-family     structures,      the lack of the requirement          for
coat and linen closets could have been noted.

        Our review of PHA-approved architectural            drawings for
102 multifamily     dwelling units showed that          97 rooms had less
than the minimum space recommended by the             construction   spec-
ifications.      For 25 units the drawings did          not provide for
coat or linen closets,       and for a few other       units the design
layouts were unsuitable       for standard-size       furnishings,   con-
trary to PHA repirements.


                                      35
        HUD instituted    review procedures which, it believed,     '
would prevent any recurrence       of design deficiencies,      Our
limited    review of the revised procedures     showed that HUD's
review of the architectural       drawings had resulted    in its
recommending to PHA various       changes to bring the drawings
up to HUD's minimum standards.         PHA, however, did not always
comply with HUD's recommendations,        and HUD did not take any
action to require      compliance by PHA.

Inspections

      PHA's inspectors       monitor contractors'        compliance with
contract    specifications;     HUD is responsible        for evaluating
the effectiveness        of PHA inspection   activities.

       PHA assigned 16 full-time      building   inspectors    to the
acquisition    and rehabilitation     project   PA 2-4 to ensure that
the housing rehabilitations       were completed in accordance with
construction    specifications.     Inspections    were made at var-
ious stages of rehabilitation,       and a final     acceptance inspec-
tion was made before PHA purchased a property.

        PHA, in our opinion,     had established      adequate inspec-
tion procedures,        but the extent of noncompliance with con-
tract    specifications     noted during our review indicated        that
its inspectors       were not fully   effective   in enforcing    com-
pliance with the specifications.            Some PHA inspectors    in-
formed us that they had been instructed           to just look at the
overall    reasonableness     of the finished    units rather   than
concern themselves with strict         adherence to the specifica-
tions.

       Our review showed that obvious deviations           from the
specifications     often had not been detected by the PHA in-
spectors.      In our opinion,   such deviations     as those relat-
ing to room size, water supply pipes, bathtub size, hot-
water-heater     capacity,  closet  space, and replacement       of
exterior    walls should have been readily       detected.

       From September 1967, when project            PA 2-4 was started,
to March 1968, 265 rehabilitated           dwelling    units were pur-
chased by PHA. During this period,             HUD assigned only one
construction    representative,       on a part-time      basis, to this
project.     His reports    indicated    that,    in general,    the

                                    36
contractors'   work was acceptable  and complied with specifi-
cations and local code requirements,    except for some rela-
tively   minor items.  The types of deficiencies  noted did not
include those discussed in this report.

       From March to early July 1968, a period when 477 addi-
tional   dwelling units were purchased by PHA, HUD did not
have a construction     representative     assigned to the project.
A construction    representative     was assigned to the project
in July 1968, and an additional        representative  was assigned
in June 1969.

       During our review we discussed with HUD regional      offi-
cials the various types of deficiencies      noted during our
onsite inspections    of dwelling units in project   PA 2-4.       In
January 1969 HUD brought these matters to PHA's attention
in a letter    which emphasized that acceptance of substandard
units by PHA could jeopardize     the present used-house program
(project    PA 2-4) as well as future programs.
       Subsequent reports of HUD's construction    representatives
increasingly   cited deficiencies  of the type noted in our in-
spections.    Since January 1969, HUD construction     representa-
tives have notified    PHA of such noncompliances as substan-
dard room sizes and lack of closets.
       In addition      to the reviews by HUD's construction    rep-
resentatives,       a comprehensive audit and operational    review
of PHA, which review included the used-house program, was
made by HUD's internal        audit staff.    This review, which was
started while our review of the used-house program was in
progress,     disclosed    many deficiencies.

        Many of the deficiencies    reported   in the internal     au-
ditors'    report which was issued on June 30, 1970, involved
the used-house program.        Some of the findings    included in
the internal     auditors'  report corroborated     the deficiencies
found during our review.




                                   37
AGENCY COMMENTS

          HUD informed us that it agreed, in general,              with our
observations        that deficiencies       existed in construction        spec-
ifications,        drawings,   and inspections       of the used-house pro-
gram.       PHA  indicated   that     these  deficiencies     could be at-
tributed      to constraints      on the total      dollars   to be spent, as
well as to a willingness            to build a house for use as public
housing that would not meet the standards for a house on
the private        market.   HUD stated that PHA had drafted new
specifications         which would be applicable          to new contracts
and which would correct           the weaknesses in the specifica-
tions cited in this report.
       Under the revised specifications       scale drawings are to
be required    for all projects.     HUD stated also that PHA in-
spection procedures had been revised and greatly            improved
as to scope and required performance.          PHA also agreed that
deficiencies     existed in the specifications       and stated that
action had been taken to correct       the deficiencies.        In re-
sponse to our proposal,     HUD  informed   us  that   it would   advise
PHA to determine the extent of noncompliances where they are
known to exist and to institute       action for their correction
or settlement.

      HUD questioned our use of MPS 300 standards for evalu-
ating the construction      and livability    of the houses in-
spected.     HUD stated that these standards applied to new
construction    and not to rehabilitated      housing.   We used the
MF3 300 standards     since these standards had been incorpo-
rated in the construction      specifications    for project  PA 2-4,

       HUD disagreed with our contention        that it should have
assigned additional      construction   inspection   personnel to the
PHA used-house program.        HUD stated that this would have
been contrary     to its policy of placing responsibility      for
the execution of a program on the local agency, would have
invited   duplication    of effort,   and would have been beyond
the staff capability      of HUD.

      On pages 36 and 37 we pointed out that 'I-IUDhad provided
no more than one construction   representative   on the used-
house program until  June 1969, at which time an additional
representative  was assigned.   In addition,   during a period

                                      38
when 477 dwelling       units were acquired, HUD did not have a
representative      actively  assigned to the project.    These
factors,    together with the deficiencies    revealed by our re-
view, support our belief       that HUD had not adequately moni-
tored the used-house program.

        Although we agreed that responsibility             for execution of
a program rests with the local agency, we believe that HUD
has the responsibility          for ensuring that Federal funds are
expended in the most efficient           and economical manner.         Since
inspections     by HUD construction        representatives     serve as a
control     over the operations       of local agencies, we believe
that adequate inspections           are essential    for HUD to properly
fulfill     its responsibility.

CONCLUSIONS

      On the basis of the results       of our scientific       random
sample, we believe that most of the dwelling             units acquired
by PHA through the acquisition        and rehabilitation       project
contained   significant    deviations   from acceptable minimum
standards of livability      and construction.        In addition,     defi-
ciencies   existed in construction      specifications,       drawings,
and inspections      of the used-house project.

      HUD, in commenting on our draft report,            agreed, in gen-
eral,   that the deficiencies       existed and informed us of ac-
tions that had been or would be taken to correct              deficien-
cies existing    in the current program and to improve future
acquisition    and rehabilitation       programs.    We believe that
the steps taken or being taken by HUD and PHA should help
to prevent similar     deficiencies       from occurring   in future
acquisition    and rehabilitation       programs.

