oversight

Public Housing: Information on Receiverships at Public Housing Authorities

Published by the Government Accountability Office on 2003-02-14.

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

                United States General Accounting Office

GAO             Report to the Chairman, Subcommittee
                on Housing and Transportation,
                Committee on Banking, Housing, and
                Urban Affairs, U.S. Senate

February 2003
                PUBLIC HOUSING
                Information on
                Receiverships at
                Public Housing
                Authorities




GAO-03-363
                a
                                               February 2003


                                               PUBLIC HOUSING

                                               Information on Receiverships at Public
Highlights of GAO-03-363, a report to          Housing Authorities
Subcommittee on Housing and
Transportation, Committee on Banking,
Housing, and Urban Affairs, U.S. Senate




About 3,000 public housing                     Receiverships at housing authorities have generally resulted from long-
authorities—state, county, and                 standing, severe, and persistent management problems that led to
municipal agencies—develop and                 deterioration of the housing stock. Under an administrative receivership,
manage low-income housing in                   HUD appoints either a contractor or a HUD employee to take over the
cooperation with the Department                housing authority’s management. Because receiverships generally involve
of Housing and Urban
Development (HUD). Since 1979,
                                               the complete takeover of a housing authority’s management and operations,
15 housing authorities have been               HUD views receiverships as a last resort when other interventions such as
placed in the hands of receivers—              technical assistance or sanctions have failed. HUD has made these decisions
outside parties designated to                  on a case-by-case basis. In four cases, decisions to appoint receivers were
manage the authorities during a                made by courts. These judicial receiverships stemmed from lawsuits filed
specific period of time, usually               against housing authorities because of poor living conditions in public
several years. GAO was asked to                housing.
identify the circumstances that led
to receiverships, any differences in           Administrative and judicial receiverships have operated similarly, and all of
the way they operate and in their              the receivers have had the same authority to make necessary changes. The
results, and the factors that have             specific corrective actions receivers have taken depended on the problems
influenced the termination of
receiverships.
                                               at the individual housing authority. Most receivers have found it necessary
                                               to oversee the complete reorganization of the housing authority’s
                                               management and operations, develop and enforce policies and procedures,
                                               and improve physical conditions. In some cases, receivers have had to
                                               desegregate public housing to address fair housing violations.

                                               Whether under administrative or judicial receivers, nearly all of the 15
                                               authorities showed improvement during their years of receivership. The
                                               four housing authorities under judicial receiverships generally have
                                               continued to demonstrate strong performance; for example, performance
                                               scores have improved and have generally remained high. While housing
                                               authorities under administrative receiverships have also made
                                               improvements, some still demonstrated a significant problem with housing
                                               units in very poor physical condition.

                                               According to HUD officials, HUD ends administrative receiverships when it
                                               is clear not only that conditions at the housing authority have improved but
                                               also that the authority’s management can sustain the improvements. The
                                               decisions to end judicial receiverships are made by judges. To date, four
                                               administrative and two judicial receiverships have been terminated.




www.gao.gov/cgi-bin/getrpt?GAO-03-363.

To view the full report, including the scope
and methodology, click on the link above.
For more information, contact David G. Wood
at (202) 512-8678.
Contents



Letter                                                                                                 1
                             Results in Brief                                                          2
                             Background                                                                4
                             Receiverships at Housing Authorities Have Resulted from Severe,
                               Long-standing Problems                                                  7
                             Administrative and Judicial Receiverships Have Operated Similarly,
                               but Specific Remedies Have Varied                                      10
                             Both Administrative and Judicial Receiverships Have Shown
                               Improvement                                                            12
                             Criteria for Ending Receiverships Vary                                   17
                             Agency Comments                                                          20


Appendixes
              Appendix I:    Scope and Methodology                                                    21
             Appendix II:    Administrative Receiverships                                             23
                             Beaumont Housing Authority (TX)                                          23
                             Camden Housing Authority (NJ)                                            23
                             Chicago Housing Authority (IL)                                           24
                             East St. Louis Housing Authority (IL)                                    24
                             Lafayette Housing Authority (LA)                                         25
                             Housing Authority of New Orleans (LA)                                    25
                             Orange County Housing Authority (TX)                                     26
                             St. James Parish Housing Authority (LA)                                  26
                             San Francisco Housing Authority (CA)                                     27
                             Springfield Housing Authority (IL)                                       27
                             Wellston Housing Authority (MO)                                          27
             Appendix III:   Judicial Receiverships                                                   29
                             Boston Housing Authority                                                 29
                             Chester Housing Authority                                                29
                             Housing Authority of Kansas City                                         30
                             District of Columbia Housing Authority                                   31
             Appendix IV:    GAO Contacts and Staff Acknowledgments                                   33
                             GAO Contacts                                                             33
                             Acknowledgments                                                          33


Tables                       Table 1: Administrative Receiverships as of December 2002                 6
                             Table 2: Judicial Receiverships as of December 2002                       7




                             Page i                                             GAO-03-363 Public Housing
         Contents




         Table 3: Change in Performance Scores for Housing Authorities
                  under Judicial or Administrative Receivership                                     15
         Table 4: Change in Performance Scores for Housing Authorities
                  under Administrative Receivership, Based on Size of the
                  Authority                                                                         16


Figure   Figure 1: PHA Performance under Receivership                                               13




         Abbreviations

         HUD          Department of Housing and Urban Development
         PHA          Public Housing Authority
         PHAS         Public Housing Assessment System
         PHMAP        Public Housing Management Assessment Program

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         Page ii                                                         GAO-03-363 Public Housing
A
United States General Accounting Office
Washington, D.C. 20548



                                    February 14, 2003                                                                           Leter




                                    The Honorable Wayne Allard
                                    Chairman, Subcommittee on Housing
                                      and Transportation
                                    Committee on Banking, Housing
                                      and Urban Affairs
                                    United States Senate

                                    Dear Mr. Chairman:

                                    About 3,000 public housing authorities—state, county, and municipal
                                    agencies—develop and manage low-income housing in cooperation with
                                    the Department of Housing and Urban Development (HUD). HUD provides
                                    funding—nearly $7 billion annually—and has contracts with these
                                    authorities that require them to maintain decent, safe, and sanitary
                                    properties and manage programs according to HUD’s regulations and
                                    requirements. Despite expenditures of this magnitude, many public
                                    housing properties have been unsafe and unsanitary for several decades.
                                    Some have violated fair housing requirements by maintaining segregated
                                    public housing. HUD provides technical assistance to authorities with such
                                    problems, and also can impose sanctions such as removing housing
                                    authority officials to help prompt corrective actions.1 HUD may also place a
                                    housing authority under administrative receivership—taking over the
                                    authority’s management and operations.

                                    Based on information from HUD, since 1979, 15 housing authorities2 have
                                    been placed in the hands of receivers—HUD officials or outside parties
                                    designated to manage the authorities during a specific period of time,
                                    usually several years. HUD initiated 11 of these receiverships, while 4 were
                                    initiated by courts, generally in response to lawsuits from residents of
                                    public housing. Whether HUD-initiated (administrative) or ordered by a
                                    court (judicial), receiverships have had the same goal: to correct the
                                    problems at the housing authority and improve the residents’ standard of
                                    living.


                                    1
                                     We discuss the tools HUD uses to address problems at Public Housing Authorities in: U.S.
                                    General Accounting Office, Public Housing Authorities: New Assessment System Holds
                                    Potential for Evaluating Performance, GAO-02-282 (Washington D.C.: Mar. 15 2002).
                                    2
                                    After we began our review, HUD initiated an additional receivership at the Shelby County
                                    Housing Authority in Tennessee. We did not include this receivership in our study.




                                    Page 1                                                         GAO-03-363 Public Housing
                   As agreed with your office, this report provides information about
                   receiverships at public housing authorities, specifically addressing the
                   following questions:

                   • What circumstances led HUD to place public housing authorities under
                     administrative receiverships and judges to order judicial receiverships?

                   • What are the differences, if any, in the way administrative and judicial
                     receiverships have operated and in the kinds of actions receivers have
                     taken?

                   • What are the differences, if any, in the results achieved with
                     administrative and judicial receiverships?

                   • What factors have influenced the decision to terminate some
                     receiverships?

