oversight

Public Housing: HUD Has Several Opportunities to Promote Private Management

Published by the Government Accountability Office on 1999-07-26.

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

                  United States General Accounting Office

GAO               Report to the Subcommittee on VA,
                  HUD, and Independent Agencies,
                  Committee on Appropriations,
                  U.S. Senate

July 1999
                  PUBLIC HOUSING
                  HUD Has Several
                  Opportunities to
                  Promote Private
                  Management




GAO/RCED-99-210
          United States
GAO       General Accounting Office
          Washington, D.C. 20548

          Resources, Community, and
          Economic Development Division

          B-281054

          July 26, 1999

          The Honorable Christopher S. Bond
          Chairman
          The Honorable Barbara A. Mikulski
          Ranking Minority Member
          Subcommittee on VA, HUD,
            and Independent Agencies
          Committee on Appropriations
          United States Senate

          Americans want government that is more businesslike and better
          managed, according to the Third Report of the National Performance
          Review—government that can limit costs without reducing services. To
          meet this demand for economy and efficiency, federal, state, and local
          agencies are taking a growing interest in managing their assets as a
          business, including exploring private management as a means of
          maximizing their return on buildings and facilities. The nation’s 1.3 million
          public housing units, which annually receive appropriations of nearly
          $6 billion, including almost $3 billion to subsidize the operating budgets of
          nearly 3,200 local public housing authorities, are a major asset worthy of
          such examination. To determine whether the resources provided to public
          housing authorities could be used more efficiently and effectively, you
          asked us to review the use of private contractors in the public housing
          industry. As agreed with your offices, this report answers the following
          questions:

      •   What is the basis for the Office of Management and Budget’s (OMB) 1998
          assertion that privatizing public housing management could save
          $200 million annually and for housing practitioners’ and experts’ belief
          that adopting private management for public housing could lead to the
          more cost-effective use of public housing resources?
      •   To what extent have housing authorities adopted private management
          strategies, what experiences have they had in implementing these
          strategies, and what primary obstacles have they encountered in adopting
          private management?
      •   Are there opportunities for the Department of Housing and Urban
          Development (HUD) to encourage housing authorities to make more
          cost-effective use of their resources by considering private management as
          an alternative to in-house management?




          Page 1                      GAO/RCED-99-210 Private Management for Public Housing
                   B-281054




                   To address these objectives, we sent a mail survey to a sample of about
                   1,200 housing authorities that included all of the approximately 500 very
                   large, large, and medium-sized authorities and a random sample of 700 of
                   the small and very small authorities. (See app. I for detailed information
                   on the results of our survey.) When the results of our survey are
                   generalized to all public housing authorities, the sampling error is plus or
                   minus 5 percent (see app. II.). We also met with public housing experts,
                   private management companies, public housing residents, and officials of
                   HUD and OMB to discuss private management efforts in public housing. To
                   gain housing authorities’ perspectives on the issues associated with
                   privatizing the management of their housing, we visited authorities in
                   Atlanta, Boston, Chicago, and Washington, D.C. (see app. III). We selected
                   these cities because of their broad but varying experiences with private
                   management.



                   OMB does not have quantitative support for its assertion that allowing the
Results in Brief   private sector to bid on contracts for managing all 3,200 public housing
                   authorities could save as much as $200 million annually. However, OMB
                   staff, private management firms, and several housing authorities told us
                   they believe private management could achieve significant savings. In their
                   view, minimizing costs is not a priority in the public housing management
                   community, and introducing competition into the public housing industry
                   should stimulate more efficient and therefore less costly operations and
                   higher-quality services. Moreover, OMB staff believe that a more
                   cost-effective use of public housing resources could be achieved by
                   establishing measurable performance standards and by privatizing the
                   management of housing developments or authorities that do not meet the
                   standards.

                   Currently, most housing authorities employ contractors to provide at least
                   some services or perform tasks such as grounds-keeping and maintenance.
                   However, only about 18 percent of the very large and large and only a
                   handful of the medium-sized, small, and very small housing authorities we
                   surveyed have contracted with private property managers to operate
                   entire developments. For the most part, according to these authorities,
                   private management has increased rental revenues, operating efficiencies,
                   and the quality of housing services. The housing authorities believe that
                   private-sector property managers achieve these gains by (1) aggressively
                   and effectively collecting rents and evicting problem residents,
                   (2) focusing on keeping buildings and grounds attractive, and



                   Page 2                      GAO/RCED-99-210 Private Management for Public Housing
             B-281054




             (3) responding to residents’ needs. Following the private managers’
             example, many in-house managers in housing authorities that have
             privatized developments have also improved their performance. Before
             implementing private management, housing authorities have had to
             overcome a number of obstacles, including their historical reliance on
             in-house management and on centralized—rather than
             project-based—budgeting and accounting systems, the possibility that
             contractors would displace their employees, and the fears of residents
             about changes in their quality of life under private management.

             HUD  has multiple opportunities to encourage the more cost-effective use of
             public housing resources through strategies such as private management.
             The gains in operating efficiency and service quality reported by housing
             authorities that have contracted with the private sector suggest that HUD
             could take advantage of opportunities to promote private management’s
             potential as a public housing management option. Over the next few
             months, HUD will have occasions to encourage housing authorities to adopt
             cost-conscious operating strategies, including private management, as the
             Department develops regulations to implement public housing reform
             legislation enacted in 1998 and as it introduces its new public housing
             assessment system. In addition, HUD has begun to develop outcome and
             output indicators for its annual performance plan that would allow it to
             measure whether housing authorities are adopting cost-conscious
             management approaches. Taking advantage of these opportunities would
             complement other recent efforts by the Department to establish
             performance measures (e.g., a new public housing assessment system) and
             incentives (e.g., mandatory receivership for long-troubled housing
             authorities) for public housing authorities. In total, these activities would
             indicate to housing authorities that HUD considers the cost-effective use of
             resources a high priority and supports the authorities’ adoption of new
             strategies, such as private management, to lower costs and improve
             quality.

             In this report, we recommend that HUD take actions to ensure that the
             benefits of private management are adequately considered by housing
             authorities as they plan their operating strategies for using federal funds to
             provide housing services for low-income households.


             Under the Housing Act of 1937, as amended, the Congress created the
Background   federal public housing program to assist communities in providing decent,
             safe, and sanitary dwellings for low-income families. Today, about 3,200



             Page 3                      GAO/RCED-99-210 Private Management for Public Housing
                                     B-281054




                                     public housing authorities own approximately 1.3 million units of public
                                     housing. Public housing authorities are typically municipal, county, or
                                     state agencies created under state law to develop and manage public
                                     housing units. Over 100,000 employees work for housing authorities that
                                     range in size from the very large (about 158,000 public housing units in
                                     New York City) to the very small (6 public housing units in Tioga, Texas).
                                     Table 1 shows the distribution of public housing authorities, units,
                                     operating funds, and capital funds by housing authority size.

Table 1: Characteristics of Public
Housing Authorities, by Size                                   Number of           Share of Share of public Share of public
                                                                   public            public       housing         housing
                                     Size of housing             housing           housing       operating          capital
                                     authority                 authorities            units          funds           funds
                                     Very large
                                     (more than 6,599
                                     units)                             16               31%             45%              41%
                                     Large
                                     (1,250-6,599
                                     units)                            131               27%             28%              26%
                                     Medium
                                     (500-1,249 units)                 249               15%             12%              12%
                                     Small
                                     (100-499 units)                 1,276               22%             12%              16%
                                     Very small
                                     (fewer than 100
                                     units)
                                                                     1,500                5%               2%              5%
                                     Source: GAO’s analysis of HUD’s data.



                                     Annually, the Congress appropriates funds to HUD to be allocated to public
                                     housing authorities for the operation, improvement, and upgrade of public
                                     housing communities. Most housing agencies receive operating subsidies
                                     to cover the shortfall between tenants’ rents and operating expenses.
                                     These subsidies help housing authorities meet operating and maintenance
                                     expenses. HUD also provides capital funds in the form of modernization
                                     grants to housing authorities to improve the physical condition and to
                                     upgrade the management and operation of existing public housing
                                     developments. Figure 1 shows the federal funding from fiscal year 1989
                                     through fiscal year 1999.




                                     Page 4                             GAO/RCED-99-210 Private Management for Public Housing
                                          B-281054




Figure 1: Federal Funding for Public Housing

$4,000 Dollars in millions


$3,500


$3,000


$2,500


$2,000


$1,500


$1,000


 $500


   $0

          1989          1990   1991     1992          1993           1994         1995       1996       1997       1998       1999
          Fiscal Year

                                                   Public Housing Capital Funds


                                                Public Housing Operating Funds


                                          Note: Funding is in constant 1999 dollars.

                                          Source: HUD budget documents.