RECOMMENDATIONS
              TO THE SECRETARYOF HUD

       We recommend that the Secretary          of Housing and Urban
Development increase HUD's surveillance             of acquisition     and
rehabilitation     programs by assigning         the number of construc-
tion inspectors      sufficient      for ensuring that such programs
are being carried       out in accordance with approved plans and
procedures.      We recommend also that the Secretary            of HIJD
require     that corrective      action be taken by local authori-
ties when deficiencies          are noted.

                                      39
                                CHAPTER4

             NEED TO IMPROVE MATERIAL SPECIFICATIONS

        Differences    existed between certain   materials    PHA
specified       for use in its used-house acqu;isition     and rehabil-
itation      project  PA 2-4 and those generally    used in new con-
struction       in the Philadelphia  area and recommended by HUD
for use in project       PA 2-4.

       Because PHA's contract  required    that 5/8-inch      dry-wall
material   be used in the rehabilitation      of the used houses,
the cost of the project    was about $500,000 more than it
would have been if l/2-inch    dry-wall    material--acceptable        in
other public housing projects--had       been used.

        We were informed by HUD personnel that the thicker              dry-
wall material     had been specified       to appease the local plas-
terers'    union, the rationale       being that, if the dry-wall
material    used was as costly as plaster,         plasterers    would be
employed to plaster        the wall:.     The requirement     for thicker
dry-wall    material    did not appear to have produced the de-
sired effect,      since we did not observe any walls that were
plastered,     nor did it appear to have added to the quality             of
construction,      since the walls between structures          were ma-
sonry.

       HUD officials      informed us that changing the specifica-
tions for the project         would have required     a renegotiation     of
the standard price for rehabilitating           the houses, which they
considered undesirable.          During May 1969, 3 months after we
discussed this matter with HUD officials,             PHA negotiated    a
new standard price with the contractors            for another acquisi-
tion and rehabilitation         project, but the requirement        for
5/8-inch-thick       dry-wall   material was not changed.

       Hardwood stair      treads generally       are used for interior
stairways     in residential     construction       in the Philadelphia
area and normally are installed            in low-rent      housing projects
financed by HUD. PHA's contract              specifications      for project
PA 2-4 did not, however, specify the type of wood to be used
for stair     treads and risers.       As a result,        the contractors
generally     used less expensive softwood for the construction
of stair    treads in the rehabilitated           houses, which reduces

                                     40
the durability   of the stairs,requires     more maintenance and
repair,   and has an adverse effect     on the appearance of the
dwelLi.ng units.

      PHA's contract    specifications       for project     PA 2-4 re-
quired that asphalt tile       be used throughout        the rehabilitated
houses.    Asphalt tile requires       considerably      more maintenance
throughout   its life than other commonly used floor-covering
materials.     The manufacturers      of resilient     flooring    do not
recommend the use of asphalt tile          in rooms, such as kitchens,
which are subject to grease spillage.              They consider asphalt
tile   to be less resistant     to the types of alkalis         and deter-
gents normally used in kitchens         and bathrooms.

      We were informed that asphalt tile had been used be-
cause it cost about 8 cents a square foot less than vinyl
asbestos tile;   however, the initial  savings may be offset
by the increased cost of maintaining    asphalt tile.

         We proposed to HUD that a review be made of the materi-
als specified        in the Philadelphia      acquisition      and rehabili-
tation     program in relation        to those prescribed       for other HUD
programs and for private          construction.       We proposed also that
HUD evaluate the economic benefits              that would be derived
from the use of different           types and grades of materials,
giving due consideration          to future maintenance costs and
durability       as well as initial      acquisition     costs.     We proposed
further     that, on the basis of its evaluation,             HUD establish
standards for materials         to be used in acquisition           and reha-
bilitation       projects  and that HUD's approval of such projects
be contingent        on the use of approved materials           unless ade-
quate justification        for deviations       is obtained.

AGENCYCOMMENTS

       HUD advised us that it agreed that l/2-inch,        in lieu of
5/8-inch,   dry-wall material  should be adequate for walls and
that it was advising PHA to reappraise       the specification.
HUD also informed us that softwood stairs       and asphalt tile
had been used in the interest    of economy. HUD stated that
the revised PHA specifications    would require    the use of hard-
wood stair   treads and better floor-covering     materials.



                                      41
        PHA informed us that its revised specifications      incor-
porated the above changes.        We believe that the changes
made by PHA in its specifications        should help to improve
the quality     of rehabilitated   houses and should reduce the
overall    cost of the program, after giving due consideration
to both initial      installation  costs and maintenance costs.

      HUD advised us also that it was continually        evaluating
the economic benefits    to be derived from the use of differ-
ent types and grades of materials      and that a continuing      re-
view and revision   of acceptable   standards was being carried
out.   HUD did not comment on our proposal that its approval
of rehabilitation   projects   be contingent    on the use of ap-
proved materials   unless adequate justification      for devia-
tions is obtained.     We believe that such approval is neces-
sary to ensure that maximum benefits       are being obtained for
the Federal funds being expended.

RECOMMENDATION
             TO THE SECRETARYOF HUD

      We recommend that, to ensure that Federal funds are
expended in the most economical manner, the Secretary of
Housing and Urban Development require     that only materials
recommended by HUD be used in rehabilitation     projects,    un-
less the use of substitute  materials   can be justified.




                                  42
                               CHAPTER 5

                            SCOPE OF REVIEW

        Our review of the used-house acquisition         and rehabili-
tation    program consisted mainly of a review of PHA's project
PA 2-4 for the rehabilitation        of 3,300 dwelling      units.     It
also involved an inspection        of 50 rehabilitated      dwelling
units that were selected on a scientific           random basis.       We
examined applicable      Federal statutes,      HUD regulations,      Fed-
eral Housing Administration        construction    standards,      PHA pro-
cedures, and HUD and PHA records and interviewed              local of-
ficials    and HUD regional    personnel.      Our work was performed
at the HUD central      office  in Washington,     D.C., and at the
HUD regional     office  and PHA in Philadelphia.




                                    43
APPENDIXES




             ‘..