                   To address the objectives, we interviewed HUD headquarters and field
                   staff, housing authority officials, and the receivers themselves; reviewed
                   public housing laws, policies and procedures; and reviewed documents
                   concerning the impact of the receiverships on the housing authorities. For
                   8 of the authorities, we obtained and analyzed HUD’s performance scores
                   during the periods before and after receivers were appointed; these scores
                   were unavailable for the other 7 authorities because their receivership
                   predated HUD’s scoring system or for other reasons. While we report
                   changes in HUD’s scores for these authorities, the small number of
                   receiverships of each type preclude using the scores to statistically identify
                   possible distinctions between administrative and judicial receiverships.
                   Further, we did not explore other factors that might have contributed to
                   changes in scores. We performed our work from February 2002 through
                   December 2002 in accordance with generally accepted government
                   auditing standards. Details about our methodology are in appendix I.



Results in Brief   Receiverships at housing authorities have generally resulted from long-
                   standing, severe management problems that persisted despite repeated
                   interventions and led to deterioration of the housing stock. Because
                   receiverships generally involve the complete takeover of a housing
                   authority’s management and operations, HUD views them as a last resort
                   and has imposed them only when interventions such as technical
                   assistance or sanctions have failed. HUD initiated some of the
                   administrative receiverships when the severity of the problems indicated



                   Page 2                                                 GAO-03-363 Public Housing
that the authorities were not complying with their agreements with HUD.
This has generally occurred when housing authorities allowed their public
housing units to deteriorate. In some cases, HUD has taken over housing
authorities for their failure to meet fair housing requirements. HUD has
made these decisions on a case-by-case basis. The judicial receiverships
stemmed from lawsuits filed against housing authorities because of poor
living conditions in public housing. The judges in these cases determined
that the problems at the authorities were so severe that only a receivership
could remedy the situation.

Administrative and judicial receiverships have operated similarly, and all of
the receivers have had the same authority to make necessary changes. The
specific corrective actions receivers have taken depended on the problems
at the individual housing authority. For example, receivers have replaced
and rehabilitated public housing units that are in poor physical condition.
Most receivers have found it necessary to oversee the complete
reorganization of the housing authority’s management and operations,
develop and enforce policies and procedures, and improve physical
conditions. In some cases, receivers have had to desegregate public
housing to address fair housing violations.

Whether under administrative or judicial receivers, nearly all of the 15
authorities showed improvement during their years of receivership,
according to changes in HUD’s assessed scores and/or other evidence. The
4 housing authorities under judicial receiverships generally have continued
to demonstrate strong performance; performance scores have improved
and have generally remained high. While housing authorities under
administrative receiverships have also made improvements, some
continued to demonstrate a significant problem with housing units in very
poor physical condition.

According to HUD officials, HUD ends an administrative receivership when
it is clear not only that conditions at the housing authority have improved,
but also that the authority’s management can sustain the improvements. Of
the 4 housing authorities whose receiverships HUD has terminated, 2 have
maintained the improvements and 1 has experienced a recurrence of
former problems. The fourth receivership officially ended in September of
2002—too recently to assess sustainability. The decisions to end judicial
receiverships are made by judges. Two judicial receiverships have been
terminated because of the improvements at the housing authorities, and
both housing authorities have maintained their assessed performance
levels.



Page 3                                                GAO-03-363 Public Housing
Background   Under the Housing Act of 1937, as amended, Congress created the federal
             public housing program to help communities provide housing for low-
             income families. Congress annually appropriates funds for the program and
             HUD allocates them to public housing authorities (PHA). PHAs are
             typically created under state law, and a locally appointed board of
             commissioners approves their decisions. HUD and the PHAs have an
             annual contributions contract—a written contract under which HUD
             agrees to make payments to the PHA and the PHA agrees to administer the
             housing program in accordance with HUD regulations and requirements.
             HUD provides the housing authorities with several types of assistance
             including

             • operating subsidies to cover the difference between rent payments and
               operating expenses;

             • capital funds to improve the physical condition of properties and
               upgrade the management and operation of existing public housing
               developments; and

             • HOPE VI grants, on a competitive basis, to revitalize severely distressed
               public housing. These grants fund the capital costs of improvements
               such as major rehabilitation and new construction, the demolition of
               severely distressed public housing, and community and support services
               for residents.3

             In fiscal year 2000, HUD began implementing the Public Housing
             Assessment System (PHAS) to improve the department’s ability to measure
             PHAs’ performance. From 1991 until 2001, HUD had used the Public
             Housing Management Assessment Program (PHMAP) to evaluate public
             housing authorities. Both systems measure the same basic elements, but
             the earlier system is based on self-certified information from the housing
             authorities and does not include an independent physical inspection or
             input from the public housing residents—both integral parts of the new
             assessment system. The new system has three major indicators as follows:




             3
              See U. S. General Accounting Office, Public Housing: HOPE VI Leveraging Has Increased,
             but HUD Has Not Met Annual Reporting Requirement GAO-03-91 (Washington, D.C.:
             November 2002).




             Page 4                                                       GAO-03-363 Public Housing
• The physical inspection indicator determines whether the housing
  authority is providing decent, safe, and sanitary housing to its residents.

• The financial condition indicator determines whether the PHA has
  sufficient financial resources and is capable of effectively managing
  those resources.

• The management operations indicator measures PHAs’ management
  performance.

Finally, a survey measures residents’ satisfaction with their living
conditions. While this performance system has not yet been fully
implemented, we concluded in our March 2002 report that it has the
potential to provide a more reliable basis for evaluating housing
authorities’ performance than the previous system.

If a housing authority receives an overall score of less than 60 percent
under the Public Housing Assessment System, or a score of less than 60
percent of the available points under more than one of the three major
indicators (physical, financial, and managerial), it is designated as a
“troubled” PHA. HUD assigns a recovery team to each troubled PHA and
develops a plan to remedy the problems. Initially, HUD may offer technical
assistance and training to a troubled authority. HUD may also sanction an
authority, for example, by withholding funding. In some cases, HUD has
entered into special agreements with PHAs that allow them flexibility in
addressing unusual challenges. For example, at the Chicago Housing
Authority, HUD waived some of its regulations for 10 years and allowed the
authority to consolidate its capital and operating funds into a single block
grant. The housing authority was thus able to undertake a large-scale
redevelopment project to replace or redevelop most of its public housing.

Finally, HUD may place a housing authority under an administrative
receivership. The department has the authority4 to take possession of all or
part of the PHAs operation and management. Generally, the receiver
replaces the top management of the housing authority and dissolves the
board of commissioners—the body that approves housing authority
management decisions. Typically, HUD will assign one of its employees or
hire a contractor to act as the board while the housing authority is under
receivership. HUD will then develop a plan for improvement based on what


4
42 U.S.C. 1437 d (j) (3) (A) (iv).




Page 5                                                GAO-03-363 Public Housing
needs to be done at the housing authority. Since 1985, HUD has placed 11
housing authorities under administrative receivership; these are listed in
table 1. Additionally, judges have placed 4 housing authorities under
judicial receivership since 1979; these are in table 2.

The Quality Housing and Work Responsibility Act of 1998 requires that
HUD place poorly performing housing authorities under receivership if
they are not able to substantially improve their performance—that is, to
improve their scores under the new assessment system to 60—within 2
years. The act directs HUD to take over all or part of the operations of
PHAs with fewer than 1,250 units or to seek a court-appointed receiver. For
PHAs with 1,250 or more units, HUD must seek a court-appointed receiver.
However, HUD is still making adjustments to the new scoring system and
has not fully implemented it. Thus, no PHAs have been placed in
receivership on the basis of their performance scores alone.

The following tables show the status of housing authorities under
receivership as of December 2002. The tables show the primary problems
that prompted the housing authorities placement under receivers,
according to HUD and housing authority data. However, most of the
housing authorities were placed in receivership for several reasons, and
some degree of management difficulty underlies the reasons for all of the
receiverships.



Table 1: Administrative Receiverships as of December 2002

Housing          Reason for           Date placed under     Status of
authority        receivership         receivership          receivership
Beaumont (TX)    Fair housing         October 2000          In progress
Camden (NJ)      Physical/            August 1997            In progress
                 management
Chicago (IL)     Physical/            May 1995              Terminated May 1999
                 management
East St. Louis (IL) Physical/         October 1985          In progress
                    management
Lafayette (LA)   Fair housing/        February 1995         Terminated
                 management                                 September 2002
New Orleans (LA) Physical/            February 1996          In progress
                 management
Orange County    Fair housing         September 1993         In progress
(TX)




Page 6                                                    GAO-03-363 Public Housing
                         (Continued From Previous Page)
                         Housing                Reason for               Date placed under         Status of
                         authority              receivership             receivership              receivership
                         St. James Parish       Physical/                April 2001                In progress
                         (LA)                   management
                         San Francisco          Physical/                March 1996                Terminated
                         (CA)                   management                                         September 1997
                         Springfield (IL)       Physical/                March 1996                Terminated
                                                management                                         September 1997
                         Wellston (MO)          Physical                 July 1996                 In progress
                         Source: GAO and HUD.