                                          The Quality Housing and Work Responsibility Act of 1998 gives housing
                                          authorities “that perform well the maximum feasible authority, discretion,
                                          and control with appropriate accountability to public housing residents,
                                          localities, and the general public.” Moreover, one of the act’s purposes is
                                          to increase the accountability and reward the effective management of
                                          public housing agencies. To monitor the performance of public housing
                                          managers and hold them accountable for the funding they receive, HUD has
                                          two tools: (1) the authorities’ annual and 5-year plans and (2) the
                                          Department’s Public Housing Management Assessment Program (PHMAP).
                                          Under the act, all housing authorities must submit plans for addressing the
                                          housing needs of low-income households in their metropolitan area. In




                                          Page 5                                  GAO/RCED-99-210 Private Management for Public Housing
B-281054




their plans, they must describe their financial resources and their planned
uses of those resources. In addition, the authorities must specify how they
will carry out asset management functions, including how they will plan
for the long-term operating, capital investment, rehabilitation,
modernization, disposition, and other needs of their public housing
inventory. Once the plans are submitted to HUD, the Department is required
to review them for compliance with the law. HUD published an interim rule
in February 1999 that provides initial implementing guidance for housing
authorities and will issue a final rule after considering public comments.

Under PHMAP, HUD uses a set of operational indicators to evaluate housing
authorities’ performance. HUD bases its performance scores for these
indicators on a housing authority’s ability to (1) perform modernization,
maintenance, inspections, and other tasks to maintain the overall physical
condition of buildings; (2) collect rents; (3) prepare vacated units for
occupancy; and (4) work with residents to provide programs,
opportunities, and safe, drug-free environments. HUD field offices depend
on each public housing authority to submit and certify to the accuracy of
about half the data that lead to the overall PHMAP score; the balance of the
information HUD uses comes from its existing information system for
tracking expenditures from major grants. HUD classifies housing
authorities as troubled if they score below 60 out of 100 possible points.
The Department is now required to impose receivership on housing
authorities that are classified as troubled for 2 years. HUD has also
designed and is now implementing a new performance assessment
system—the Public Housing Assessment System. This system is broader
than and subsumes PHMAP. Besides assessing management performance,
the new system includes measures of physical condition, financial
management, and residents’ satisfaction.

In May 1997, HUD published a guidebook on privatizing public housing.
According to the acting assistant secretary at the time, the guidebook,
along with case studies presented as appendixes, is intended to help
housing authority officials who have decided to consider private
management for at least some of their developments. The guidebook was
prepared under a HUD contract by a consulting firm that advises housing
authorities interested in pursuing private management. The guidebook is
available directly from HUD or can be downloaded from HUD’s home page
on the Internet.




Page 6                      GAO/RCED-99-210 Private Management for Public Housing
                         B-281054




                         OMB staff told us that they had no quantitative basis for asserting in
Benefits of              November 1997 that $200 million could be saved annually if the private
Competition Support      sector were allowed to bid on contracts for operating public housing. In its
the Belief That Public   November 1997 passback1 on HUD’s fiscal year 1999 budget request, OMB
                         proposed that the management of all housing authorities be opened up to
Housing Resources        bids from private management companies, nonprofit agencies, and other
Could Be Used More       well-managed housing authorities. We recognize that the savings from
                         private management would be difficult to quantify because most housing
Cost-Effectively         authorities have not developed the project-based budgeting and
                         accounting systems needed to determine the true costs of operating
                         individual housing developments. In addition, baseline data for individual
                         projects would be needed before overall savings could be estimated.
                         Nevertheless, as we have reported in the past, introducing competition
                         into the management of government activities typically results in lower
                         costs and higher-quality services. OMB and others continue to advocate the
                         private sector’s involvement in public housing. This view is not
                         widespread, however, among public housing authorities—very few of the
                         over 3,000 very small, small, and medium-sized authorities use private
                         contractors to provide more than a few services.

                         Currently, most housing authorities have little incentive to change their
                         views. Their income is relatively stable and certain, and the demand for
                         their housing is high. They would derive little benefit from increasing their
                         revenues because such increases generally lead to corresponding
                         reductions in the subsidy payments they receive from HUD. To foster a
                         more competitive and cost-sensitive environment within public housing,
                         OMB staff, some housing authority officials, and several private-sector
                         contractors believe that housing authorities could use private management
                         to lower costs, increase revenues, and deliver services more efficiently.
                         We have made similar observations in evaluating other federal programs.
                         For example, in an October 1997 report on privatizing social services, we
                         reported that

                         “Competition has long been held as a principle central to the efficient and
                         effective working of businesses in a free-market economy. In a
                         competitive market, multiple parties attempt to secure the business of a
                         customer by offering the most favorable terms. Competition in relation to
                         government activities can occur when private-sector entities compete
                         among themselves or when public-sector entities compete with the private

                         1
                          Before HUD and other agencies send their budget requests to the Congress, OMB reviews the requests
                         and provides the agencies with guidance and alternative recommended program funding levels. These
                         comments are contained in internal negotiation documents called “passbacks.” Agencies are allowed
                         to appeal the recommendations in their passback.



                         Page 7                              GAO/RCED-99-210 Private Management for Public Housing
                        B-281054




                        sector to conduct government business. In either case, competition for
                        government business attempts to bring the advantages of a competitive
                        market economy—lower prices and higher-quality goods or services—to
                        the public sector.”2

                        In OMB’s November 1998 passback on HUD’s fiscal year 2000 budget
                        proposal, OMB staff questioned whether all housing authorities are using
                        operating subsidies and capital grants cost-effectively. OMB staff stated that
                        establishing measurable performance standards and incentives to meet
                        such standards could enhance good management and cost-effectiveness in
                        the use of public housing resources. In this passback, OMB staff noted that
                        HUD’s relationship to housing authorities is contractual and should be
                        contingent on performance. Moreover, to ensure that housing authorities
                        were successful, HUD would need to measure their actual performance
                        against its performance standards.

                        Furthermore, OMB staff characterized private management as one remedy
                        that HUD could use for housing authorities whose performance fell short of
                        the Department’s standards. In 1998, OMB suggested, as it did in 1997, that
                        HUD invite bids from private management companies, nonprofit entities,
                        and well-managed housing authorities to manage poorly performing
                        authorities. The prospect of losing managerial control in this manner could
                        give housing authorities an incentive to improve their performance.


                        Private management in public housing ranges from hiring contractors for
Private Management      individual services and functions to hiring them to manage entire
Generally Has           developments or an entire housing agency. While most housing authorities
Benefited Housing       contract for some individual services, such as pest control, landscaping, or
                        applicants’ background checks, only a small percentage have contracted
Authorities That Have   for the day-to-day management of their properties. Recently, however,
Overcome Obstacles      more authorities have begun to explore private management as an option
                        for their properties. The housing authorities that have adopted private
to Implementation       management have generally reported operating efficiencies or higher-
                        quality service. However, these authorities had to overcome obstacles
                        before they could implement private management.




                        2
                        Social Service Privatization: Expansion Poses Challenges in Ensuring Accountability for Program
                        Results (GAO/HEHS-98-6, Oct. 20, 1997).



                        Page 8                              GAO/RCED-99-210 Private Management for Public Housing
                             B-281054




Contracting for Individual   Housing authorities that are contracting for certain individual services or
Services and Functions       functions report that they often save money and improve service delivery.
Often Lowers Costs or        Seventy-six percent of housing authorities contract with a private
                             company for at least one housing management function. Most frequently,
Improves Service Delivery    housing authorities contract for pest control (61 percent), trash collection
                             (53 percent), bookkeeping or accounting (53 percent), vehicle
                             maintenance (27 percent), and landscaping/grounds-keeping (24 percent).

                             Seventy-nine percent of the housing authority managers we surveyed who
                             have contracted for at least one housing management service or activity
                             reported improved operations. Some cited lower costs, primarily for
                             salaries and equipment. For instance, the Anne Arundel County Housing
                             Authority in Maryland reported saving over $100,000 per year by
                             contracting for lawn care, vacant unit painting, and cleaning services for
                             1,026 units in eight developments. In addition, it avoided a capital cost of
                             $46,500 for lawn care equipment. However, some housing authorities
                             reported that they performed the services themselves, achieving better
                             results. For example, the Eutowah Area Consolidated Housing Authority
                             in Georgia performs the vehicle maintenance and routine and preventive
                             maintenance work for its 358 units in two neighboring towns. According to
                             the Eutowah Area’s executive director, he achieves more value and better
                             quality by doing the work with in-house staff rather than contracting for
                             the work.