  45
                                                                                                               APPENDIX I
                                                                                                                   Page 1
                            DEPARTMENT             OF   HOUSING            AND         URBAN     DEVELOPMENT

                                         FEDERAL           HOUSING           ADMINISTRATION
                                                        WASHINGTON,          D.   C.     20411




ASSISTANT   SECRETARY-COMMISSIONER                            Jill     13 1970




            Mr,Max Hirschhorn
            Associate Director
            Civil Division
            United States General
              Accounting Office
            Washington, D, C. ~$48
            Dear Mr. Hirschhorn:
            This is in further reference to your letter of March 31 and your
            accompanyingdraft of a proposed report on this Departmentts Used-
            House Method of Providing Low-Rent Public Housing.
            As I mentioned in my letters of April 24 and June 10, this year, we
            were seeking a response from the Philadelphia Housing Authority (PHA)
            in accoxxiancewith your request, before giving you our reply to the
            draft report. We now have received and reviewed the requested PHA
            report.  Meanwhile we have had separate repotis on the matter from
            our region&!. office'in Philadelphia and from knowledgeable central
            office staff.
             Having only quite recently acquired responsibility for low-rent public
             housing production, I can tell you that I sincerely appreciate any
             help that I can get in sizing up the integrity,   effectiveness and ef-
             ficiency of the program. .Your report, accordingly, has been given
             very careful attention,
             I am attaching a copy of the response provided by the Philadelphia
             Housing Authority (with a transmittal letter of June 8 from Deputy
             Fkecutive Director, Miles Mahoney). For the convenience of your
             auditors in the preparation of their final draft, I am enclosing also
             a copd of the commentsprovided by our regional office and of the
             separate commentary supplied earlier and independently by our low-rent
             housing technical staff in Washington,
             There appears ko.be a substantial degree of consistency amongthese
             responses. While they indicate disagreement with your draft report in
             somematters of factual detail, these appear to be relatively minor0
             I am more concerned with conclusions expressed. .


                                                                      47
Someof these conclr:sions appc?arto be questionable because of factual
misunderstandings, which i.his exchange of information should he17 to
clarify.  Other concl~sio~~s, blowevf:rOappear to be expressions of kech-
nical and operating judgcment offered by the auditors.    I believe ad-
equate responses to these will be found in the attached comments*
As a matter of policy, I would emphasize particularly that this ussd-
house approach to meeting low-rent public housing needs was-and still
is+-in an exploratory stage. We desperately need to find ways to pro-
vide more of this class of housing in the right 'locations more econo-
mically.  Wemust retain a reasonable degree of flexibility   and allow
for somemargin of honest error if we are not to stifle the,effort,
On the other hand we most assuredly will not knowingly tolerate msl-
feasance, misfeasance or fraud by participating contractors or other
principals; and we expect our supervisory and audit staffs to maintain
constant and effective vigilance accordingly. In this connection I
appreciate especially that your auditors raised ques%ionssuch as those
concerning insulation specified but in someinstances not installed,
and concerning exterior wall reconstruction in some cases not performed.
We are, of course, following up particularly on these matters to see
that corrective action is completed as warranted; and if your staff
has any basis to doubt that effective action is being taken I should be
very grateful to hear fQ%her,from you about it,
On the whole, I am grateful for the time and effort that your staff
has devoted to this project,   I feel sure that their inquiries, as well
as tl-eir findings, have helped to stimulate and otherwise contribute to
someof the corrective actions that have been taken. They doubtless
have caused effective attention to be focused earlier on certain in-
adequacies than otherwise would have occurred,
I should add that I am reserving Judgementto some degree on certain
aspects of this operation for various reasons, not the least of which
is the fact that, as you are aware3 our HUDauditors also have con-
cluded a study of this activity.   Their report is expected to be avail-
able to you. In any event, your report, albng with the internal audit
report, will be studied further as we seek to effect continuing im-
provements in the efficiency and effectiveness of this innovative pro-
gram approach.
                                        Sincerely yours0



                               Assist
Attachments



                                   4s
                                                                                                             APPENDIXI
                                                                                                                Page 3

                              DEPARTMENT             OF   HOUSING        AND         URBAN     DEVELOPMENT

                                           FEDERAL           HOUSING         ADMINISTRATION
                                                          WASHINGTON,        D. C.     20411




ASSISTANT     SECRETARY-COMMISSIONER                             Aug 12 1970


            Mr. Max Hirschhorn
            Associate    Director
            Civil  Division
            United States General
              Accounting Office
            Washington,     D. C. 20548
            Dear Mr.         Hirschhorn:
            Supplementing my letter         of July 13, 1970, and in response to
            the oral request of your staff,         I am forwarding   a consoli-
            dated summary of the comments of the Department concerning
            the draft     report   to the Congress on the used-house method
            of providing      low-rent   public housing in the Philadelphia
            area.     This summary covers in a succinct        form suitable   for
            inclusion     in your final     printed report  the comments of the
            Department previously        furnished  to you with my letter    of
            July 13.
            Because the report     deals with the Philadelphia    Housing Author-
            ity's  program, we also furnished     to you with my letter    of
            July 13 a copy of the Authority's       comments on the report    and
            the transmittal   letter    from Mr. Miles Mahoney, Deputy Execu-
            tive Director,  obtained in accordance with your request.
            Again, may I express our appreciation     for the opportunity to
            review the report  and to provide you with our views and back-
            ground information  on the matters   covered.
                                                                               Sincerely          yours,




            Enclosure



                                                                        49
 APPENDIXI
    Page 4
                                                                                 July   28, 1970

                             GAO DRAFT REPORTTO THE CONGRESS
                   "REVIEW OF THE USED-HOUSEMETHODOF PROVIDING LOW-RENT.
                                PUBLIC HOUSING1l, March 1970


The above titled    report concerns the manner in which HUD and the Philadelphia
Mousing Authority     (PHA) have been administering    the Acquisition    and Rehabilitation
(A&RI program for used houses in the City of Philadelphia,           with specific reference
to the part of the program designated as PA-2~4 for 3,300 dwelling units.              The
following  paragraphs list the principal     observations   made in the GAO report,        and
HUD comments.

1.   GAO Observation:   Predominance of multifamily             structures results    in reversal
     of approved Development Program goal regarding              types of structures.

     HUD Response:      The GAO report indicates        that the programming of building             types
     should have followed       the breakdown as given in the Development Program (DP).
     Xt should be noted that the actual wording used in the program is as follows:
     "It is estimated     that approximately       2,942 structures       will be acquired,       providing
     3,300 dwelling units".         The DP then tabulates         the breakdown as 2,600 single-
     family,    325 two-family,     and 17 three-family       structures.      The preparation      of the
     DP for PA-2-4 was based in large part on the experience from the earlier                       PA-2-58,
     59, and 60 programs which were generally             carried out in areas of the city where
     two story single-family        houses predominate.         In the case of the PA-2-4 program,
     the City Council designated         the Midtown areas where larger,           3 and 4 story
     structures    predominate.      By agreement, the selection          of specific     blocks wherein
     houses were to be rehabilitated           was made by the Vacant Bouse Coordinating
     Committee (VHCC), composed of representatives               of city agencies.        Consequently,
     the PHA restored the larger houses available               to multifamily     occupancy that were
     chosen in order to produce the needed dwelling units,                 particularly      in view of
     the 6,000 to 9,000 eligible         families   in dire need of immediate housing.              At the
     present time, the City Council has i-emoved its restriction                  on limiting     rehabili-
     tation   of existing    structures    to designated      areas and there is now a city-wide
     choice of house shells.         This has resulted      in current production         being directed
     to single family houses.