                         Note: In 1996, HUD placed the Housing Authority of New Orleans in a partial receivership and in 2002
                         placed the authority in a full administrative receivership.




                         Table 2: Judicial Receiverships as of December 2002

                         Housing                Reason for              Date placed under          Status of
                         authority              receivership            receivership               receivership
                         Boston (MA)            Physical/               July 1979                  Terminated
                                                management                                         September 1990
                         Chester (PA)           Physical                August 1994                In progress
                         Kansas City            Physical                July 1993                  In progress
                         (MO)
                         District of            Physical/               May 1995                   Terminated
                         Columbia               management                                         September 2000
                         Source: GAO and HUD.




Receiverships at         The problems that compel HUD and the courts to place public housing
                         authorities in receivership are serious physical, financial, and managerial
Housing Authorities      deficiencies that violate agreements between HUD and the authority and
Have Resulted from       that have persisted despite repeated interventions. The courts have
                         imposed all four judicial receiverships to date in response to lawsuits that
Severe, Long-standing    also involve the poor condition of public housing properties. (Appendixes
Problems                 II and III, respectively, discuss the details of these administrative and
                         judicial receiverships.)



HUD Uses Receiverships   The PHAs that HUD has placed under receivership have generally had
When Other Approaches    severe management problems resulting in poorly maintained housing.
                         These problems violate the agreements between the PHAs and HUD, which
Have Been Unsuccessful


                         Page 7                                                                GAO-03-363 Public Housing
require that public housing be maintained according to HUD’s standards—
decent, safe, and sanitary. HUD has placed housing authorities under
receivership after long-standing and severe problems that have not
responded to other HUD interventions, such as training or sanctions. HUD
has also taken over PHAs that were violating fair housing requirements by
maintaining segregated public housing developments, where the
segregation could not be addressed by other means.

Management difficulties are typically the cause of persistent problems at
PHAs, according to HUD and housing authority officials. Managers may
lack experience or may refuse to comply with HUD’s requirements. For
example, HUD determined that the St. James Parish Housing Authority in
Louisiana could not fulfill its mission because of ineffective management.
According to HUD officials, the public housing units at St. James were in
deplorable condition and were deteriorating “at an alarming rate.” HUD
also cited high turnover rates among managers and insufficient training as
the reasons the Housing Authority of New Orleans was unable to manage
its maintenance and modernization programs. Eight of the 11
administrative receiverships involved PHAs that had problems with the
physical condition of their units. For example, the Camden Housing
Authority, the Housing Authority of New Orleans, the St. James Parish
Housing Authority, and the Wellston Housing Authority were not
completing routine maintenance on their public housing units before going
into receivership. At the Chicago Housing Authority, most of the public
housing had been poorly designed, was old, and was deteriorating.

At three PHAs, HUD took control of the management and operations
primarily to address racial segregation in the public housing developments.
HUD placed the Beaumont, Lafayette, and Orange County Housing
Authorities under receivership in order to desegregate the public housing
developments. At the Beaumont and the Orange County housing
authorities, HUD is under court order (Young v. Martinez) to take actions
to facilitate desegregation. When the PHAs failed to desegregate the
developments, HUD decided to place both under receivership. HUD took
over the Lafayette Housing Authority because the management was
maintaining its public housing waiting lists based on race, ensuring that its
developments were segregated.

In one case, HUD assumed control of a single program without placing the
entire housing authority in receivership. According to HUD officials, the
Puerto Rico Public Housing Administration lacked the capacity to manage
its HOPE VI program. HUD hired a contractor to help manage the projects



Page 8                                                GAO-03-363 Public Housing
                            and provide technical assistance, but the housing authority was not
                            properly overseeing the program. A report issued by HUD’s Inspector
                            General in March of 2001 reported a total breakdown of the housing
                            authority’s ability to administer its HOPE VI project. According to the
                            report, the authority lacked effective management and accounting controls
                            over its federal funds and did not effectively monitor the activities of the
                            contracted project manager. HUD officials told us that the situation has
                            improved, and that the program will be returned to the Puerto Rico
                            Housing Administration in the near future.



Lawsuits over Poor Living   To date, all judicial receiverships at PHAs have resulted from lawsuits filed
Conditions Prompted         by residents and have involved the very poor physical condition of public
                            housing units. All four of the housing authorities under judicial
Judicial Receiverships      receivership had similar histories of problems. Besides the poor condition
                            of the occupied public housing units, the housing authorities had high
                            vacancy rates because units had been deemed uninhabitable. As a result,
                            those on waiting lists for public housing could not obtain housing, the
                            neighborhoods surrounding the empty units deteriorated, and crime near
                            the abandoned housing rose. According to HUD and PHA officials, poor
                            management, corruption, and local political interference were the
                            underlying causes of the problems at these housing authorities.

                            When residents in Kansas City, Missouri, filed suit against the housing
                            authority, the judge ordered the PHA to rehabilitate or repair all housing
                            developments in poor condition. When it failed to comply with the order,
                            the judge ordered the PHA into receivership and named a receiver to
                            oversee the redevelopment of public housing in the city. In Boston,
                            according to a PHA official and the former receiver, the housing authority
                            had lost control of its public housing developments before it went into
                            receivership. Criminals controlled the developments, the PHA had stopped
                            trying to maintain occupied units, and it failed to board up vacant units.
                            Finally, residents filed suit, and the judge ordered the receivership. At the
                            Chester Housing Authority, the judge made the decision to place the PHA in
                            receivership after touring the developments and witnessing the poor living
                            conditions and the drug dealing that went on in front of them, according to
                            the attorney for the case. At the District of Columbia Housing Authority, the
                            judge ordered the PHA into receivership after 2 years of investigating and
                            detailing the poor condition of the public housing developments.




                            Page 9                                                GAO-03-363 Public Housing
Administrative and        Administrative and judicial receiverships have operated similarly in that
                          they usually both involve the complete takeover of a PHA’s management
Judicial Receiverships    and operations or of an entire program within a PHA. Both types of
Have Operated             receivers have the same authority to implement any necessary changes to
                          improve the PHA’s performance. However, the remedies receivers apply
Similarly, but Specific   vary, largely because the situations that result in receiverships differ. The
Remedies Have Varied      nature and extent of the problems determine the kinds of goals that are set
                          and the way they are addressed.



Both Administrative and   Once a PHA goes into receivership, the receiver has the authority to take
Judicial Receiverships    full control of management and operations. The PHA’s management
                          relinquishes control of the housing authority to the receiver, and the locally
Involve the Complete
                          elected board of commissioners is dissolved. In most cases, the receiver
Takeover of a PHA’s       replaces the top management positions at the housing authority and
Management and            institutes new policies and procedures to affect improvements. For
Operations                example, when the Housing Authority of Kansas City entered a judicial
                          receivership, the receiver brought staff from his consulting firm to fill top
                          management positions. The receiver and his staff rewrote personnel
                          standards, personnel policies, and procurement policies in order to restore
                          the PHA’s accountability. Similarly, under an administrative receivership at
                          the St. James Parish Housing Authority, the receiver hired a new executive
                          director, established a system of financial controls, developed new
                          personnel policies, and put in place new maintenance guidelines for the
                          public housing developments. At the Housing Authority of New Orleans,
                          HUD and the City of New Orleans initially agreed to a partial or “quasi”
                          receivership in 1996. It replaced the board of commissioners with a
                          contractor and appointed an executive monitor to oversee the PHA’s
                          management and operations. When the housing authority had shown little
                          improvement after several years, HUD imposed a full administrative
                          receivership in January 2002 with a HUD employee as the receiver.

                          Although the legal authority of the administrative and judicial receiverships
                          are the same, court-appointed receivers may be better able to effectively
                          use their authority according to officials of several housing authorities and
                          public housing experts that we spoke with. According to these officials, the
                          court-appointed receivers are more insulated from local politics and better
                          able to make necessary changes at the housing authority.




                          Page 10                                                GAO-03-363 Public Housing
Receivers’ Actions Respond   Actions imposed by receivers to remedy problems at a PHA respond to the
to Specific Problems         specific problems that need to be addressed. In all of the judicial
                             receiverships and several of the administrative receiverships, the receiver
                             has taken action to redevelop or rebuild a substantial portion of the public
                             housing developments. Following are the examples of actions to remedy
                             specific problems:

                             • At the Housing Authority of Kansas City, the receiver had every public
                               housing unit either rebuilt or rehabilitated because of the poor condition
                               of the housing stock.