Some Very Large, Large,      Our survey found that about 9 percent of all public housing units—over
and Very Small Housing       100,000 units—are under private management. Although housing
Authorities Report           authorities of all sizes have privatized the management of individual
                             housing developments to some extent, most of the privately managed units
Benefits From Using          are owned by the very large and large (1,250 units or more) housing
Private Management for       authorities. Typically, the goal of these authorities is to reduce the size of
Entire Housing               the housing portfolio they manage on a daily basis. At the other extreme,
Developments                 we found that some very small housing authorities (owning fewer than 100
                             units) are also hiring private managers, often to save money by combining
                             their portfolio with those of other very small housing authorities. Despite
                             their small size, these authorities say they must address many of the same
                             management issues as the large authorities.

                             In general, the housing authorities that are using private firms to manage
                             individual developments identified positive and significant results. For
                             example, at all four of the housing authorities we visited—in Atlanta,
                             Boston, Chicago, and Washington, D.C.—officials told us that private



                             Page 9                      GAO/RCED-99-210 Private Management for Public Housing
                           B-281054




                           management contributed to improvements, efficiencies, and savings. We
                           found that private management helped to (1) improve the financial
                           management and operating efficiency of public housing authorities,
                           (2) improve customer service through the provision of more responsive
                           property management functions, (3) introduce private-sector business
                           practices into public housing management and make the benefits of the
                           practices well-known, and (4) provide economies of scale that reduce
                           costs and improve operating efficiency. However, we also found that
                           savings are difficult to quantify because none of the housing authorities
                           have fully developed property-based budgeting and accounting systems.
                           Such property-based systems are needed if traditional housing authority
                           managers are to become successful asset managers focused on cutting
                           costs and developing strategies for adding revenues in their public housing
                           real estate portfolios.

Improved Financial         Of the housing authorities that answered our questionnaire, 43 percent of
Management and Operating   those using private management believe that their overall financial
Efficiency                 management improved with private management. Forty percent reported
                           no change. Fewer than 5 percent reported that their financial management
                           became worse after private management was introduced. Over 60 percent
                           reported lower vacancy rates, more timely rent collection, and stronger
                           lease enforcement because of private management. Such improvements
                           increased the authorities’ PHMAP scores.

                           For example, Atlanta Housing Authority officials told us that their vacancy
                           rate declined with private management. Atlanta Housing Authority
                           officials also believe that the private managers were instrumental in
                           improving the authority’s financial management practices by facilitating
                           the comparison of budgeted amounts with actual expenditures for each
                           development. Atlanta did not have such a system before it introduced
                           private management. In addition, housing authority officials in
                           Washington, D.C., credit the private management companies with
                           increasing rent collections, reducing unit turnover time, developing
                           effective unit inspection programs, and increasing efficiency in other ways
                           that helped the housing authority achieve a passing PHMAP score.

                           Small housing authorities have also benefited from private management.
                           The housing authority of Konawa, Oklahoma, for example, contracted
                           with a private company to handle the day-to-day management of its 38
                           public housing units. According to the chairman of the board of
                           commissioners, private management saves the city about $6,500 per year.




                           Page 10                    GAO/RCED-99-210 Private Management for Public Housing
                                   B-281054




Improved Customer Service          Private management companies have improved housing services to
                                   residents by providing fundamental property management functions. Of
                                   the housing authorities we surveyed that were using private management,
                                   62 percent reported that the exterior appearance, or “curb appeal,” of
                                   their properties improved; 74 percent saw improvement in the day-to-day
                                   management of their developments; 65 percent said that private
                                   management companies improved day-to-day maintenance activities; and
                                   59 percent believed that residents’ satisfaction increased.

                                   Housing authority officials in Atlanta, Chicago, Boston, and Washington,
                                   D.C., agreed that private management companies excel at improving the
                                   curb appeal of public housing properties, which could help housing
                                   authorities attract more working families to public housing.3 When private
                                   management companies take over properties, their first priorities usually
                                   include awarding landscaping contracts, putting up new signs,
                                   discouraging graffiti and trash dumping through daily cleanups, and
                                   repainting entrances and other public areas (see fig. 2).


Figure 2: Exterior Amenities and
Landscaping, Chicago, Illinois




                                   Housing authority officials also agreed that private management
                                   companies typically do a good job of eliminating maintenance backorders
                                   and improving maintenance response times. For example, private
                                   management companies in Washington, D.C., told us that they eliminated
                                   backlogs of hundreds of work orders in their first few weeks under

                                   3
                                   Attracting more working families to public housing is a goal of the Quality Housing and Work
                                   Responsibility Act of 1998.



                                   Page 11                              GAO/RCED-99-210 Private Management for Public Housing
                                    B-281054




                                    contract. In Boston, housing authority officials told us that private
                                    management companies can perform many simple maintenance repairs
                                    more efficiently and economically than their in-house maintenance staff.
                                    For example, they said that a private firm can often send one maintenance
                                    employee to perform a simple task, such as repair a broken pipe in a wall,
                                    while labor agreements require the housing authority to use a number of
                                    skilled tradespeople.

                                    Individuals representing resident groups told us that tenants’ quality of life
                                    improved under private management. For example, a private management
                                    company in Chicago built a laundry room for residents, eliminating a
                                    10-block trip to the closest laundromat. A private management company in
                                    Washington, D.C., used operating budget savings to fund improvements
                                    such as new carpeting in the lobby, tables and chairs in the recreation
                                    room, and a new roof-top card room (see fig. 3).


Figure 3: New Roof-Top Card Room,
Washington, D.C.




Private-Sector Business             Contracting, whether for landscaping and grounds-keeping at a few
Practices                           properties or for managing a few entire housing developments, brings a
                                    degree of competition into a housing authority’s regulated management




                                    Page 12                     GAO/RCED-99-210 Private Management for Public Housing
B-281054




environment. Officials at the four housing authorities we visited told us
that they now see the benefits of competition with the private sector. For
example, after noting the positive impact of improved curb appeal at their
privately managed properties, Boston Housing Authority officials
improved the curb appeal at properties managed in-house (See fig. 4).
Boston officials also began inviting private managers to their management
retreats to share management practices. The severely troubled Chicago
Housing Authority was under HUD’s management when it significantly
expanded its private management portfolio in 1995. Chicago has an asset
manager to oversee its privately managed portfolio and plans to give the
private management companies more autonomy in managing properties in
hopes that successful private-sector practices will influence the housing
authority’s management. In Washington, D.C., the receiver told us that that
he no longer plans to place the housing authority’s entire portfolio under
private management because he believes that his in-house staff is adopting
many private-sector management techniques.4 He is satisfied with the
current balance of 12 privately managed and 44 housing-authority-
managed developments. The receiver plans to continue implementing
private-sector practices, including a project-based budgeting system, a
regionalized organizational structure, and a pay-for-performance plan. He
believes that these practices will allow in-house managers to operate at a
cost equal to or less than that of the private management companies that
receive a management fee.




4
The District of Columbia Housing Authority has been under the management of a court receiver since
May 1995.



Page 13                             GAO/RCED-99-210 Private Management for Public Housing
                                      B-281054




Figure 4: Improved Curb Appeal at a
Property Managed by the Boston
Housing Authority




                                      Page 14    GAO/RCED-99-210 Private Management for Public Housing
                               B-281054




Cost-Effective Housing         Private management can help small authorities achieve economies of scale
Portfolio Size                 with reduced overhead, as well as help make large authorities’ portfolios
                               more manageable. In Northeast Texas, 13 housing authorities in three
                               counties managing portfolios ranging in size from 6 to 104 units contracted
                               with the Texoma Council of Governments to provide management
                               services. The Council acts as the managing agent and provides all
                               management services for the housing authorities. According to the
                               Council’s director, reducing the number of audits, accounting fees,
                               insurance policies, and association memberships from 13 to 1 will save
                               more than $30,000 each year. Additional savings from reductions in staff
                               time, postage, copies, and other administrative costs are expected.

                               Conversely, the Boston Housing Authority eased its large workload by
                               contracting for the management of about one-quarter of its 44 housing
                               developments for the elderly. Boston reduced the typical workload of its
                               site managers to one to three developments, a level that is in line with
                               private-sector practices. Previously, the site managers of Boston’s housing
                               developments for the elderly were responsible for four to seven
                               developments and, according to housing authority officials, had time for
                               collecting rents and providing basic maintenance but not for providing
                               services and outreach to tenants.


Housing Authorities Have       On the basis of our survey and our visits with housing authorities, we
Overcome Obstacles to          identified six obstacles to the effective use of private management
Implementing Private           companies: (1) difficulty in departing from the status quo; (2) a history of
                               centralized operations, budgeting, and accounting; (3) inexperience in
Management                     monitoring contractors’ performance, (4) residents’ fear of change;
                               (5) concerns about the impact of a change in management on housing
                               authority personnel; and (6) the disincentive to change created by high
                               PHMAP scores. We also found that some housing authorities have overcome
                               the obstacles and implemented effective private management programs.