2.   GAO Observation:       Consideration     should be given     to promoting     and encouraging
     homeownership.

     HUD Response:        At the time the DP for PA-2-4 was prepared,         there was no plan
     for a home-ownership program and homeownership was not envisaged.                   Not until
     December 1968, did this become a serious HUD concept.                The in-city    areas where
     the PA-2-4 project was implemented offer little             inducement toward homeownership
     whether the structures         are single or multifamily.       Two new programs of rehabili-
     tation   have been introduced       and should improve the possibilities         of homeowner-
     ship.    Construction      standards have been improved to provide additional             amenities.
     However,    even with low interest       mortgages or other available       subsidies,     only a
     few families     are in financial      position  to undertake homeownership.           If the city
     were to carry out its early plans for providing            additional    recreational      and
     educational     facilities     as well as improved services in the rehabilitation             areas,
     an additional      thrust toward homeownership would be provided.
                                                                                                                APPENDIXI
                                                                                                                   Page 5

3.   GAO Observation:            Dwelling        units       acquired      in locations      prohibited           by Develop-
     ment Program.

     HUD Response:      The applicable      criterion     in the DP for rehabilitation      was
     stated as follows:        a) acquisition       shall be in areas approved by the City
     Council;    b) selection    of structures       close to an obvious nuisance such as
     a slaughterhouse,      junk yard, or laundry plant will be deferred.              Although
     this is true in a few instances,            the frequency does not appear to be as
     great as the report infers.          A few of the rehabilitated       houses are adjacent
     to industrial     or commercial sites, but it should be noted that one of the
     characteristics     of the. in-city      areas of Philadelphia     is the frequent     inter-
     spersion     of    small    industrial            buildings      and businesses        in    residential          blocks.
     The rehabilitation      program was not intended to change the established
     pattern     of these areas, but rather to restore them to the type of neighbor-
     hoods that they were originally         and to provide decent housing for people
     who have lived and wish to continue to live there, especially             because they
     offer the advantages of near-by employment.            Because structures   were
     relatively     scarce that were suitable      for rehabilitation   and could be obtained
     as vacant properties       or from willing    sellers of owner-occupied    houses, a
     stipulation      in the program, the PHA was induced to rehabilitate        a few
     structures     that were adjacent to commercial sites not considered too objet-
     tionable.

4.   GAO Observation:            Limited        improvement         of a neighborhood            through        rehabilitation.

     HUD Response:           The GAO report             is critical        of the PHA for not renewing                  enough
     structures        in   a given     block     to      improve     it   substantially,         limiting        acquisition
     and rehabilitation         to 20 percent of the houses in that block.            The GAO
     explains      the limitation     as being ah outcome of PHA desire to give anonymity
     to public housing tenants.           Actually,    the 20 percent limitation        was applied
     by the PHA at the request of neighborhood               groups, subject to a time limit.
     It was based on the understanding            that other rehabilitation       programs, such
     as those run by the Philadelphia            Housing Development Corporation,          FHA 235,
     and non-profit       group programs would also take part in the process and com-
     plete the major portion of structures             in the block.     Unfortunately,      the plans
     for rehabilitation         by others did not amount to anywhere the volume expected
     with the result that most blocks were left with only the houses rehabilitated
     by the PHA. In such cases, now that the time limit has expired,                     the PHA is
     attempting       to obtain additional     single-family      house shells for continuing       the
     rehabilitation       of the block.

5.   GAO Observation:            Periodic        review        of program.

     HUD Response: The GAO report states that the Development Program for PA-2-4
     provides for periodic      review by HUD at 500-unit    increments and at least once
     every six months.       On the basis of these reviews HUD was to recommend con-
     tinuation,   modification,     or termination   of the program.   The report continues
     by saying  that although many deficiencies        were known, HUD did not take effective
     corrective   measures.     Our comments follow:
     APPENDIXI
           Page    6                                                                                       :


      a.   The deficiencies    cited by the GAO ate not as prevalent    or significant   as
           would appear from the report,     nor do they have a detrimental    effect on
           the program.     The used-house rehabilitation  program was new. Every step
           could not be foreseen.      It is only through experience that the operation
           of a program can be refined and progressively      improved.   This has generally
           been done as the result of HUD recommendations and the effort        will continue.

      b.   It is HUD policy to vest in local public housing agencies, in this case
           the PHA, the maximum amount of responsibility             in the administration       of
           the low-tent     housing program, and permit the decision making and imple-
           menting processes to be made with minimum Federal intervention.                   The current
           operating     budget of the PHA shows a total of 18 development employees
           occupied full time on the used-house program, 15 maintenance employees
           partly occupied,       and a substantial      portion of other staff time given to the
           program.      The HA0 function      has been to monitor and review the program in
           consonance with avoidance of duplication             of PHA effort  to the maximum
           ability     of available     staff.   In the opinion of local officials,        the used-
           house program in Philadelphia           has been highly successful in accomplishing
           the limited     goals of providing       decent, safe and sanitary    housing quickly
           and at relatively        low-cost in areas where it is urgently       needed for families
           living    in deplorable     conditions , and where there are no relocation          facili-
           ties to permit a fully comprehensive program involving             demolition      and new
           construction.        Because of this achievement,       HUD has not found it opportune
           to consider terminating          the program.

      c.   In those areas where HUD evaluation       showed a need for modifications     to the
           program, appropriate    actions wete recommended to the PHA. Most of them
           have been put into effect.      The program is under constant review.       In order
           to provide a substantive     basis for the foregoing    statement,   HUD Central
           Office staff engineers have just made a second on-site         review of PHA used-
           house operations.     They found that an impressive number of improvements in
           administration,   inspection , construction    and materials   have been effected
           in the period following     an earlier   review in November 1968.

6.    GAO Observation:     Rehabilitated     dwelling        units   do not meet construction   and
          livability   standards.

      HUD Response:

      a.   Applicable   Standards.   The GAO report does not specifically     cite the
           standards used in its evaluation      of the construction  and livability      of
           the houses inspected.     It is believed that reference might have been to
           MPS 300 and MPS 2600, which ate standards for new construction,           and not
           FHA 950 and HUD PG-50, which ate standards for the rehabilitation           of
           housing.   The latter   do not requite   some of the items that the GAO auditors
           found lacking.