                             • Similarly, at the Chicago Housing Authority, the receiver tore down
                               some of the deteriorated and poorly designed housing developments.

                             • At the three PHAs where racial segregation was the problem, the
                               receivers implemented plans to desegregate the public housing
                               developments. At the Beaumont and Orange County Housing
                               Authorities, for instance, HUD-appointed receivers provided incentives
                               such as moving expenses to persuade public housing residents to move.

                             Receivers may also take other actions to prevent future problems in
                             addition to responding to short-term needs. Examples of actions to prevent
                             future problems are as follows:

                             • At the Boston Housing Authority, the receiver permanently disbanded
                               the board of commissioners because it had been a source of some of the
                               PHA’s original problems—the board was not conducive to effective
                               management. According to the receiver and housing authority officials,
                               the members of the board did not have the necessary skills or political
                               independence to make the right decisions for the housing authority.
                               Currently, the top official for the Boston Housing Authority reports
                               directly to the Mayor.

                             • At the District of Columbia Housing Authority, the receiver facilitated
                               the restructuring of the housing authority so that it would become a
                               separate entity rather than a department of the city. This restructuring
                               allowed the PHA’s management more control over its operations and
                               budget.




                             Page 11                                              GAO-03-363 Public Housing
Both Administrative       According to HUD’s assessed performance scores and/or other evidence,
                          nearly all of the 15 authorities showed improvement during their years of
and Judicial              receivership whether under administrative or judicial receivers. While the
Receiverships Have        numbers are too small to statistically identify differences between judicial
                          and administrative receiverships, we found that this pattern of
Shown Improvement         improvement was consistent for the 4 housing authorities under judicial
                          receiverships. Performance scores under judicial receiverships have
                          generally remained high. In contrast, some housing authorities under
                          administrative receiverships still demonstrate problems such as housing
                          units in poor physical condition and high turnover among managers. In
                          reviewing the 5 authorities under administrative receivership for which a
                          sufficient number of HUD’s assessed performance scores were available,
                          we also noted that the 2 largest housing authorities showed more
                          improvement than the 3 small and medium-sized authorities in the initial
                          years of receivership; however, the small and medium-sized housing
                          authorities improved their scores more over the long run.



PHAs Have Made Progress   Most housing authorities under receivership demonstrated some type of
under Receivership        progress, regardless of the initial problems. Almost all the authorities that
                          were placed under receivership because of severe physical problems with
                          their public housing units improved the physical condition of their units.
                          For example, the Camden Housing Authority, the District of Columbia
                          Housing Authority, the Wellston Housing Authority, and the Housing
                          Authority of Kansas City all had problems with the physical condition of
                          their units prior to being placed in receivership. Throughout their
                          receiverships, all of these housing authorities improved the physical
                          condition of their units through extensive rehabilitation and modernization
                          efforts.

                          The three housing authorities (Beaumont, Orange County, and Lafayette)
                          that were placed in receivership because of racial segregation also showed
                          overall improvement, based on their performance scores. While HUD’s
                          performance scores do not have a component that captures the progress
                          made in desegregating developments, they do indicate that, in recent years,
                          these housing authorities generally made progress in improving the
                          management of the agency and the physical condition of the housing stock.
                          The Lafayette Housing Authority was in troubled status when it was taken
                          over by HUD in 1995 but managed to receive performance scores that were
                          high enough under the receivership to remove that designation.




                          Page 12                                               GAO-03-363 Public Housing
Overall, HUD’s assessed performance scores show a pattern of
improvement at housing authorities placed in receivership. The eight
housing authorities for which a sufficient number of performance scores
were available showed a median increase in their overall performance
score of about 27 percent after 2 years of receivership and about 41 percent
after 3 years of receivership. The last scores for PHAs—the last available
score for PHAs currently under receivership and the score for the final year
for PHAs that are out of receivership—showed a median increase of about
67 percent (see fig. 1).



Figure 1: PHA Performance under Receivership




Note: We analyzed HUD data on seven receiverships for the 2-year mark and eight receiverships for
the 3-year and last score marks. The last score category represents the last available score for
housing authorities still under receivership and the final score under receivership for terminated
receiverships. Median percentage increases are rounded to the nearest percent.


Although the number of available performance scores was not sufficient
for the above analysis, the scores that were available for an additional 4
housing authorities also showed a general pattern of improvement. The
Beaumont, Camden, East St. Louis, and the Springfield Housing Authorities




Page 13                                                               GAO-03-363 Public Housing
                            showed some improvement in their performance scores during
                            receivership.



Improvements Have Been      All of the four housing authorities that have been or are currently under
Consistent at Authorities   judicial receivership (Boston, District of Columbia, Kansas City, and
                            Chester) have generally shown consistent improvements. Following are
under Judicial              examples of improvements at these authorities:
Receiverships
                            • At the Housing Authority of Kansas City, Missouri, several units were
                              either rehabbed or redeveloped during the receivership, and new
                              procurement and personnel policies were instituted. By the late 1990s,
                              the housing authority was consistently achieving lower crime rates,
                              higher rent collections, and a higher occupancy rate.

                            • The District of Columbia Housing Authority demolished several vacant
                              public housing units and extensively modernized others in order to
                              improve the physical condition of its developments. According to a
                              senior housing authority official, every unit that needed work was
                              rehabilitated or modernized. Financial management systems were also
                              put in place during the receivership, which allowed the housing
                              authority better access to funding.

                            • The housing stock at the Chester Housing Authority also improved
                              during receivership. The PHA has conducted revitalization work on
                              several developments and has been able to decentralize all operations
                              and implement agencywide standard operating procedures.

                            Further, all of these authorities continue to progress. Turnover among
                            managers has decreased, and performance scores have been high.

                            In contrast, while housing authorities under administrative receiverships
                            have also made improvements, some are still experiencing problems. For
                            example, the public housing units at the Housing Authority of New Orleans,
                            Louisiana, are still in very poor physical condition. Additionally, according
                            to HUD officials, the housing authority still has significant management
                            problems that have led to further HUD involvement in the receivership.

                            While the numbers are too small to statistically identify differences
                            between judicial and administrative receiverships, we noted that HUD’s
                            assessed performance scores for the housing authorities under judicial
                            receivership showed a generally consistent pattern of improvement. The



                            Page 14                                               GAO-03-363 Public Housing
                         data for the eight authorities for which a sufficient number of performance
                         scores were available are shown in table 3.



                         Table 3: Change in Performance Scores for Housing Authorities under Judicial or
                         Administrative Receivership

                                                     Score at              Score at             Score at 3            Last score
                         Housing                 beginning of           2 years into            years into                 under
                         authority               receivership          receivership           receivership          receivership
                         PHAs under judicial receiverships
                         Chester                          41.97                  71.67                 83.23                     90
                         Kansas City                      51.46                  60.82                 74.71                     80
                         District of                      37.80                    N/A                 79.25                     72
                         Columbia
                         PHAs under administrative receiverships
                         Chicago                          51.07                  64.73                 69.96                     65
                         Lafayette                        25.69                  83.73                 73.06                     85
                         New Orleans                      48.18                  85.16                     61                    43
                         Orange County                    64.76                  71.90                 47.86                     87
                         Wellston                         43.91                  42.45                     50                    78
                         Source: GAO and HUD.

                         Note: The Boston Housing Authority is not included in the judicial receiverships due to the receivership
                         ending before performance score assessments began. The District of Columbia Housing Authority did
                         not receive an overall performance score after 2 years in receivership (FY 1997). The last score
                         category represents the last available score for housing authorities still under receivership and the final
                         score under receivership for terminated receiverships. For all housing authorities in this table, scoring
                         assessments began under PHMAP and continued under PHAS. See appendix I for more information.




Improvements Varied by   While again the numbers of housing authorities are too small to statistically
Housing Authority Size   make distinctions, we also noted that among the five administrative
                         receiverships for which a sufficient number of performance scores were
                         available, the 3 small and medium-sized housing authorities experienced
                         higher increases in performance scores, over longer timelines, than the 2
                         very large housing authorities. The scores for these authorities are shown
                         in table 4.




                         Page 15                                                                    GAO-03-363 Public Housing
Table 4: Change in Performance Scores for Housing Authorities under
Administrative Receivership, Based on Size of the Authority

                           Score at           Score at 2            Score at 3           Last score
Housing                beginning of           years into            years into                under
authority              receivership         receivership          receivership         receivership
Small and medium-sized PHAs
Lafayette                       25.69                83.73                73.06                    85
Orange County                   64.76                71.90                47.86                    87
Wellston                        43.91                42.45                    50                   78
Very large PHAs
Chicago                         51.07                64.73                69.96                    65
New Orleans                     48.18                85.16                    61                   43
Source: GAO and HUD.