Difficulty in Departing From   Most housing authorities told us that they are satisfied with how they have
the Status Quo                 operated in the past, contracting for a few individual housing services,
                               such as trash removal or pest control, but using in-house staff to manage
                               individual housing developments. Fifty-seven percent of the housing
                               authorities believe their properties would not benefit from private
                               management. Forty-three percent believe that switching to private
                               management would be more costly than managing with in-house
                               personnel. The exceptions were typically the 2.2 percent of housing
                               authority directors who have contracted with private firms to manage one



                               Page 15                     GAO/RCED-99-210 Private Management for Public Housing
                         B-281054




                         or more public housing developments. These directors attributed
                         management improvements and cost savings to the private-sector’s
                         management style and practices, not generally found in traditional public
                         housing.

Centralized Management   According to HUD’s May 1997 “how to” guidebook on using private firms
                         to manage public housing, a key difference between public and private
                         management is the degree of centralization. Most housing authorities
                         manage their housing operations from a central office with centralized
                         budgeting and accounting systems, while private firms rely on
                         decentralized management with property-based accounting, which, in
                         turn, provides the information necessary to prepare property-based
                         budgets. When consolidated, compared, and analyzed, this property-based
                         information provides a basis for deciding how to manage the housing
                         authority’s assets.5 According to the Institute for Real Estate Management,
                         HUD is encouraging public housing authorities to adopt decentralized
                         management practices, including property-based budgeting and
                         accounting, which are common in the private sector. However, most
                         housing authorities have not transformed their systems. Without
                         property-based budgeting and accounting, housing authorities have
                         difficulty determining the true costs of operating a housing development.
                         Such information is necessary to control costs, measure program
                         efficiency, and make strategic asset management decisions such as
                         whether to privatize the management of individual developments.

                         All four housing authorities we visited are decentralizing their operations,
                         although the level of decentralization varies. The District of Columbia
                         Housing Authority has decentralized its property oversight by dividing
                         itself into three nearly autonomous, similarly sized regional housing
                         agencies. The Boston Housing Authority split its elderly and family
                         housing portfolios and placed a portion of each under private
                         management. The New York City Housing Authority, on the other hand,
                         chose to privatize its scattered-site housing program. In all three cases, the
                         goal was to devolve responsibility and accountability for individual
                         developments so that managers could focus on analyzing the physical,
                         structural, and marketing needs of their housing portfolios. In addition, the
                         use of private property managers has instilled competition, and exchanges



                         5
                          Whereas a traditional housing authority director can be compared to a hands-on chief operating
                         officer, an asset manager is more like a chief executive officer, supervising and implementing policy.
                         More specifically, asset management depends on systems and data, including project-based budgeting
                         and accounting systems, a property-based performance-monitoring system, relevant market
                         information, and property-based data on physical needs.



                         Page 16                               GAO/RCED-99-210 Private Management for Public Housing
                             B-281054




                             between private and in-house managers have enhanced performance
                             throughout entire agencies.

                             Property-based budgeting and accounting are common in private property
                             management but rare in public housing because of the program’s unique
                             funding arrangement: HUD provides both capital and operating funds to a
                             housing authority as a single organizational unit, not to individual
                             developments under the authority’s management. HUD’s regulations require
                             housing authorities that manage over 500 units to practice project-based
                             or cost-centered accounting.6 Preparing property-based budgets, which
                             requires establishing and maintaining appropriate accounting records at
                             each property, can improve efficiency and responsiveness because such
                             budgets accurately present the costs of operating each property. Knowing
                             costs at the project level enables management to determine how much of
                             an agency’s operating resources are spent on the properties themselves
                             compared with central office overhead. It can also provide information to
                             guide capital expenditures and to identify properties whose management
                             would benefit from private management. According to the former deputy
                             assistant secretary, property-based budgeting and accounting are the
                             single most effective tools for measuring the performance of a property;
                             without them, a housing authority cannot truly decentralize operations
                             because its internal controls will be inadequate. Of the four housing
                             authorities we examined in detail, Atlanta’s came closest to achieving a
                             full property-based budgeting and accounting system.

Inexperience in Monitoring   Delegating property-management functions to private companies relieves
Contractors’ Performance     a housing authority of day-to-day property management tasks; however,
                             private management experts and housing authority officials told us that to
                             ensure success, privatization efforts need clear and specific
                             performance-based standards and in-house staff able to run effective
                             monitoring programs. According to District of Columbia Housing
                             Authority officials, the private firms under performance-based standards
                             outperformed those without performance-based standards. Housing
                             authority officials in Atlanta also included performance measures in
                             private management contracts. Accordingly, Atlanta will pay management
                             companies that meet agreed-upon performance goals a bonus over and
                             above the monthly management fee. Conversely, Atlanta plans to penalize
                             management companies that fail to meet its performance standards.



                             6
                              Cost centers can be delineated by administrative departments or divisions within a housing authority,
                             by office locations, by individual projects, or by clusters or communities of projects that consist of one
                             or more contiguous buildings, an area of contiguous row houses, or scattered-site buildings.



                             Page 17                                GAO/RCED-99-210 Private Management for Public Housing
                              B-281054




                              Monitoring is also essential to ensure that contractors perform effectively.
                              HUD’s private management guidebook describes property management
                              oversight activities as including monthly or quarterly site visits, annual or
                              semiannual reviews of management procedures, monthly reviews of
                              income and expense statements and operating performance data, and
                              reviews of audited financial statements. All four authorities we reviewed
                              require private management companies to submit periodic management
                              and financial reports.

Residents’ Fears of Change    Residents’ fears, whether real or perceived, can be major obstacles to
                              successfully adopting private management. Our survey results suggest that
                              most housing authority officials do not know how their residents view
                              private management. When asked if they believed residents favored
                              private management, 48 percent of the housing authority officials neither
                              agreed nor disagreed with the statement. Of those that responded, those at
                              housing authorities that have hired private firms to manage at least one
                              housing development were less concerned about residents’ fears of
                              change. Only 8 percent of those at housing authorities that have privatized
                              at least one development responded that they believe residents do not
                              favor private management, compared with over 35 percent of those at
                              housing authorities that have not privatized any developments.

                              Effective communication can help to avoid or overcome these problems.
                              For example, the residents at one Chicago development initially thought
                              that they would lose their homes under private management. To allay
                              these fears, the property management company presented its plans to the
                              residents and subsequently held monthly meetings to update them on the
                              management transition. In Boston, the authority included the residents in
                              its review of the bidders’ qualifications. According to resident leaders at
                              both authorities, most of the residents now prefer private management
                              and are pleased with the additional social services and improved living
                              conditions provided by the private management companies.

Concerns About Displacing     To implement private management, housing authorities must be willing to
Housing Authority Personnel   address concerns about displacing in-house staff. Housing authorities use
                              different approaches to mitigate the impact of private management on
                              existing personnel. HUD’s privatization guidebook identifies five
                              approaches: (1) Choose properties for private management that are new or
                              recently modernized, thus minimizing the displacement of existing staff;
                              (2) rely on staff attrition to cover the costs of and limit the need for
                              reductions in force; (3) freeze personnel vacancies for over a year in
                              anticipation of private management; (4) ask the private firms to hire



                              Page 18                     GAO/RCED-99-210 Private Management for Public Housing
                              B-281054




                              existing staff for some period; and (5) use the management improvement
                              line item in HUD’s comprehensive grant modernization program as a source
                              of transitional funding, thereby giving the housing authority more time to
                              adjust its organization.

                              The Atlanta Housing Authority encouraged private managers to hire
                              housing authority employees who were assigned to a development, subject
                              to the management company’s pre-employment requirements. The housing
                              authority stipulated that management companies that hire its employees
                              must recognize and honor each individual’s respective years of service in
                              determining eligibility and benefit levels under the company’s group
                              insurance and leave accrual plans. Furthermore, all staff who took jobs
                              with private management companies were eligible to reapply to the
                              housing authority within 1 year; however, few people took advantage of
                              this offer. The District of Columbia Housing Authority, on the other hand,
                              recognized that the low performance level of its staff was part of the
                              problem and did not require or encourage private firms to hire its staff.

The Disincentive Created by   In response to our survey question asking why private management had
High Management Assessment    not been considered as an option, executive directors often cited their
Scores                        high PHMAP scores and interpreted those scores to mean that their
                              programs were running efficiently. Under PHMAP, however, high scores are
                              common and should not be the only measure of program efficiency. As of
                              February 1999, 99 percent of the housing authorities had passing scores;
                              over 75 percent scored over 90 out of 100, and HUD rated them as “high
                              performers.” HUD’s new Public Housing Assessment System is designed to
                              be more comprehensive. One of its four components will measure the
                              physical condition of public housing. For that reason, the new assessment
                              system may provide a better measure of an authority’s potential to make
                              more effective use of its resources by adopting asset management and
                              other private management strategies. In the past, HUD required some of the
                              troubled, primarily very large housing authorities, such as those in Atlanta
                              and Chicago, to incorporate private management, and the results have
                              been positive. Whether private management could benefit housing
                              authorities of all sizes, regardless of their performance scores, is not
                              known.