                                                        52
                                                                             APPENDIX I
                                                                                 Page 7


b.   Insulation.    There were instances of the absence of insulation          in some
     roofs and windows bays of houses accepted for occupancy.            The PHA is
     currently   making inspection    of properties    to determine whether insulation
     had been provided,    and its attorney    is exploring    the matter of securing
     redress.    The revised PHA inspection      procedure now calls for a certification
     by the inspector    responsible    that each structure    has met specifications.
     The HUD Construction     Representative   assigned to the used-house program
     spot checks houses during rehabilitation         as well as those that have been
     accepted by the PHA.

c.   Room   Size.      Some of the bedrooms in houses that had been accepted prior to
     the time of the GAO audit had areas less than 70 square feet.             This was
     due to the pressing need for dwellings           and the scarcity of suitable  house
     shells coupled with constraints         placed on the developer by the original
     layout of exterior       walls, doors and windows in the houses being rehabili-
     tated.       Revised PHA specifications     will set minimum floor areas.

d.   Closets.      Linen and coat closets found lacking in some single-family
     buildings     by the GAO auditors,   even though not required by HUD PG-50,
     Rehabilitation      Guide for Residential   Properties, are now being provided.

e.   Water Pipe.    Copper pipe of the required  size and grade is now being
     installed   in all structures.   In houses where this was not done, the PHA
     has caused developers to carry out necessary corrections.

f.   Plywood.  Marine plywood required by the specifications  not being obtaina-
     ble, the PHA agreed to accept exterior  grade plywood in its place.
                                     .
8.   Exterior   walls. The PHA engaged an engineering     consultant  to establish
     the facts in regard to the failure   of developers to strengthen     or replace
     unsound exterior  brick walls.   The estimated   cost of correction   was set
     at $15,000, and monies were withheld    from the developers involved to have
     the deficiencies  corrected,

h.   Laundry Tubs.     In instances when the basement ceiling  height was below
     5'-ll",   developers were instructed   to install a dual compartment sink in
     the kitchen in lieu of the specified     concrete laundry tub in the basement.
     No reduction    in price was made. The PHA contends that these cases are
     averaged into the standard schedule price.

i.   Water heaters.   Thirty and forty gallon water       heaters   are now being   in-
     stalled depending on the size of the unit.




                                               53
APPENDIXI
   Page 8

     j-     Bathroom      Appurtenances.         .I few 4’6”      in place                     of   the specified       5’-0”   bath-
            tubs were accepted           because    of space limitation                           imposed   by the original
            plan or the need to add a closet                 or heating                      duct.      PHA specifications         are
            being    revised     to include      bathroom      accessories                     and ceramic        wall    tit-e
            around     bathtubs     to a height       of 6'-0".

7.   GAO Observation:                Reasons        for     deviations         from     minimum           standards          of       livability
     and construction.

     FILED Response : In general                    we agree with            the GAO observation                that      there     existed
     deficiencies           in construction               specifications,             drawings,        and inspection             of the
     used-house          program.          We have been and are continuing                           to take measures             to
     correct        these weaknesses.                 The PHA has drafted                 a revised        set of Standards                and
     Specifications            dated December               23, 1969, which will                 be issued         for use in new
     contracts.           The items          cited      in the GAO report               have been added or corrected.
     Under these           specifications,              quarter-inch            scale     drawings       are required           for all
     proposals.           The inspection              procedure         performed         by PHA inspectors               has been
     revised       and greatly          improved          as to scope and performance.                        The inspectors               will
     certify       on the final            punch list           that     specifications            have been complied               with.
     The GAO report            contends          that the HA0 should                 have assigned           additional         con-
     struction         inspection          personnel          to the Philadelphia                used-     house program.               This,
     as indicated           in paragraph            5, would be contrary                  to HUD policy           of placing
     responsibility            for the execution                  of a program          on the local           agency,       would invite
     duplication          of effort,           and is beyond             the staff        capability         of the HAO. HUD
     Construction           Representatives               do not have full              inspection         responsibility.                 Their
     primary       duty is to see that                  local       housing      agency       procedures        for construction
     and inspection            are being           satisfactorily            performed         and HUD requirements                 fulfilled.
     Insofar       as deficiencies               in houses already               accepted        and occupied           are concerned,
     HUD will        advise      the PHA to determine                   the extent          of noncompliances,where                   known
     to exist        and institute            action       for their         correction          or settlement.

8.   GAO Observation:              Need      to   resolve       differences            in    the       quality         of   certain          materials.

     HUD Response:       The         GAO draws attention                  to   three        specific             material      deficiencies
     In the rehabilitation               program:

     a.     Drywall.          l/Z-inch    drywall   construction     in lieu     of S/g-inch    should      be
            adequate        for walls.       HUD is advising     the PHA in regard         to a reappraisal                                          of
            this     requirement       based on PG-50 and the local          building     code.

     b.    Interior        Stairs.       Hardwood    stair  treads    are preferable     to softwood        treads
           which have been used for the sake of economy.                       The revised       PHA specifica-
           tion     require        oak treads    and risers     for the first     floor  flight,        and clear
           pine risers          and yellow     pine treads     for the second and third           flights.




                                                                         54
                                                                                    APPENDIXI
                                                                                       Page 9

     c.   Asphalt Tile.     In the interests  of economy, the PHA has used asphalt           tile.
          The new specifications     call for upgrading of floor covering materials            even
          though it will result    in higher rehabilitation   costs.

The GAO recommends that HUD evaluate ,the economic benefits          to be derived from the
use of different    types and grades of materials      and that standards be established
for the acquisition      and rehabilitation  projects   in all localities.     It may be assumed
that such evaluation      is an on-going project    and that there is continuing    review and
revision   of acceptable    standards.

9.   HUD Summation: The GAO report brought out certain weaknesses in the PA-2-4
     program and deviations    from the original concept set forth      in the Development
     Program.    Many of these appeared in the interest  of facilitating      and expediting
     production.    The program's value has not been impaired nor was the cost increased.
     Corrective   actions have been taken both by HUD and PHA when their necessity has
     been revealed by experience.

     The Philadelphia    Used-House Program (PUHP) has provided standard and sanitary
     living  quarters  for over 5,000 families        in approximately     three years.    The tenants
     enjoy facilities    in their own neighborhood       without  relocation     that are far better
     than were previously     available.      We acknowledge that the program did not provide
     wider streets,   playgrounds,      schools, community centers,      nor adequate parking,     all
     of which are important      to a viable neighborhood.       With more adequate funding the
     PUHP new construction     could be used together       in an urban renewal venture to pro-
     vide these other facilities        and greatly encourage the possibility         of eventual
     homeownership.




                                                    55
APPENDIXII
    Page 1
                                COPY

                 THE PHILADELPHIA HOUSINGAUTHORITY
                       2012-18 CHESTNUTSTREET

                       PHILADELPHIA, PA.         19103



                                  June 8, 1970



Mr. Albert D. Levy
Assistant   Director of Development
Department of Housing and
   Urban Development, Region II
Curtis Building
Sixth & Walnut Streets
Phila.,   Pa. 19106
Dear Mr. Levy:
      Attached you will find the reply of The Philadelphia  Housing
Authority   to the audit made of The Authority's Used House Program by
the United States General Accounting Office.