Note: The last score category represents the last available score for housing authorities still under
receivership and the final score under receivership for terminated receiverships. The analysis could
only be done on 3 of the 6 small and medium-sized housing authorities and 2 of the 5 large or very
large-sized housing authorities under administrative receivership. For all housing authorities in this
table, scoring assessments began under PHMAP and continued under PHAS. See appendix I for more
information.


Most of the small and medium-sized PHAs that have been placed in
administrative receivership have had less severe physical problems than
the large and very large housing authorities. For example, the three PHAs
that HUD placed in receivership because of racial segregation can be
classified as small or medium-sized. The receiverships at these three PHAs
have focused primarily on ensuring that the segregation patterns end. For
the most part, these housing authorities do not have the severe physical
deterioration of their housing stock that large PHAs such as Chicago have.
While other small and medium-sized PHAs under administrative
receivership have had some physical problems with their public housing
units, management, or both, the scale of the issues has been limited by the
housing authority’s size.

In contrast, large and very large housing authorities have often had
significant physical and management problems that have required
substantial work. The housing authorities of New Orleans, Chicago, and
Camden have all had substandard housing units, high turnover rates for top
managers, and weak internal controls. These PHAs have had to undertake
major rehabilitation of public housing developments and initiate changes in
personnel, procurement, and other policies in order to correct the
deficiencies that led to receivership. In some cases, the improvements have




Page 16                                                                 GAO-03-363 Public Housing
                              not been sustained. For example, some public housing developments in
                              both New Orleans and Chicago are still in poor physical condition.



Criteria for Ending           No set guidelines exist for ending either administrative or judicial
                              receiverships because both are handled on a case-by-case basis.
Receiverships Vary            Receiverships that have been terminated have ranged from as little as one
                              and a half years (Springfield and San Francisco) to approximately 11 years
                              (Boston). To date, most of the current receiverships have lasted
                              approximately 5 to 9 years.5 Of the receiverships included in our review,
                              only 4 administrative and 2 judicial receiverships have been terminated.

                              HUD’s regulations, past or current, do not prescribe when HUD returns a
                              PHA to local control once it’s under an administrative receivership. The
                              criteria HUD uses to make this decision vary depending on the problems
                              that led to receivership and the severity of those problems. Judges make
                              the determination to end judicial receiverships on the basis of a PHA’s
                              progress in satisfying the initial goals set for the receivership. The judge’s
                              criteria have varied depending on the level of improvement that is deemed
                              necessary to overcome the problems that led to the receivership.



HUD’s Termination             To date, HUD has terminated four receiverships—the Chicago Housing
Decisions Consider Severity   Authority, the Lafayette Housing Authority, the San Francisco Housing
                              Authority, and the Springfield Housing Authority. The Chicago Housing
of Problems
                              Authority was in receivership for approximately 4 years as HUD privatized
                              some functions, developed plans to improve maintenance and security
                              operations, and began to rebuild and rehabilitate the housing stock. Once
                              HUD completed these improvements and removed the PHA from troubled
                              status, HUD began discussions with the Mayor for the return of the housing
                              authority to local control. The receivership ended in May 1999. While the
                              housing authority has continued to have some problems with its housing
                              stock since 1999, it has sustained enough of the improvements that were
                              made under the receivership and, thus, has avoided further intervention in
                              its public housing program. In addition, HUD has entered into agreements



                              5
                               There are 10 receiverships in progress that are included in this review, 7 of which are in this
                              range. There are three that are not in this range: the Beaumont Housing Authority (2 years),
                              the St. James Parish Housing Authority (1.6 years), and the East St. Louis Housing Authority
                              (17 years).




                              Page 17                                                            GAO-03-363 Public Housing
with the authority that will lead to a complete physical transformation of its
public housing developments within 10 years.

At the Lafayette Housing Authority, HUD decided not to terminate the
receivership until all concerns about racial segregation had been
addressed. The PHA was taken over as a result of severe management
problems—the management was purposely segregating public housing
developments by race, according to HUD officials. It was also in troubled
status when it went into receivership, with an overall performance score of
25.69 percent for fiscal year 1995. It was removed from troubled status in
1998 after receiving a performance score of 83.73 percent for fiscal year
1997. However, HUD kept the authority in receivership because of racial
segregation issues and did not end the receivership until the PHA enacted
policies to bring the housing authority in full compliance with fair housing
requirements. Once these policies were in place and HUD determined that
the PHA could sustain the improvements, HUD terminated the
receivership. The PHA was officially turned back over to local control on
September 17, 2002.

At the San Francisco Housing Authority, HUD decided to terminate the
receivership after the Mayor appointed a new board and strategies had
been initiated to turn the PHA around. HUD had taken over the PHA in
March 1996 at the Mayor’s request, after he had fired the executive director
and commissioners. HUD sent a recovery team of HUD officials,
consultants, and employees from other housing agencies to assess the
PHA’s operations and develop strategies to deal with the problems. The
acting HUD Assistant Secretary for Public and Indian Housing assumed the
role of the board of commissioners. HUD also contracted to fill several key
management positions to continue the recovery efforts and once the Mayor
had appointed a new board member, HUD decided to turn the housing
authority back over to local control. The housing authority was officially
handed over to the new board in September 1997.

The Springfield Housing Authority (SHA) voluntarily transferred
operational control to HUD in 1996. The housing authority was in troubled
status and HUD agreed to monitor the SHA after it signed a Memorandum
of Agreement (MOA) that was designed to correct the housing authority’s
deficiencies. A HUD official assumed the role of the board of
commissioners throughout the receivership. Under the MOA, the SHA had
made progress on several fronts, including quality of physical work and
budget controls. In September 1997, the housing authority was removed
from troubled status and HUD decided to transfer the SHA back to local



Page 18                                                GAO-03-363 Public Housing
                         control. The short receivership ended that month when the SHA board of
                         commissioners passed a resolution accepting control of the housing
                         authority.



Judges Have Terminated   Thus far, judges have terminated two of the four judicial receiverships—the
Receiverships That Met   Boston Housing Authority and the District of Columbia Housing Authority.
                         The receiverships ended when the judges determined that the housing
Their Goals
                         authorities had met specific criteria or made substantial improvements at
                         the PHAs. The Boston Housing Authority was initially placed in
                         receivership in 1979 after residents filed a lawsuit against the housing
                         authority alleging uninhabitable living conditions in the city’s public
                         housing developments. In general, the PHA had problems carrying out
                         basic functions of a housing authority. According to the receiver and a BHA
                         official, the housing authority also had problems controlling crime in its
                         public housing developments. The judge decided to return the PHA to local
                         control after the housing authority improved the conditions that had led to
                         receivership. Additionally, according to the receiver, he and the judge
                         wanted the board of directors permanently disbanded and an effective
                         manager appointed. After the authority accomplished these measures, the
                         judge agreed to release the PHA from the receiver’s control and give the
                         agency back to the city, with the Mayor acting as the receiver and the court
                         maintaining supervision of the housing authority. The court’s active
                         supervision of the PHA ended in 1990. According to the current
                         Administrator of the Boston Housing Authority, the PHA has been able to
                         maintain the governance structure and some of the improvements made
                         under the receivership. The housing authority has achieved strong
                         performance scores the last couple of years, and according to HUD
                         officials, this is reflective of the progress that the PHA has made.

                         The District of Columbia Housing Authority was placed under a judicial
                         receivership because of poor living conditions and failure to make vacant
                         units available for residents. For these reasons, a lawsuit was filed against
                         the housing authority, and the presiding judge placed the PHA in
                         receivership. The judge’s criteria for ending the receivership were
                         performance scores of 70 or higher for 2 consecutive years of assessment.
                         The PHA was able to meet this requirement after extensive rehabilitation
                         and modernization work on its public housing units and the reshaping of its
                         administrative and financial management systems. The receivership ended
                         in September 2000, and the PHA currently operates as an independent
                         agency in cooperation with the D.C. government.




                         Page 19                                               GAO-03-363 Public Housing
Agency Comments   We provided a draft of this report to HUD for its comment and review. We
                  received comments from the Director, Field Operations Staff, and the
                  Director, Troubled Agency Recovery Operations, who generally concurred
                  with the content of this report. HUD commented that further analysis
                  should be conducted on the differences between judicial and
                  administrative receiverships, because it believes that judicial receiverships
                  are more costly than administrative receiverships. In addition, HUD
                  provided technical comments, which we incorporated in this report as
                  appropriate.