                              Page 19                     GAO/RCED-99-210 Private Management for Public Housing
                          B-281054




                          Each year, HUD provides grants and subsidies totaling nearly $6 billion to
Opportunities Exist       housing authorities. Because of this substantial funding, HUD bears a
for HUD to Encourage      responsibility to ensure that housing authorities focus adequate attention
More Cost-Effective       on making cost-effective use of their resources. To carry out this
                          responsibility, HUD has several relatively new means of focusing housing
Use of Resources          authorities’ attention on strategies, including private management, for
                          increasing revenue, lowering costs, and improving the quality of services
                          in public housing. These means include (1) the Department’s guidebook on
                          privatization; (2) new regulations that require periodic housing agency
                          plans, implementation of HUD’s newly designed Public Housing Assessment
                          System, and adoption of new formulas for providing annual grants and
                          subsidies to housing authorities; and (3) the Department’s annual
                          performance planning process. By taking full advantage of each of these
                          means of emphasizing cost-efficiency in public housing, HUD can ensure
                          that housing authorities perceive that the cost-effective use of resources is
                          a high priority and that HUD supports the authorities’ exploration of
                          strategies such as private management for using their resources
                          cost-effectively.


HUD’s Guidebook Could     HUD  has recognized that private management can have positive results. HUD
Be Made More Accessible   published a private management guidebook and made it available on the
                          Internet to help housing authorities adopt this strategy. The cover letter to
                          the 1997 guidebook, signed by the Secretary of Housing and Urban
                          Development, endorses private management—stating that
                          “[w]ell-structured private management programs have resulted in reduced
                          costs, improved performance, and higher quality of work”. However, the
                          guidebook is not easily accessible from HUD’s Internet Web site because it
                          does not have a separate link and will not appear on a search of HUD’s
                          “guidebook” database. The user must search for the words “private
                          management” to access the document. In contrast, HUD’s HOPE VI Urban
                          Revitalization Demonstration Program has a prominent link on the Public
                          and Indian Housing home page with access to a separate Web site that
                          collects and shares information on best practices, a resource bank of
                          sample requests for proposals, requests for qualifications, contracts, and
                          HUD policies and regulations that affect the program.


                          Housing authority officials also seemed unsure of HUD’s position on private
                          management. When asked to react to a statement about whether HUD
                          supports private management, 60 percent neither agreed nor disagreed
                          with the statement. We believe that this response reflects a perception on
                          the part of housing authority managers that HUD has not taken a position



                          Page 20                     GAO/RCED-99-210 Private Management for Public Housing
                           B-281054




                           on private management. Housing authority employees attending HUD’s
                           July 1999 conference on best practices would not have seen much
                           evidence that HUD supports the use of private management for public
                           housing. The topic was not covered in any of the nearly 100 workshops on
                           best practices held at the 5-day conference. Only a handful of the over
                           1,300 nominations for best practices submitted for HUD’s Public and Indian
                           Housing programs covered some aspect of private management.


New Regulations and a      The Quality Housing and Work Responsibility Act of 1998 (title V, P.L.
New Performance            105-276) substantially amends the U.S. Housing Act of 1937 and offers HUD
Measurement System Offer   several opportunities to encourage greater cost-effectiveness in public
                           housing. For example, the act requires housing authorities to develop
Opportunities for HUD to   annual and 5-year plans that describe, among other things, the agencies’
Encourage the              plans for implementing an asset management philosophy for their public
Cost-Effective Use of      housing inventory.7 In addition, the act provides for entities other than
Resources                  housing authorities to administer public housing and for two or more
                           housing authorities to form consortia to administer any or all of each
                           agency’s respective housing programs. In its initial guidance—published on
                           February 18, 1999—HUD stated that the two provisions will require
                           rulemaking. HUD’s goal is for housing authorities to plan strategically to
                           make more efficient use of federal assistance, more effectively operate
                           their programs, and better serve their residents. HUD’s interim rule for
                           developing public housing planning documents—also published on
                           February 18, 1999—stated that the purpose of both the annual and the
                           5-year plans is to require housing authorities to examine their existing
                           operations and needs and to design short- and long-range strategies to
                           address those needs. Although the interim rule did not explicitly refer to
                           private management as a management option, the Deputy Assistant
                           Secretary, Office of Policy, Program, and Legislative Initiatives, told us
                           that the template HUD is currently considering as a model for public
                           housing plans contains private management as an example in the section
                           on asset management. He also agreed that HUD should strongly encourage
                           small housing authorities to form consortia.

                           HUD currently has another opportunity to emphasize cost-effectiveness and
                           provide incentives for housing authorities to increase revenues as it
                           develops a new formula for providing operating subsidies to housing
                           authorities. The Quality Housing and Work Responsibility Act of 1998
                           stipulates that housing authorities can benefit from reductions in their

                           7
                            The act specifies that asset management functions include, but are not limited to, plans for long-term
                           operating and capital investment, rehabilitation, modernization, and property disposition.



                           Page 21                               GAO/RCED-99-210 Private Management for Public Housing
B-281054




utility and waste management costs and increases in the incomes earned
by residents. However, these incentives, though positive, are not likely to
generate much revenue for housing authorities, at least not in the short
term.8 Moreover, in our 1998 report on HUD’s current system of providing
subsidies, we found that the four large housing authorities we visited
believed that they needed incentives and flexibility to increase their
revenues so that they would be less dependent on HUD’s operating subsidy.9
 A characteristic of private managers of public housing is that their
business practices, such as more aggressive evictions, timelier rent
collections, and faster preparation of vacated housing units for occupancy,
result in higher rental revenue. However, unless housing authorities
believe that they will not lose a portion of their subsidy if they maximize
income, they may not be motivated to explore private management as a
strategy to increase their rental income. Therefore, as HUD develops a new
operating subsidy formula, it can consider a stronger performance
incentive as part of the new subsidy formula. Such an incentive would be
consistent with a broad provision in the act to create a performance
incentive in the public housing capital grant program.

Finally, HUD has an opportunity to emphasize cost-effectiveness in its new
Public Housing Assessment System. HUD will implement this system on
October 1, 1999, and its purpose is to measure housing authorities’
performance on the basis of standards that are objective, uniform, and
verifiable. HUD published a notice in the May 13, 1999, Federal Register that
details the new assessment system’s scoring process. While the new
system includes financial indicators, such as liquidity levels, receivables
outstanding, and expense controls, it does not include measures of
program efficiency, such as the number of households served per month
per unit of cost, that can be used to compare operating costs with housing
services provided.

By referring to private management in its new management regulations as
a useful management tool or strategy, HUD could help to build the concept
into housing authorities’ strategic planning. HUD would then know that
authorities were at least aware that the Department supports private
management as an option for achieving greater productivity through the

8
 While the earnings of former welfare recipients may eventually benefit housing authorities, they are
not likely to do so during the first year. The act mandates that housing authorities disregard for 12
months increases in income for persons who (1) have been unemployed for 1 or more years and obtain
employment through participation in a family self-sufficiency or job training program or (2) have
received temporary assistance for needy families within the last 6 months. After the 12-month period,
the rent increase is phased in at no greater than 50 percent for the next 12-month period.
9
 Public Housing Subsidies: Revisions to HUD’s Performance Funding System Could Improve Adequacy
of Funding (GAO/RCED-98-174, June 19, 1998). To prepare this report, we conducted in-depth
interviews with housing authorities in Baltimore, Kansas City, Los Angeles, and Miami.


Page 22                              GAO/RCED-99-210 Private Management for Public Housing
                         B-281054




                         more cost-effective use of resources, higher-quality services, or increased
                         revenues. In addition, once authorities start to consider private
                         management in their planning and asset management decisions, HUD could
                         improve its own performance plan, as discussed below.


HUD’s Performance Plan   To further encourage the cost-effective use of public housing resources,
Also Provides            HUD has established expectations for housing authorities in its fiscal year

Opportunities for        2000 annual performance plan. In this plan, HUD expresses its expectations
                         for itself and its partners as either outcome or programmatic output
Fostering the            indicators. In guidance issued to all agencies on how to develop these
Cost-Effective Use of    indicators in annual performance plans, OMB stated that “agencies are
Resources                strongly encouraged to include, as appropriate, measures of customer
                         service and program efficiency.”