      It is my understanding that our        comments will be considered in
the preparation  of the Department of        Housing and Urban Development's
reply and that they will be included         in their entirety  in the report
to be published by the United States         General Accounting Office.
                                  Sincerely       yours,

                                  /s/    Miles    Mahoney
                                  Miles Mahoney
                                  Deputy Executive         Director
Attachment




                                        56
                                                                                                      APPENDIXII
                                                                                                          Page 2
                            REPLIES OF THE PHILADELPHIA HOUSING AUTHORITY
                            TO THE UNITED STATES GENERAL ACCOUNTING OFFICE
                            AUDIT OF THE PHILADELPHIA HOUSING AUTHORITY’S
                                          USED HOUSE PROGRAM

              The lengthy        critique       prepared      by GAO, as well as HUD audits,               are of
value in refining          the delivery          system for the acquisition             and rehabilitation
of local housing         authority        dwelling     units.       When production        is at a signifi-
cant level      and a large number of units                  are provided      under any program,          mis-
takes     and imperfections          will   be in evidence.            Obviously    the    important      con-
sideration      is that earlier           mistakes     will     lead to refinements          and a more
efficient     system     for future        programs      in Philadelphia         as well as other cities.
 It is interesting         to note that no other city except Philadelphia                         has produced
enough rehabilitated           publit      housing     units      to justify     a comprehensive        review.

                Briefly,   Philadelphia       believes   the following     five    (5) points to be
of great      significance       and believes      these five considerations        have made the
acquisition        and rehabilitation       program an unqualified        success.

1.             Over 5,000 dwelling          units    including      many with 4, 5, and 6 bedrooms
               have been provided          for low-income         families      in Philadelphia.      This
               production      set against       a large relocation           workload     resulting   from
               recent     urban renewal,       highway construction,              and code enforcement
               displacement       have provided        relocation        sources for thousands       of
               Philadelphia       relocatees.

2.             The Philadelphia       Housing Authority      program has meant significant
               renewal     of neighborhoods     in which no private     rehabilitation         or new
               construction      has occurred     over a period of 15-20 years.           The Phila-
               delphia     Housing Authority      renewal   activities  in these neighborhoods
               are at present       encouraging     and making possible    private     rehabilitation.
3.             The cost of rehabilitation               of existing        vacant shells           is significantly
               less expensive          than acquisitidn,          demolition,         and new construction            of
               dwelling       units.      The cost     of acquisition          of typical        row houses
               under urban renewal            has averaged        $4,000.00       to $6,000.00          per structure.
               The demolition          costs are approximately              $1,500.00       per unit and the
               cost    of new construction           for a three-bedroom              unit currently         exceeds
               $18,000.00        in Philadelphia.           This extremely          high cost of approx-
               imately       $ZS,OOO.OO (for only a three-bedroom                     unit)    is much higher         than
               the corresponding           total   rehabilitation           cost of the existing              shell.
               Additionally,         the cost of providing            new six-bedroom            units     in infill
               lots would very likely             exceed $30,000.00.              Therefore,         for the highly
               desirable       scattered      site program,        rehabilitation           of existing         units
                is financially         much more advantageous             than acquisition,             demolition,
               and new construction.

4.             Almost unanimously,          The Philadelphia       Housing Authority       residents
               prefer    scattered      site rehabilitated        units   over the traditional          project
               environment.        Additionally,       there is no expensive        security      required
               for scattered       site units    thereby     eliminating      the fastest     rising
               operating     cost in project       settings.

5.             Another   important   contribution       of the program has been the training
               and development     of both rehabilitation          contractors    and rehabilitation
               tradesmen   who have developed       skills,    techniques,     and knowledge        and
               have been encouraged      to enter    private     residential    rehabilitation.
APPENDIX II
    Page 3


PC   PAR

 6     1
                        The developers         are no longer       permitted      to locate     units     in restricted
          areas of the city and, after               approval     by The Philadelphia          Housing Authority,
          contract    for rehabilitation           of these proper.ties.           Numerous problems         resulting
          from developers       obtaining       shells    have been eliminated           by using The Philadelphia
          Housing Development         Corporation        as a centralized        acquisition       agent.      This new
          procedure     permits    more effective         planning     of locations        for units     and permits
          the participation        of good rehabilitation             developers      who have experienced           diffi-
          culty    in obtaining     sufficient         numbers of vacant shells.
                        In September,       1969, the City Council             of Philadelphia        approved      and
          the Mayor signed a bill           providing       for the acquisition          and rehabilitation          of
          scattered     site units      for public       housing    throughout      the city,     thereby     eliminating
          quotas in certain        areas and exclusion           of certain      areas in the City of Philadel-
          phia.

 7    4
                        The distribution           goal on Page 7, Paragraph             4 states:       “The         develop-
          ment program stipulated             that 79 percent           of the rehabilitated         houses         were to
          consist     of single-family          structures        and only 21% were to be rebuild                   to accomo-
          date two or three families”.                  Although      this precise      distribution      has         not been
          met, the trend since October,                 1968, indicates         that the goal will        be        reached
          since no additional          multi-family          structures      (duplexes     or triplexes)            are being
          contracted.

 8    1
                           The figures          given in this paragraph               are quite deceptive           since the
          program goals referred                 to on Page 7 dealt           with structures,            not dwelling        units.
          To March 31, 1970, 2,817 single-family                         units      (72% of the total)           have been
          acquired.         Seven hundred forty-one               duplexes       and 345 triplexes            have been acquired.
          This makes a total             of 1,086 multi-family              structures        which is 28% of the total.
                           The statement           that the program promoted density                    beyond the range of
           20-59 duplexes           per acre shown in Philadelphia’s                     Comprehensive        Plan is not a
          strong       argument against            the program.         The Philadelphia           Housing Authority            no
          longer      rehabilitates           two or three family           units.        Additionally,        when we did
          rehabilitate          duplexes       and triplexes,         they were in areas which had previously
          contained        as many as six or seven dwelling                     units     per row structure.             Investor
          owners had broken these buildings                     into six or seven small apartments                       and, in
          fact,     the rehabilitation               into three units         reduced the potential              density     of the
          neighborhood.             These large triplex           units     have not been used for single-family
          structures        for at least 40 years and some were never used for single                                    family
          structures.           Additionally,           the density      range, as presented              in Philadelphia’s
          Comprehensive           Plan, is only a general              recommended density              range to be used as
          a guide and cannot be considered                     a limit.