                  We are sending copies of this report to the Chairman and Ranking Minority
                  Member, Senate Committee on Banking Housing and Urban Affairs; the
                  Ranking Minority Member, Subcommittee on Housing and Transportation,
                  Senate Committee on Banking, Housing, and Urban Affairs; the Chairman
                  and Ranking Minority Member, House Committee on Financial Services;
                  the Chairman and Ranking Minority Member, Subcommittee on Housing
                  and Community Opportunity, House Committee on Financial Services. We
                  will send copies to the Secretary of Housing and Urban Development and
                  the Director of the Office of Management and Budget. We also will send
                  copies to other interested parties, and we will make copies available to
                  others upon request. In addition, the report will be available at no charge
                  on the GAO Web site at http://www.gao.gov. Please contact me at (202) 512-
                  8678 if you or your staff have any questions about this report. Key
                  contributors to this report are listed in appendix IV.

                  Sincerely yours,




                  David G. Wood
                  Director, Financial Markets and
                    Community Investment




                  Page 20                                               GAO-03-363 Public Housing
Appendix I

Scope and Methodology                                                                      AA
                                                                                            ppp
                                                                                              ep
                                                                                               ned
                                                                                                 n
                                                                                                 x
                                                                                                 id
                                                                                                  e
                                                                                                  x
                                                                                                  Iis




             We gathered information on 15 public housing authorities (PHA) that have
             been under receivership. We excluded one receivership that HUD initiated
             after we began our study (Shelby County Housing Authority). We
             interviewed PHA officials, HUD officials who either were involved with a
             receivership or are now helping to monitor a PHA, and when we could, the
             receivers for the PHAs.

             To identify the circumstances that led the Department of Housing and
             Urban Development (HUD) or the courts to impose receiverships, we
             reviewed HUD’s guidance and policies regarding receiverships. In addition,
             we gathered information and obtained documents on the events and
             conditions at the PHAs that preceded each receivership. We also
             interviewed several housing authority officials, officials from industry
             groups, lawyers that handled the lawsuits resulting in receiverships, and
             HUD officials that had been involved in receiverships.

             To identify potential differences in the way administrative and judicial
             receiverships operate, we interviewed officials involved with
             administrative receiverships and officials involved with judicial
             receiverships, including several receivers. In addition, we reviewed
             documentation on the actions receivers took to address the problems at the
             PHAs. We examined the impact of these actions on the PHAs.

             To identify the conditions that lead to the termination of receiverships, we
             examined relevant documentation from HUD and the receivers and
             interviewed officials who were directly involved with a termination. In
             order to assess the performance of PHAs under receivership, we obtained
             all the performance scores from both the old and new scoring systems that
             were available for the 15 PHAs we reviewed. The data covered fiscal years
             1991 (when performance assessments first began) through 2001 (the latest
             year for which scores were available). Performance scores were not
             available for all housing authorities for some years. The Boston and East St.
             Louis Housing Authorities were placed under receivership several years
             before HUD began assessing PHAs. The San Francisco and Camden
             Housing Authorities did not have an assessment score for the year that
             each housing authority was placed under receivership. Other receiverships
             began recently or lasted less than 2 years and, consequently, the housing
             authorities had very few performance scores. The Beaumont Housing
             Authority receivership and St. James Parish Housing Authority
             receivership began in 2000 and 2001, respectively. The Springfield Housing
             Authority receivership lasted less than 2 years. Where possible, we




             Page 21                                               GAO-03-363 Public Housing
Appendix I
Scope and Methodology




examined changes in performance scores for these seven housing
authorities while they were under receivership.

For eight PHAs that had performance scores at the time the receivership
began and whose receiverships lasted at least 2 years, we conducted
further analysis on the changes in performance scores that occurred during
the receivership. We used the score for the fiscal year that a housing
authority went into receivership as the beginning of receivership score. We
used the 2- and 3-year intervals so that the assessments would reflect the
effects of the receivers’ actions as fully as possible. We used the final score
for terminated receiverships in order to show the progress made during the
entire receivership. For housing authorities still under receivership, we
used the last available score to show as much of the progress made as
possible. In either case, this score was the score for the fiscal year that the
housing authority was last assessed while under receivership.

We used HUD’s criteria to determine the size of PHAs. These criteria are
based on the number of public housing units in a housing authority’s stock,
as follows:

• Very large, more than 6,599 units;

• Large, 1,250 units to 6,599 units;

• Medium, 500 units to 1,249 units;

• Small, 100 units to 499 units; and

• Very small, less than 100 units.

 We conducted our work from February 2002 through December 2002 in
accordance with generally accepted government auditing standards.




Page 22                                                GAO-03-363 Public Housing
Appendix II

Administrative Receiverships                                                                       Appendx
                                                                                                         Ii




Beaumont Housing   The Department of Housing and Urban Development (HUD) took over the
                   public housing authority (PHA) in 2000 because of racial segregation in the
Authority (TX)     public housing developments. The Beaumont Housing Authority is one of
                   several housing authorities in East Texas bound by the Young v. Martinez,
                   Final Judgment and Decree, which makes HUD responsible for addressing
                   racial segregation in public housing developments. When the Beaumont
                   Housing Authority failed to take the necessary steps to desegregate its
                   public housing, HUD assumed control of the PHA’s management and
                   operations. Initially, HUD removed all the managers and the board of
                   commissioners and hired a contractor to evaluate the problems and
                   develop a work plan for improvement. A HUD staff person is currently the
                   Acting Executive Director, and another HUD staff person has replaced the
                   board of commissioners.

                   According to HUD officials, the problems at the Beaumont Housing
                   Authority have effectively been remedied. The developments have been
                   desegregated, and HUD believes that the current management is capable of
                   operating the housing properly. HUD officials are currently preparing to
                   end the receivership and to turn back the housing authority to local
                   control. The Acting Executive Director is currently interviewing candidates
                   for the position of Executive Director, and HUD has asked the Mayor of
                   Beaumont to appoint an advisory committee that will become the board of
                   commissioners once HUD ends the receivership.



Camden Housing     HUD took over the Camden Housing Authority in 1997 with the
                   concurrence of the mayor of Camden. The PHA had a long history of
Authority (NJ)     problems. It was unable to provide decent, safe, and sanitary housing; had
                   poor internal controls; was not complying with federal regulations; and
                   political influence was interfering with its ability to improve, according to
                   HUD officials.

                   HUD hired consultants to manage the housing authority and designated a
                   HUD official to act as the board of commissioners. After assessing the
                   conditions at the PHA, the consultants instituted initiatives to clean and
                   repair the housing projects, improve management’s relationship with the
                   residents, and improve the PHA’s organizational structure. Longer-term
                   improvement efforts focused on modernizing the properties and improving
                   property management, maintenance, financial management,
                   administration, security, resident initiatives, and strategic planning. The
                   housing authority now has an executive director in charge, but a HUD



                   Page 23                                               GAO-03-363 Public Housing
                         Appendix II
                         Administrative Receiverships




                         official continues to oversee management and operations. Although the
                         Camden Housing Authority is performing well, HUD is not returning it to
                         local control at this time because of the instability of City of Camden,
                         which the state of New Jersey has recently placed under receivership.



Chicago Housing          The Chicago Housing Authority has had a long history of management
                         problems and distressed housing conditions. HUD had designated the PHA
Authority (IL)           as “troubled” as far back as 1979, when the department first began to focus
                         on poorly performing PHAs. The Chicago PHA had weak internal controls,
                         fiscal problems, and frequent turnover among its top management. In
                         addition, the PHA’s housing was some of the worst in the country—old,
                         deteriorating, and poorly designed for the climate.

                         In 1995, HUD took control of the PHA’s management and operations and
                         put HUD employees in charge. HUD reorganized the PHA’s management,
                         privatized some functions, developed plans to improve maintenance and
                         security, and began to rebuild and rehabilitate the housing stock. HUD
                         returned the housing authority to local control by 1999 after the PHA had
                         improved its performance scores enough for HUD to lift its “troubled”
                         designation. According to HUD officials, however, even though the Chicago
                         PHA was no longer technically troubled, it still was not completely “fixed”
                         because many of its housing developments were still in poor condition.
                         However, after HUD returned the housing authority to local control it
                         agreed to a grant of $1.5 billion over 10 years so the PHA could carry out a
                         transformation plan that calls for demolishing 18,000 public housing units
                         and rehabilitating or redeveloping another 25,000.