                         In its fiscal year 2000 performance plan, HUD specifies five strategic goals,
                         one of which is to increase the availability of decent, safe, and affordable
                         housing in American communities. To help achieve this goal, the plan
                         states, HUD will aid public housing authorities in analyzing their housing
                         markets, their most pressing needs, and their most cost-effective
                         responses through their operating plans. However, under this strategic
                         goal, the plan includes no outcomes or outputs—for either HUD or housing
                         authorities—to measure the achievement of cost-effectiveness through
                         joint HUD-housing authority analyses of markets and needs.

                         The Director of Policy Development, Office of Policy Development and
                         Research, said that the plan did not focus on productivity measures
                         because some incentive to make cost-effective use of available resources
                         already exists in the public housing operating subsidy formula. She said
                         that a housing authority’s allowable expenses are predetermined for a
                         given year; therefore, if an authority can reduce its costs through
                         efficiencies, it will have some extra funds for discretionary uses that year.
                         Having these extra funds, therefore, would be an incentive to operate
                         more efficiently.

                         However, our 1998 report on HUD’s current system of operating subsidies,
                         while limited in scope to four large housing authorities, found that housing
                         authorities did not recognize this incentive, nor were they gaining
                         discretionary income by becoming more operationally efficient. Instead,
                         these four housing authorities reduced or deferred their maintenance or
                         used other grants to defray operating costs to cope with what they
                         considered inadequate funding. The Director of Policy Development noted



                         Page 23                     GAO/RCED-99-210 Private Management for Public Housing
              B-281054




              that to create more incentives to operate efficiently, a negotiated
              rulemaking panel that is currently developing a new formula for operating
              subsidies might build some incentives for cost-effectiveness into the new
              formula.

              Two of HUD’s five strategic goals are partially related to providing safe
              public housing. In turn, parts of key objectives within these goals specify
              that housing should be safe and that housing authorities should be held
              accountable for results. HUD’s performance plan discusses several means
              of achieving these objectives, including rating housing authorities on their
              administration, regularly inspecting the physical quality of public housing,
              and subsequently enforcing contracts that require housing to be kept in
              standard condition. To measure public housing safety, the performance
              plan contains indicators related to tenants’ satisfaction, housing quality
              standards, and life-threatening health and safety deficiencies. However,
              the plan does not similarly emphasize and include indicators for the
              cost-effective use of resources. Moreover, it does not link the safety
              indicators with incentives such as funding or with consequences for not
              achieving minimum performance, as OMB suggested in its November 1998
              passback. Therefore, without cost indicators or a linkage between
              performance and incentives, housing authorities may perceive that the
              cost-effective use of resources is not important to HUD and that exploring
              strategies such as private management to reduce costs is not encouraged.


              The public housing authorities we reviewed have not widely embraced
Conclusions   private management, but where they have, the results generally have been
              positive and demonstrate that private management can be a catalyst for
              change and improvement. Because many housing authorities have not
              considered private management as an alternative housing management
              strategy, we believe that they may have been depriving themselves and
              their residents of private management’s potential benefits. In addition, to
              the extent that private management could help to raise public housing
              revenues, excessive subsidies could be avoided and services could be
              increased. Because private management is not an irreversible change in
              management style, we believe that more housing authorities could afford
              to consider it before concluding that it would not work for them.

              Although HUD has required some troubled housing authorities to
              implement private management, the Department has not actively
              promoted this approach. For example, it did not include private
              management in public housing on the agenda for its recent conference on



              Page 24                     GAO/RCED-99-210 Private Management for Public Housing
                         B-281054




                         best practices. In addition, HUD’s guidebook on private management is
                         hard to find on the Internet. Nevertheless, HUD currently has several
                         opportunities to encourage housing authorities to focus on operational
                         efficiency by considering options such as asset management and private
                         management. These opportunities include the framing of new regulations
                         that will implement HUD’s new Public Housing Assessment System and the
                         1998 public housing reform legislation. This legislation mandates a new
                         operating subsidy formula and requires housing authorities to prepare
                         annual and 5-year plans. In addition, HUD has an opportunity to develop
                         outcome and output indicators for its performance plan that would enable
                         the Department to measure whether housing authorities are adopting
                         cost-conscious management approaches.


                         To implement provisions of the Quality Housing and Work Responsibility
Recommendations          Act of 1998, clarify the Department’s position on private management, and
                         foster the cost-effective use of federal resources, we recommend that the
                         Secretary of Housing and Urban Development

                     •   make the 1997 guidebook on private management more readily accessible
                         on HUD’s Internet Web site and expand the site to include additional
                         information, such as a resource bank of important private management
                         documents, best practices, and pertinent experiences, that housing
                         authorities can share;
                     •   ensure that the regulations HUD develops to implement provisions of the
                         1998 public housing reform legislation (1) encourage housing authorities
                         through their planning process to consider and adopt asset management
                         principles, including project-based budgeting and accounting;
                         (2) encourage small housing authorities to look for opportunities to
                         achieve efficiencies by forming consortia or joint ventures that could
                         include third parties; and (3) provide incentives for housing authorities to
                         make more cost-effective use of their resources;
                     •   develop outcome and output indicators in the Department’s annual
                         performance plan that can be used to measure whether housing
                         authorities are adopting cost-conscious management approaches.


                         We provided copies of a draft of this report to HUD and OMB for review and
Agency Comments          comment. Later, we met with HUD’s Deputy Assistant Secretary for Policy,
and Our Evaluation       Programs, and Legislative Initiatives and Deputy Assistant Secretary for
                         Community Relations and Involvement and OMB’s Housing Branch Chief to




                         Page 25                     GAO/RCED-99-210 Private Management for Public Housing
              B-281054




              obtain their comments. We also sent each of the case studies in appendix
              III to the appropriate housing authority for review and comment.

              HUD generally agreed with the report and all but one of our
              recommendations and said that the report provided new and useful
              information that should benefit housing authorities as they consider hiring
              private-sector contractors to help operate and maintain their properties. In
              several areas, however, HUD disagreed with the draft report. In particular,
              the draft report included a proposed recommendation that HUD consider
              adding an indicator to its new Public Housing Assessment System that
              would measure changes in program efficiency. Although HUD believes that
              such an indicator would be useful, it also believes that the Department’s
              new assessment system contains several similar indicators. Moreover, HUD
              said that because the resources available to public housing authorities are
              not equal across the board, developing an equitable indicator of efficiency
              is not technically feasible at this time. We agreed and withdrew our
              proposed recommendation for such an indicator.

              HUD also differed with our characterization of the Department as neutral
              toward privatization because of the disclaimer printed in its privatization
              guidebook. According to the Department, the disclaimer meets a legal
              requirement and does not represent HUD’s position. HUD believes it is
              positive rather than neutral about the benefits of using private contractors
              to operate public housing. We revised the report to reflect HUD’s position.

              OMB officials also agreed with the report’s conclusions and
              recommendations, and they provided several suggestions to enhance
              clarity, which we have incorporated as appropriate.


              To assess OMB’s basis for estimating HUD’s potential savings from
Scope and     implementing private management, we met with OMB staff to obtain
Methodology   supporting documentation. We also reviewed correspondence between the
              Council of Large Public Housing Authorities and OMB concerning OMB’s
              support. In addition, we reviewed studies and published articles on
              privatizing public housing and other social services.

              To determine the extent to which housing authorities have adopted private
              management strategies in their public housing programs, we mailed a
              survey to 1,182 housing authorities to obtain their views on contracting
              with private companies. We drew our sample from HUD’s Public Housing




              Page 26                     GAO/RCED-99-210 Private Management for Public Housing
B-281054




Authority Profiles database that we downloaded from the Department’s
home page on the Internet.

For assistance in designing our survey, we obtained input on the content
of the questionnaire from officials of the National Association of Housing
and Redevelopment Officials, private management companies, and
housing experts. We pretested the questionnaire with officials of six
housing authorities in Maryland, Virginia, and Georgia. Each pretest
consisted of a visit by our staff to a housing authority. During these visits,
we simulated the actual survey experience by asking housing authority
officials to fill out the questionnaire. We also interviewed housing
authority officials after they had completed the questionnaire to ensure
that (1) the questions in the survey were readable and clear, (2) the terms
used in the survey were precise, (3) the survey did not place an undue
burden on housing authority officials, and (4) the survey was independent
and unbiased in its point of view.

We used HUD’s size classification categories for public housing agencies
and mailed 1,182 surveys addressed to executive directors—401 surveys to
all of the very large, large, and medium-sized housing authorities, 399
surveys to a random sample of the small housing authorities, and 382
surveys to a random sample of the very small housing authorities. We
received 1,065 completed, useable questionnaires—a response rate of
90 percent.