9     2
                       Although     none of the dwelling            units     in the multi-family        houses have
       been sold through           a homeownership       program,        neither      have any of the single-
       family     units     been sold.       This will     no longer be the case in Philadelphia                     since
       180 rehabilitated           scattered     site units       in-the      Haddington     Area will     be sold
       under Turnkey III,            a lease-purchase        arrangement         for public     housing    residents.
       In addition,         the new Project        Rehab Program will            provide    for possible      sale under
       Section       235 of all single-family           units produced           for The Philadelphia         Housing
       Authority        beginning     approximately      July 1, 1970.             These two new programs          will
       significantly          promote homeownership          opportunities.            The units    produced     prior     to
       the beginning          of Project     Rehab for The Philadelphia                Housing
                                                                                                                 APPENDIX II
                                                                                                                     Page 4

PG PAR

 9         2
            Authority     were produced         under a specification         without    sales features.         In order
             to save construction           costs, no showers were provided            in any of the units.             There
            were no hardwood floors,              or even vinyl      floors   since asphalt       tile    was permitted       in
             the specifications          and is significantly          less expensive.        The new Project       Rehab
             Program provides         for these additional         sales features      which should encourage            home-
            ownership.        Additionally,         there are many families         who do not qualify        for any of
             the homeownership          programs.        Even with a 1% mortgage       in the 235 Program or in
             the subsidized       23.3 Program,        thousands   of Philadelphia       families      are not in a
             financial    position       to undertake        homeownership.

IO         1
                              The Philadelphia       Housing Authority         has acquired         1950 North Eighth
               Street     adjacent     to the vacant lot shown in the picture.                    Subsequently,       The
               Philadelphia        Housing Authority       has also purchased          1807, 1908, 1909, 1910, 1916,
               1919, 1920, 1921, 1922, 1923, 1924, 1926, 1929, 1934, 1935, 1939, 1941, 1943, 1945,
               1949, and 1950 North Eighth Street.                   This is a total       of twenty-one        structures,
               approximately        4St of the block.          The Authority      proceeded       with rehabilitation
               and acquisition        on the premise that code enforcement                 would remove the objection-
               able uses and concentrated            rehabilitation       would renew the neighborhood.                   In some
               areas of Philadelphia,          20% or less of a block,            when rehabilitated          by The Phila-
               delphia      Housing Authority,       will     encourage   private     rehabilitation.           In other
               areas,     a more significant       investment        is necessary      in order to sitmulate            private
               investment.

11   l/2
                             The City’s     Comprehensive   Plan and planning     theories     as impiemented       by
               the City Planning        Commission are subject       to change.   Undoubtedly,       some rehabili-
               tation   efforts   initiated     as early   as 1965 may be acquired        for other uses which
               are designated     at a later      date.   A number of prominent      planners     no longer
               judge residential        use along with institutional        and commercial     investment    unde-
               sirable.

12         1
                             Further detail       is essential           to a full       understanding        of this paragraph.
               The Philadelphia        Redevelopment         Authority        in the Model Cities           Urban Renewal Area
               drew plans in conjunction            with the Model Cities                Area   Wide Council         for renewal
               of soae blocks containing            rehabilitated           Philadelphia        Housing Authority            struc-
               tures, uhich were to be acquired                 and demolished           to provide      new housing         sites.
               The Model Cities        Urban Renewal Area originally                   contained       some fifty       Philadel-
               phia Housing Authority          dwelling       units      that were to be acquired               in this manner.
               However,    to date, none have been acquired                     and there      are only five Philadel-
               phia Housing Authority          structures         after     some careful        replanning        that may require
               acquisition      for the overall        improvement          of the Model Cities            Area.       Considering
               the fact that more than 3,800 structures                       have been rehabilitated              under a pro-
               g~aa that preceeded         Model Cities         Urban Renewal activities.by                 four years,          the
               possible    acquisition      of only five structures                 should     be seen as a demonstration
               of careful     planning     and coordination             on the part of The Philadelphia                  Housing
               Authority,     the Redevelopment         Authority,          the City Planning           Commission,        and
               Model Cities.




                                                                     59
APPENDIXII
    Page 5

PG   PAR

13    .I
                            The Philadelphia         Housing Authority      is cooperating      with other                city
           agencies       for further      rehabilitation       and new construction        for building                in in-fill
           lots by both the Housing Authority                 and the Redevelopment         Authority      in           the Model
           Cities      Area.      There is no guarantee         that private     owners will     complete               renewal    of
           these areas.           There is no guarantee         that private     owners will      complete              any reha-
           bilitation.          However, The Philadelphia           Housing Authority’s        Used House               Program
           has been designed           and is being implemented           to encourage     such investment                  and
           recent      rises    in acquisition         prices for vacant shells        in our traditional                   areas
           indicate        that private      rehabilitation       is being undertaken.

13
                          Every study done for the City Planning      Commission,    The Philadelphia
           Housing Authority       and the Redevelopment   Authority   has concluded       that rehabili-
           tation    is the best and most efficient      method of improving      a block.      The high
           cost of demolition       and new construction   have placed severe limits          on the finan-
           cial   feasibility    of the new construction     route to renewal.

13    3
                      The Philadelphia       Housing Authority  must question  whether    the photo
           shown on Page 13 is “Typical”         of the limited effect of sporadic    rehabilitation.
           On the contrary,    a great number of blocks have been renewed and private               rehabi-
           litation  has occurred      simply and only because of The Philadelphia       Housing
           Authority  Program.

14
                          In some cases,        a house is acquired                and rehabilitated         with the under-
           standing     that other vacant shells               on that block           are    to be made available           for
           the Used     House Program.          When, in fact,           these additional            vacant shells        cannot
           be made available,            the single      rehabilitation            on that block       will    not have the
           catalytic      effect     necessary      to significantly             improve      the neighborhood.           In
           cases where this has occurred,                  the centralized            acquisition      agent,     The Phila-
           delphia     Housing Development            Corpor,ation,         has pursued         the  owners of surrounding
           properties       through      all the means available               to them in order to prepare                a
           package of vacant shells             which would be appropriate                    to The Philadelphia
           Housing Authority’s             Used House Program.              The Philadelphia          Housing Development
           Corporation        is able to accept vacant shells                    as gifts       (tax write-offs)        from
           own&s and can also eliminate                  city tax liens            ana judgements        against     the
           properties.          The acquisition        through       sheriff       sale is also utilized           although      it
           is a lengthy         process.

21    1
                       The fifty    dwelling   units  selected   at random                     (which is less         than 2%
           of the units   acquired)      is not necessarily    a scientific                     random sample         of the
           other 98% of the units.

21    4
                           The Philadelphia      Housing Authority      Inspection      Division      currently
           reports      not to the Development        Division,    but directly      to the Deputy Executive
           Director,       and The Philadelphia       Housing Authority        is currently      proud of the
           quality      of work    it is accepting.        Rigid standards       are being enforced         and we
           invite     inspection     by any agency of the single-family             dwelling     units     now being
           produced.        In late 1969, eight       of the sixteen     housing     inspectors       were terminated
           as employees        of The Philadelphia       Housing Authority.         Under a new Inspection           Co-
           ordinator,       the performance     of the Inspection       Division     and the quality          of the
           units     accepted    has improved considerably.