East St. Louis Housing   HUD took control of the East St. Louis Housing Authority in 1985.
                         According to HUD officials, the PHA was mismanaged, routine
Authority (IL)           maintenance was not being completed on the public housing units,
                         modernization funds were being improperly used, and housing authority
                         officials had been indicted for crimes that included larceny and
                         embezzlement. Additionally, the city was in political chaos, contributing to
                         the problems at the PHA, according to HUD officials.

                         HUD hired a contractor to manage the PHA and implement needed
                         changes. The contractor reorganized the staff, rewrote all policies, and
                         created a merit-based personnel system. In addition, it rehabilitated or
                         repaired about one-third of the public housing units and established a



                         Page 24                                              GAO-03-363 Public Housing
                       Appendix II
                       Administrative Receiverships




                       maintenance program to keep the units in compliance with HUD’s
                       standards. Currently, the PHA is performing well. An executive director
                       runs the management and operations, and a full board of commissioners is
                       in place. However, according to HUD officials, the PHA will remain under
                       receivership—they do not believe the city is in a condition to operate the
                       housing authority because of its financial problems. HUD officials
                       responsible for monitoring the East St. Louis PHA believe that if they
                       return it to local control now, it would not sustain the improvements that
                       have been made under the receivership.



Lafayette Housing      HUD took over the Lafayette Housing Authority in 1995 as a result of severe
                       management problems and racial segregation in the public housing
Authority (LA)         developments. The PHA was placing families in public housing
                       developments based on their race rather than on their place on the waiting
                       list. HUD disbanded the PHA’s board of commissioners and hired a new
                       Executive Director. HUD staff also developed new policies and procedures
                       for placing families in public housing and provided the technical assistance
                       needed to bring the authority back into compliance with fair housing
                       requirements. HUD returned the Lafayette PHA to local control in 2002.



Housing Authority of   The Housing Authority of New Orleans had a long history of management
                       problems, and its public housing has long been in very poor condition. In
New Orleans (LA)       1996, HUD entered into a “cooperative endeavor agreement” with the city
                       of New Orleans in order to correct problems at the PHA. Under this
                       agreement, HUD dissolved the PHA’s board of commissioners and chose a
                       HUD representative as Executive Monitor to oversee the authority’s
                       progress in implementing improvements. The improvement plan focused
                       mainly on rehabilitating and redeveloping the deteriorating public housing
                       stock.

                       In 2002, after the PHA had made little progress, HUD took control of the
                       PHA’s management and operations. A team of HUD officials is now in
                       complete control of the management of the housing authority. According to
                       HUD officials involved in the receivership, they are working on reallocating
                       staff resources, reorganizing the PHA’s structure, and cutting back on
                       unnecessary expenditures. They have procurement, management, and
                       financial problems yet to address. According to HUD officials, they are
                       also making progress toward improving the condition of the housing stock
                       through several new construction and rehabilitation projects.



                       Page 25                                              GAO-03-363 Public Housing
                         Appendix II
                         Administrative Receiverships




Orange County            HUD took over the Orange County Housing Authority in 1993 because of
                         the management’s failure to desegregate its public housing. As it is with the
Housing Authority        Beaumont Housing Authority, HUD is responsible for facilitating
(TX)                     desegregation of Orange County public housing under Young v. Martinez,
                         Final Judgment and Decree. A HUD staff person currently serves as the
                         board of commissioners, and HUD has contracted with the Executive
                         Director of a neighboring PHA to manage the day-to-day operations. HUD
                         staff involved with the receivership told us that they had succeeded in
                         desegregating public housing developments in three of the PHA’s four
                         communities. HUD staff felt that they had done as much as they could to
                         desegregate the public housing developments and attempted to place the
                         PHA under local control. However, local officials refused, according to
                         HUD. As a result, HUD now plans to dismantle the housing authority.
                         Public housing developments in two of the communities will be sold,
                         although the units will remain as affordable housing. The developments in
                         the remaining two communities will be transferred to another PHA.



St. James Parish         HUD took over the St. James Parish Housing Authority in 2001 after the
                         authority had been in troubled status for almost 8 years. The PHA was
Housing Authority (LA)   poorly managed, was not completing routine maintenance on its public
                         housing units, and was not boarding up vacant units. It had been under the
                         supervision of HUD’s Office of Troubled Agency Recovery since 1997 and
                         began receiving assistance from HUD’s Troubled Agency Recovery Center
                         (TARC) in 1998. The PHA improved after receiving TARC assistance, but
                         it continued to have problems—for example, it did not keep financial
                         records and much of its housing stock was in disrepair—violating the
                         provisions of its Memorandum of Agreement (MOA) with HUD.

                         HUD hired a consulting firm to run the management and operations of the
                         PHA and to act as the board of commissioners. According to TARC
                         officials, the consulting firm established financial controls, put in place
                         new policies and procedures (including new personnel policies), and
                         provided extensive training to staff at the facility. According to HUD
                         officials, the PHA is currently doing well. The staff are now completing
                         routine maintenance and following the consulting firm’s policies and
                         procedures. The housing authority now has an Executive Director, and
                         HUD is training members of an advisory board that will become the board
                         of commissioners once HUD returns the PHA to local control.




                         Page 26                                               GAO-03-363 Public Housing
                        Appendix II
                        Administrative Receiverships




San Francisco Housing   HUD took over the San Francisco Housing Authority in 1996 after the
                        Mayor of San Francisco requested HUD’s assistance. The PHA had
Authority (CA)          managerial problems, high crime at its public housing developments, and
                        problems with the physical condition of the units. HUD sent a team of
                        consultants, HUD officials, and employees of other PHAs to act as
                        managers and correct the problems. A HUD official functioned as the board
                        of commissioners. HUD’s recovery efforts included implementing new
                        policies and procedures and reorganizing the PHA. HUD returned the PHA
                        to local control in 1997. Several years after the PHA was returned to local
                        control, it developed financial difficulties and sought the assistance of
                        HUD’s TARC. The TARC continues to monitor and provide assistance the
                        San Francisco Housing Authority.



Springfield Housing     The Springfield Housing Authority voluntarily transferred operational
                        control to HUD in 1996. The PHA was in “troubled” status, and its
Authority (IL)          deficiencies were not being corrected. The board of commissioners
                        resigned, and a HUD official assumed its role.

                        In September 1996, the housing authority signed an MOA that was aimed at
                        addressing the PHA’s problems. Under the MOA, the PHA was able to make
                        some changes, including improving its contract administration,
                        modernizing its budget controls, raising the quality of construction work,
                        and improving the physical condition of the housing stock. By September
                        1997, the PHA had improved enough to be removed from troubled status
                        and returned to local control.



Wellston Housing        HUD took over the Wellston Housing Authority in 1996 after a series of
                        problems and 3 years of poor performance scores. The PHA had severe
Authority (MO)          management and financial problems, as well as problems with the physical
                        condition of its housing units. HUD initially had staff from its local area
                        office act as the board of commissioners and executed an agreement with a
                        nearby PHA to oversee the day-to-day management and operations.
                        According to officials of the managing PHA, the Wellston Housing
                        Authority was in a state of chaos. They found severe physical deficiencies
                        in the public housing units, rents had not been collected, and there were no
                        records to determine who lived in the public housing or whether residents
                        were qualified to live there. According to HUD officials, the management of
                        the housing authority prior to receivership was dysfunctional.




                        Page 27                                              GAO-03-363 Public Housing
Appendix II
Administrative Receiverships




According to officials responsible for operating the housing authority at the
beginning of the receivership, they had to recreate all of the management
and information systems and inspect all the units to determine
maintenance needs. They had to reverify all the residents’ incomes and
determine whether or not residents had been paying rent. The management
team completed a physical needs assessment of the units to determine the
health and safety violations that needed to be addressed and routine
repairs that were required. After the initial problems were resolved, the
HUD Office of Troubled Agency Recovery in Cleveland took over the
oversight of the PHA and hired an Executive Director to run the day-to-day
operations. HUD also hired a contractor to act as the board. The contractor
is currently training members of an advisory board that will eventually act
as the board of commissioners once HUD returns the PHA to local control.
According to HUD and housing authority officials, the public housing units
are now in good condition and the housing authority is operating properly.