To identify housing authorities’ views on and experiences with hiring
contractors to manage specific housing developments and perform
discrete housing management functions, we visited housing authorities in
Atlanta, Boston, Chicago, and Washington, D.C. Case study analyses of
these four locations enabled us to gain an in-depth understanding of issues
associated with privatizing the management of public housing
developments in these jurisdictions. We selected these cities because of
their varying experiences with private management. We also met with
public housing experts, private management companies, public housing
residents, HUD officials, and OMB staff to obtain their perspectives on the
use of private management for public housing. In addition, we evaluated a
significant study done in October 1998 that attempted to measure
differences in efficiency and effectiveness between privately and publicly
managed public housing properties in Dade County, Florida.

Finally, to evaluate HUD’s role in fostering successful private management
efforts at housing authorities, we met with officials from two HUD



Page 27                      GAO/RCED-99-210 Private Management for Public Housing
B-281054




offices—Public and Indian Housing, and Policy Development and
Research. We also spoke with officials from HUD’s Atlanta, Boston,
Chicago, and Washington, D.C., field offices. In addition, we discussed
HUD’s role with public housing experts, housing authority officials, and
private management companies.

We conducted our review from July 1998 through June 1999 in accordance
with generally accepted government auditing standards.


We are sending copies of this report to the Chairs and Ranking Minority
Members of the Senate and House Committees with responsibility for
public housing; to Andrew Cuomo, Secretary of Housing and Urban
Development; and to Jacob Lew, Director, Office of Management and
Budget. We will make copies available to others on request.

Please contact me at (202) 512-7631 if you or your staff have any questions.
Key contributors to this report are listed in appendix IV.




Judy A. England-Joseph
Director, Housing and Community
  Development Issues




Page 28                     GAO/RCED-99-210 Private Management for Public Housing
Page 29   GAO/RCED-99-210 Private Management for Public Housing
Contents



Letter                                                                                               1


Appendix I                                                                                          32
                       Most Housing Authorities Contract With Private Companies for                 32
Survey Results           Some Management Services or Functions
                       Contracts for Management Services Are Small Compared With                    33
                         Housing Authorities’ Operating Budgets
                       Most Housing Authorities Are Not Contracting for the                         33
                         Management of Entire Public Housing Developments
                       Very Large or Very Small Housing Authorities Are More Likely to              33
                         Use Private Management for Their Developments
                       Housing Authorities Are Not Clear as to HUD’s or Residents’                  37
                         Views on Private Management

Appendix II                                                                                         38

Sampling Errors and
Confidence Intervals
for Estimates
Appendix III                                                                                        45
                       Housing Authority of the City of Atlanta                                     45
Very Large Housing     District of Columbia Housing Authority                                       50
Authorities’           Chicago Housing Authority                                                    55
                       Boston Housing Authority                                                     61
Experiences With
Private Management
Appendix IV                                                                                         67

GAO Contacts and
Staff
Acknowledgments
Tables                 Table 1: Characteristics of Public Housing Authorities, by Size               4
                       Table I.1: Management Services Most Often Provided by Private                32
                        Contractors
                       Table I.2: Housing Authorities’ Use of Private Companies to                  33
                        Manage Developments




                       Page 30                    GAO/RCED-99-210 Private Management for Public Housing
          Contents




          Table I.3: Housing Authorities Using Private Management                      34
           Companies to Manage Housing Developments
          Table II.4: Housing Authority Managers’ Beliefs About the                    37
           Benefits of Private Management for Authorities That Have and
           Have Not Privatized Housing Developments
          Table II.1: Sampling Errors and Confidence Intervals for                     38
           Estimates Derived From Responses to Selected Survey Questions

Figures   Figure 1: Federal Funding for Public Housing                                  5
          Figure 2: Exterior Amenities and Landscaping, Chicago, Illinois              11
          Figure 3: New Roof-Top Card Room, Washington, D.C.                           12
          Figure 4: Improved Curb Appeal at a Property Managed by the                  14
            Boston Housing Authority
          Figure II.1: Percentage of Responding Housing Authorities, by                35
            Size, Agreeing That Their Properties Would Not Benefit From
            Private Management
          Figure II.2: Percentage of Responding Housing Authorities, by                36
            Size, Agreeing That Private Management Is More Costly Than
            Managing With In-House Staff




          Abbreviations

          AHA        Housing Authority of the City of Atlanta
          BHA        Boston Housing Authority
          CHA        Chicago Housing Authority
          DCHA       District of Columbia Housing Authority
          HUD        Department of Housing and Urban Development
          OMB        Office of Management and Budget
          PHA        Public Housing Authority
          PHMAP      Public Housing Management Assessment Program
          VA         Department of Veterans Affairs


          Page 31                    GAO/RCED-99-210 Private Management for Public Housing
Appendix I

Survey Results


                                              This appendix summarizes the results of our survey of 1,182 housing
                                              public authorities. We drew our sample of housing authorities from the
                                              Department of Housing and Urban Development’s (HUD) Public Housing
                                              Authority Profiles database, which we downloaded from HUD’s home page
                                              on the Internet. We mailed questionnaires to the executive directors of
                                              (1) all 401 housing authorities classified by HUD as very large, large, and
                                              medium-sized; (2) a random sample of 399 housing authorities classified as
                                              small; and (3) a random sample of 382 housing authorities classified as
                                              very small. We received completed, useable questionnaires from 1,065
                                              housing authorities—a response rate of 90 percent. This appendix
                                              summarizes our analysis of the responses we received.


                                              We found that 76 percent of housing authorities contract for at least one
Most Housing                                  housing management service with a private company. In most cases,
Authorities Contract                          housing authority managers responded that the shift from in-house
With Private                                  management to private management improved operations. Table I.1
                                              identifies the 10 services that, according to respondents, are most often
Companies for Some                            provided by private companies, the percentage of housing authorities
Management Services                           using private companies, and housing authority managers’ views on the
                                              results of using these companies.
or Functions
Table I.1: Management Services Most Often Provided by Private Contractors
                                    Percentage of housing       Reported change resulting from using private company
                                           authorities that                         (in percent)
Type of service                        contract for that service          Became worse          Did not change         Became better
Pest control                                                  81                            3                19                    65
Trash collection                                              73                            4                35                    37
Bookkeeping/accounting (excluding
audit)                                                        57                            2                17                    54
Vehicle maintenance                                           43                            2                31                    49
Training housing authority employees                          39                            0                14                    77
Landscaping/grounds-keeping                                   38                            5                24                    69
Processing evictions and other legal
services                                                      30                            3                25                    57
Providing training and social
services for residents                                        20                            4                19                    65
Conducting background checks                                  18                            2                17                    70
Administration of modernization
programs                                                      18                            5                11                    71
                                              Source: GAO’s analysis of survey responses.




                                              Page 32                            GAO/RCED-99-210 Private Management for Public Housing
                                         Appendix I
                                         Survey Results




                                         The costs of contracts for individual management services or functions
Contracts for                            typically represent a small percentage of a housing authority’s operating
Management Services                      budget. About 70 percent of the housing authorities that contract for
Are Small Compared                       individual services or functions reported that they spend 10 percent or less
                                         of their operating funds for private firms to perform individual services.
With Housing                             Twenty-one percent reported paying 11 to 20 percent to outside firms, and
Authorities’ Operating                   10 percent reported paying more than 20 percent. Savings usually result
                                         from lower costs for salaries and equipment.
Budgets
                                         The percentage of housing authorities that have hired private companies
Most Housing                             to manage entire developments is low (fewer than 3 percent of all housing
Authorities Are Not                      authorities), according to our survey results. Table I.2 shows the
Contracting for the                      breakdown, by size, of the housing authorities that are using private
                                         management companies.
Management of Entire
Public Housing
Developments


Table I.2: Housing Authorities’ Use of
Private Companies to Manage                                                        Percentage using private management
Developments                             Size of housing authority                                           companies
                                         Very large                                                                    86
                                         Large                                                                         10
                                         Medium                                                                         1
                                         Small                                                                          1
                                         Very small                                                                     3



                                         Because very large housing authorities own most of the units being
Very Large or Very                       privately managed, about 9 percent of all public housing, or over 100,000
Small Housing                            units, is under private management. In addition, very small housing
Authorities Are More                     authorities are hiring private managers to manage some or all of their
                                         housing developments, although this activity accounts for only a small
Likely to Use Private                    fraction of the total public housing stock. Table I.3 identifies the housing
Management for Their                     authorities responding to our survey that are using private contractors or
                                         resident managers to manage some or all of their housing developments
Developments                             and indicates how many units are under private management.