                                                                    60
                                                                                                             APPENDIX II
                                                                                                                  Page 6



22       1
                           The text of this paragraph          shows inspection          of units      in a method
             beyond what can be considered            random selection.            Be assured,      however,     that all
             units    presently     being produced      are insulated.          Before developers         are allowed        to
             sheetrock,      the amount and quality        of the insulation           is inspected.         Currently,         a
             reinspection       of all units purchased        within     the last year is being carried                 out
             and where deficiencies         are found,     the developer         must repair      these deficiencies
             under the one year warranty.
                           Currently,     in spite    of the questionable           and conflicting        requirements
             of The Federal       Housing Administration,          The City of Philadelphia              Housing Code,
             and The Philadelphia         Housing Authority        specifications,        no single-family           struc-
             ture is being rehabilitated           with the smallest          bedroom less than 70 sq. ft.                  All
             other bedrooms in a single-family             unit must have at least 100 sq. ft. and the
             master bedroom must be at least 125 sq. ft.

25   3
                          There is also confusion     as to the FHA-PHA Specifications                regarding
             coat, bedroom and/or      linen closets.     In single-family        units      coat and linen
             closets,   as well as bedroom,     are required      for FHA Minimum Property            Standards.
             The Philadelphia     Housing Authority    specification       required      bedroom closets         but
             are silent    with regard to coat and/or       linen closets.         Currently,       no single-
             family   houses are being rehabilitated        without   a coat     closet      and linen    closet
             even if the original      design of the house did not contain              either    or both of
             these closets.

25   1, 2, 3
                          The question     of wall work being paid for and not provided                   by the con-
             tractor   has been carefully        researched       and in a few cases, amounting           to perhaps
             $lS,OOO.OO, walls were paid for and not provided.                     Monies from retention        funds
             were taken to cover this loss from the appropriate                    developers,      the walls were
             made structurally       sound, the developers          were disqualified        from the program,       and
             in some cases     criminally     prosecuted.         In many of the cases which were thought
             to be fraudulent      wall contracts,        Fareful    examination      proved that      the walls had
             been done or the wall had been certified                as not requiring        replacement     and the
             money was deleted       from the contract.

26       1
                           When the basement ceiling         is less than 5’11” from the floor,
             laundry    tubs are installed       in the kitchen      rather    than in the basement since
             there   is not sufficient      room in the basement to provide             an adequate      area for
             laundry    work and it is structurally          and financially       unfeasible      to lower the base-
             ment floor.      In the cases where this happens,              no adjustment       is made in price
             since,    on the average,     developers   will    have to put laundry           tubs in the basement
             approximately      the same percentage     of the time and that percentage               is averaged
             into the overall      price.




                                                                   61
APPENDIXII
          Page 7

PG PAR

2%   1
                        The five      deficiencies       in the specifications           listed      are, in fact,
         deficiencies        which have in large part been corrected                    by the new specifications
         for    the Project       Rehab Program.         The fact that the former specifications                   which
         had been approved           by HUD did not correspond            to the ultimate          in building     prac-
         tices     is true,     but this fact is not a valid              criticism      of the program since
         there were constraints              on the total      dollars    to be spent as well as a willing-
         ness to build         a house for public          housing which did not meet the standards                    of
         the private       market.       This is no longer          true and the renewal          of vacant shells        in
         Philadelphia        under Project         Rehab will      meet high standards          of design and con-
         struction      either     for sale under Section             235 or for rental         to a public      housing
         resident.        In addition        to the new specifications            which will      correct     these defi-
         ciencies,      amendments and additions              to the old specification            have been issued on
         a continuing        basis and have upgraded             the quality       of the units produced.
29
                         4” scale architectural     drawings          will    be required      for     all     single-family
         units      in the new Project     Rehab Program.
34
                          The new specification         includes     4” dry    wall   rather    than         the previously
         used     S/g”    thickness.

35   3
                          In the new Project   Rehab specifications               new stairs         are required        using
         oak     treads     and risers in place of soft wood.
36   2
                     In place of the asphalt      tile  throughout    the house, the new specifica-
     tions    call for strip     oak flooring     in the living    and dining   room areas, vinyl-
     asbestos     tile    in the kitchen    and all bedrooms and ceramic tile       on the bathroom
     floors.
                                                                                              APPENDIXII
                                                                                                  Page 8

           THE PHILADELPHIA                              MQUSING AUTHORITY
                                2012.lS           CHESTNUT            Sl’REET

                                 PHILADfILPHIA,                PA.      19103


                                                                                       September      1, 1970




Mr; Albert      D. Levy, Director, Production                Division
Department      of Housing & Urban Development
Curtis    Building
6th & Walnut Streets
Philadelphia,      Pa .19106


Dear Mr. Levy:

In reference   to our letter  of June 8, 1970 covering    replies   of The Philadelphia
Housing Authority    to the audit made of the Authority’s      Used House Program by
the U. S. General Accounting     Office, we would like to amend two areas of those
replies.

1.   On Page 2 of our replies      referring to Page 8, Paragraph                            1 of the Audit,    the
     breakdown of structures      should be as follows:

                                   1124      single     unit structures
                                     609     duplexes
                                     293     triplexes
                                  2026       total     number of structures

2.   On Page 5 of our replies  referring    to Page 25, Paragraphs 1,2,3 of the Audit,
     Walls paid for by the Authority     and not provided by the Developers amounted
     to $65,600.


                                                                     $%qerely.      yours,


                                                     &&wiJh*         Deputy      Executive     Director




                                                    63
APPENDIX III


                  PRINCIPAL OFFICIALS OF THE

         DEPARTMENTOF HOUSING AND URBAN DEVELOPMENT

     RESPONSIBLE FOR THE ADMINISTRATION OF ACTIVITIES

                   DISCUSSED IN THIS REPORT


                                               Tenure of office
                                               From            -To
SECRETARYOF HOUSING AND URBAN
  DEVELOPMENT(formerly     Adminis-
  trator,    Housing and Home Finance
  Agency):
       Robert C. Weaver                 Feb.      1961            Dec. 1968
       Robert C. Wood                   Jan.      1969            Jan.    1969
       George W. Romney                 Jan.      1969            Present

ASSISTANT SECRETARYFOR RENEWAL
  AND HOUSING MANAGEMENT:
     Don Hummel                         May       1966        Feb. 1969
     Howard J. Wharton (acting)         Feb.      1969        Mar.    1969
     Lawrence M. Cox                    Mar.      1969        July    1970
     Norman V. Watson (acting>          July      1970        Present

ASSISTANT SECRETARYFOR HOUSING
  PRODUCTION AND MORTGAGECREDIT
  AND FEDERAL HOUSING COMMIS-
  SIONER:
     Eugene A. Gulledge                 Oct.      1969        Present




                                                     U.S.   GAO    Wash.,   D.C.


                                64