Page 28                                               GAO-03-363 Public Housing
Appendix III

Judicial Receiverships                                                                           Appendx
                                                                                                       iI




Boston Housing    The Boston Housing Authority was initially placed in receivership on
                  July 25, 1979, after tenants filed a class-action lawsuit in 1975 claiming
Authority         unsafe and unsanitary living conditions at the public housing authority’s
                  (PHA) developments. The court’s decision was affirmed on February 4,
                  1980. The next day the court appointed a receiver to take any and all
                  actions needed to bring conditions in the housing units into compliance
                  with the state’s sanitary code and all other laws regulating the conditions
                  and habitability of housing. The court gave the receiver all the powers that
                  a housing authority’s board of commissioners or executive director could
                  exercise. The board of commissioners, which had contributed to the PHA’s
                  management problems, was disbanded and a new management structure
                  was later put in place. The court would closely oversee the receivership’s
                  progress through weekly meetings, written reports, and hearings.

                  During the receivership, the housing authority undertook several
                  improvements, including stabilizing and fully redeveloping several
                  developments, rehabilitating vacant and dilapidated buildings, making
                  extensive capital commitments, and overhauling maintenance systems. The
                  redevelopment efforts resulted in the complete redesign and rehabilitation
                  of several large developments and the conversion of one into a privately
                  owned, mixed-income development. By 1984, the PHA had made enough
                  progress to end the tenure of the initial receiver. Boston’s Mayor assumed
                  the powers of the receiver and appointed an administrator to exercise
                  those powers. The new team continued the efforts of the past receiver,
                  particularly working to reduce vacancies by rehabilitating empty units.
                  These efforts substantially reduced the number of vacancies. The PHA also
                  developed initiatives in operational areas such as security, tenant selection,
                  and litigation.

                  The receivership terminated in September 1990 with the judge noting that
                  supervision was no longer necessary because of the extensive
                  improvements the PHA had made during the 1980s. According to
                  Department of Housing and Urban Development (HUD) officials, the
                  Boston Housing Authority is currently performing well and has received
                  high performance scores in the last few years.



Chester Housing   The Chester Housing Authority (Pennsylvania) was placed in receivership
                  in August 1994 based on a class-action lawsuit filed in 1990. The lawsuit
Authority         claimed that HUD had permitted and approved the de facto demolition of
                  units in public housing developments by allowing them to deteriorate. At



                  Page 29                                                GAO-03-363 Public Housing
                       Appendix III
                       Judicial Receiverships




                       the time, the PHA was not repairing and renting its vacant units, and HUD
                       was already overseeing the PHA after declaring it in violation of its contract
                       in 1991. According to the lawyer for the plaintiffs, the judge agreed with the
                       plaintiffs, finding that HUD had in effect constructively demolished the
                       PHA’s units by allowing them to deteriorate. The receiver was charged with
                       reorganizing the PHA, redeveloping and rebuilding the crumbling and
                       unsanitary units, and helping to create mixed-income communities in the
                       developments and neighborhoods.

                       Throughout the receivership, the PHA has improved on several fronts. It
                       embarked on a revitalization effort that has culminated in the award of two
                       HOPE VI grants to rebuild two of the most dilapidated developments. It has
                       made progress in demolishing units and building new ones to replace them
                       at other developments. According to PHA officials, it has also formed its
                       own police force to provide better security at the developments. On the
                       management side, the PHA has converted to an asset-management
                       structure by decentralizing all operations and converting to site-based
                       accounting and maintenance, and moving staff from centralized offices to
                       specific developments. Each site now has its own waiting list for tenants
                       and its own inventory, and all leasing functions occur at the sites. The PHA
                       has been reorganized and has implemented new standard operating
                       procedures for each department that have been approved by HUD and the
                       court.

                       The PHA’s performance scores have been high for the last 2 years but the
                       housing authority remains under receivership. According to PHA officials,
                       the main concern about ending the receivership is the ability of local
                       authorities to manage it. The City of Chester has faced significant decline
                       and was designated as a distressed municipality in the past. PHA and local
                       HUD officials believe that since the court is concerned about ending the
                       receivership, in all likelihood, some type of monitoring will continue once
                       the receivership ends.



Housing Authority of   The Housing Authority of Kansas City (Missouri) went into receivership
                       after a lawsuit alleging uninhabitable conditions and fair housing violations
Kansas City            in public housing developments. According to the attorney who filed the
                       lawsuit in 1989, the living conditions in the developments were very poor
                       and vacancies so high that the situation was tantamount to demolishing the
                       units. On November 25, 1991, a Consent Decree was entered into that was
                       aimed at improving the PHA, but the PHA repeatedly violated it. In July




                       Page 30                                                GAO-03-363 Public Housing
                       Appendix III
                       Judicial Receiverships




                       1993, a U.S. District Court judge placed the PHA in receivership and in
                       September 1994 appointed a receiver.

                       Since the appointment of the receiver, the PHA has focused on rebuilding
                       distressed communities and improving the quality of the housing stock.
                       The housing authority has modernized several developments and received
                       HOPE VI grants that it has used to completely redevelop some dilapidated
                       developments and scattered-site units. It has also made other
                       improvements, installing community gardens, playgrounds, and new curbs
                       and gutters. On the management side, the PHA has implemented new
                       procurement and personnel policies. According to the receiver, the
                       receivership team reorganized the PHA and created standards for planning
                       and development, construction, and development management. Finally,
                       the PHA has taken steps during the receivership to promote self-sufficiency
                       among residents.

                       Overall, the PHA has lowered crime rates, raised rent collections, and
                       increased occupancy rates during the receivership. In addition, it now
                       serves almost twice the number of households as it did in September 1994.
                       Currently, the housing authority is in the final stage of receivership. In
                       September 2002, the local board of commissioners was reconstituted. The
                       receiver is now a Special Master, with oversight responsibilities for both
                       the board and the PHA.



District of Columbia   The District of Columbia Housing Authority was placed in receivership in
                       May 1995 after tenants filed a lawsuit in 1993. The lawsuit focused on two
Housing Authority      claims: first, that the PHA had constructively demolished public housing
                       units by failing to maintain and allocate them to those on a waiting list, and,
                       second, that the PHA had violated its contract with HUD by failing to
                       maintain its units in decent, safe, and sanitary condition. Additionally,
                       public housing was under the Mayor’s control prior to the receivership and
                       during that time, turnover of management was high. According to a study
                       done on the receivership, the agencies operating public housing went
                       through 13 different directors between 1979 and 1995. After negotiations on
                       the receivership, the Mayor of the District of Columbia, HUD, and the
                       plaintiffs’ counsel entered into a written agreement that allowed the
                       receiver virtually unlimited powers to manage the agency; the presiding
                       judge would have oversight responsibility.

                       When the receivership began, the housing authority had a number of
                       problems. According to PHA officials, the developments were



                       Page 31                                                GAO-03-363 Public Housing
Appendix III
Judicial Receiverships




deteriorating, and many units were in poor physical condition.
Management systems either worked inadequately or not at all. To address
these problems, during the first year, the receiver focused on establishing
the administrative and financial management systems necessary to proceed
with needed improvements in the housing stock and the agency itself. The
next step was a redevelopment strategy aimed at improving physical
conditions by reducing density, integrating design features that would deter
criminal activity, and substantially improving architecture, in part by
incorporating architectural characteristics of surrounding communities.
These efforts included three HOPE VI revitalization projects, three HOPE
VI demolition projects, and four home ownership projects. Additionally, the
housing authority created an Occupied Unit Rehabilitation Program to
complete all deferred maintenance. The plan called for installing new
flooring, kitchen appliances, and bathroom fixtures and making other
repairs to units. The PHA also rehabilitated several vacant units that
needed extensive rehabilitation. Finally, it decentralized its administrative
structure in an effort to increase responsiveness and accountability.

The receivership produced improvements in the consistency of operations
within the agency, reduced the number of vacant units, and improved the
physical condition of the PHA’s housing stock. The District of Columbia
Housing Authority Act of 1999, which was enacted in February 2000,
allowed the PHA to become independent and maintain control over
personnel, financial, and procurement matters while working with the
government of the District of Columbia. The receivership ended in
September 2000, after the PHA met the judge’s criteria for terminating the
receivership by receiving a performance score of 70 or higher for 2
consecutive years of annual HUD assessments.




Page 32                                               GAO-03-363 Public Housing
Appendix IV

GAO Contacts and Staff Acknowledgments                                                       Appendx
                                                                                                   iIV




GAO Contacts      David G. Wood, (202) 512-8678
                  Paul Schmidt, (312) 220-7681



Acknowledgments   In addition to those individuals named above, Emily Chalmers, Jacqueline
                  Garza, Curtis Groves, Tarek Mahmassani, and John McGrail made major
                  contributions to this report.




(541019)          Page 33                                            GAO-03-363 Public Housing
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