                                         Page 33                     GAO/RCED-99-210 Private Management for Public Housing
                                       Appendix I
                                       Survey Results




Table I.3: Housing Authorities Using
Private Management Companies to                                                                             Total number
Manage Housing Developments                                                               Total number     of units under
                                                                                              of public            private
                                       Size/name of housing authority                     housing units     management
                                       Very large
                                       Puerto Rico                                               56,836            56,836
                                       Chicago, IL                                               35,087            17,252
                                       Atlanta, GA                                               14,308             4,492
                                       New York City, NY                                        157,757             4,100
                                       Boston, MA                                                12,600             3,456
                                       Washington, D.C.                                          11,780             2,438
                                       Dade County, FL                                           10,348             1,772
                                       Philadelphia, PA                                          20,692             1,572
                                       New Orleans, LA                                           11,678             1,546
                                       Baltimore, MD                                             16,951               324
                                       Cuyahoga, OH                                              11,112                36
                                       Large
                                       Hawaii                                                     5,367             2,023
                                       St. Louis, MO                                              5,107             1,561
                                       Jersey City, NJ                                            3,605             1,438
                                       San Bernardino, CA                                         1,731               815
                                       Seattle, WA                                                6,500               700
                                       Houston, TX                                                3,414               500
                                       Kansas City, MO                                            1,308               232
                                       Milwaukee, WI                                              4,752               370
                                       Charlotte, NC                                              3,714               290
                                       Newark, NJ                                                 9,319               206
                                       San Francisco, CA                                          6,064                85
                                       Minneapolis, MN                                            6,361                42
                                       Medium
                                       St. Petersburg, FL                                           891               555
                                       Stamford, CT                                                 841               242
                                       Small
                                       San Diego County, CA                                         121               121
                                       Winnebago County, IL                                         325               100
                                       Very small
                                       Dane County, WI                                               86                86
                                       Stuart, FLA                                                   70                70
                                       Pleasonton, CA                                                50                50
                                       Mount Holly, NC                                               46                46
                                                                                                              (continued)


                                       Page 34                      GAO/RCED-99-210 Private Management for Public Housing
                                         Appendix I
                                         Survey Results




                                                                                                                Total number
                                                                                              Total number     of units under
                                                                                                  of public            private
                                         Size/name of housing authority                       housing units     management
                                         Konawa, OK                                                      38                38
                                         Welsh, LA                                                       36                36
                                         Caddo Electric Coop, OK                                         34                34
                                         Bancroft, LA                                                    28                28
                                         Cheyenne, OK                                                    22                22
                                         Emmons, ND                                                      15                15

                                         Fewer than 10 percent of the housing authorities responding to our survey
                                         disagreed with the statement that their properties would not benefit from
                                         private management. A slightly higher percentage (11 percent) disagreed
                                         with the statement that private management is more costly than managing
                                         with in-house staff. As figures I.1 and I.2 indicate, support for private
                                         management increases with the size of the housing authority.


Figure II.1: Percentage of Responding
Housing Authorities, by Size, Agreeing   80 PHA size
That Their Properties Would Not
Benefit From Private Management
                                         70


                                         60


                                         50


                                         40


                                         30


                                         20


                                         10


                                          0

                                              Very small   Small   Medium     Large/
                                                                            very large




                                         Page 35                        GAO/RCED-99-210 Private Management for Public Housing
                                         Appendix I
                                         Survey Results




Figure II.2: Percentage of Responding
Housing Authorities, by Size, Agreeing   80 PHA size
That Private Management Is More
Costly Than Managing With In-House
Staff                                    70



                                         60



                                         50



                                         40



                                         30



                                         20



                                         10



                                          0

                                              Very small   Small   Medium     Large/
                                                                            very large




                                         Housing authority directors who have and have not tried private
                                         management responded differently to these and other statements about
                                         private management. Table II.4 compares the opinions of the two groups
                                         of respondents.




                                         Page 36                        GAO/RCED-99-210 Private Management for Public Housing
                                        Appendix I
                                        Survey Results




Table II.4: Housing Authority
Managers’ Beliefs About the Benefits    Percentage of respondents that agreed
of Private Management for Authorities                                   Housing authorities with
That Have and Have Not Privatized       Statement about the use of        one or more privately     Housing authorities with
Housing Developments                    private management for                managed housing         no privately managed
                                        individual developments                  developments        housing developments
                                        Properties would not benefit
                                        from private management                                8                          66
                                        Private management is more
                                        costly than managing with
                                        in-house staff                                        16                          47
                                        The way to begin
                                        implementing private
                                        management is unclear                                 16                          41
                                        Current housing authority
                                        employees may be displaced
                                        if private management is used                         57                          78
                                        Contractor performance is
                                        difficult to monitor                                  16                          44
                                        There is a lack of competent
                                        management firms in your
                                        area                                                  25                          45



                                        Seventy-two percent of the housing authorities responding to our survey
Housing Authorities                     indicated that they neither agreed nor disagreed with the statement that
Are Not Clear as to                     “HUD does not support private management.” The percentage that
HUD’s or Residents’                     disagreed was significantly higher for housing authorities that have
                                        contracted for the management of one or more developments (65 percent)
Views on Private                        than for housing authorities that have not (20 percent).
Management
                                        Sixty percent of the housing authorities responded that they neither
                                        agreed nor disagreed with the statement that “Residents in your [housing
                                        authority] are not in favor of private management.” Eight percent of the
                                        responding housing authorities that have contracted for the management
                                        of one or more developments agreed with the statement, compared with
                                        35 percent of the responding housing authorities that have not.




                                        Page 37                         GAO/RCED-99-210 Private Management for Public Housing
Appendix II

Sampling Errors and Confidence Intervals
for Estimates

                                     This appendix presents (1) estimates of the responses we would have
                                     received to selected questions in our survey of public housing authorities
                                     (PHA) if we had surveyed the executive directors of all of the nation’s PHAs
                                     and (2) sampling errors and confidence intervals for these estimates.
                                     Although we surveyed all very large, large, and medium-sized housing
                                     authorities, we used a sample (called a probability sample) of the small
                                     and very small housing authorities. Our survey results are, therefore,
                                     estimates, each of which has a measurable precision, or sampling error,
                                     that may be expressed as a plus/minus figure. By adding the sampling
                                     error to and subtracting it from the estimate, we can develop upper and
                                     lower bounds for each estimate. The range between these bounds is called
                                     the confidence interval. Sampling errors and confidence intervals are
                                     stated at a certain confidence level—in this case 95 percent. For example,
                                     a confidence interval at the 95-percent confidence level means that in 95
                                     out of 100 instances, the sampling procedure we use would produce a
                                     confidence interval containing the value we are estimating. Table II.1 lists
                                     the sampling errors and confidence intervals for selected estimates.

Table II.1: Sampling Errors and
Confidence Intervals for Estimates                                      Estimate        Sampling    Confidence interval
Derived From Responses to Selected   Survey topic                    (in percent)          error       From            To
Survey Questions
                                     Public housing units
                                     managed by a private
                                     company or resident
                                     management corporation                 8.70             .001       8.70         8.70
                                     Type of service provided
                                     wholly or partially by a
                                     private company and the
                                     change resulting from
                                     using the private company
                                     Bookkeeping/accounting
                                     (excluding audit)
                                       Used                                52.77             1.30      50.22        55.32
                                       Not Used                            22.24             0.93      20.42        24.06
                                       Became worse                         0.85             0.24       0.38         1.32
                                       Did not change                       8.48             0.78       6.95        10.01
                                       Became better                       25.67             1.20      23.32        28.02
                                       Don’t know                          13.99             0.98      12.07        15.91
                                     Contracting and procurement
                                       Used                                 6.01             0.66       4.72         7.30
                                       Not Used                            65.17             1.28      62.66        67.68
                                       Became worse                         0.74             0.23       0.29         1.19
                                       Did not change                       1.11             0.30       0.52         1.70
                                                                                                               (continued)



                                     Page 38                       GAO/RCED-99-210 Private Management for Public Housing
Appendix II
Sampling Errors and Confidence Intervals
for Estimates




                                      Estimate       Sampling     Confidence interval
Survey topic                       (in percent)         error        From            To
  Became better                             3.41          0.50        2.43         4.39
  Don’t know                                0.38          0.17        0.05         0.71
Collection of rents
  Used                                      2.83          0.39        2.07         3.59
  Not Used                                 70.66          1.22       68.27        73.05
  Became worse                              0.33          0.12        0.09         0.57
  Did not change                            0.79          0.21        0.38         1.20
  Became better                             1.32          0.26        0.81         1.83
  Don’t know                                0.09          0.00        0.09         0.09
Economic development
  Used                                      1.69          0.30        1.10         2.28
  Not Used                                 69.94          1.23       67.53        72.35
  Became worse                              0.03          0.00        0.03         0.03
  Did not change                            0.26          0.08        0.10         0.42
  Became better                             0.86          0.23        0.41         1.31
  Don’t know                                0.26          0.08        0.10         0.42
Marketing properties
  Used                                      1.98          0.29        1.41         2.55
  Not used                                 70.05          1.22       67.66        72.44
  Became worse                              0.20          0.12a      –0.04         0.44
  Did not change                            0.41          0.14        0.14         0.68
  Became better                             1.01          0.19        0.64         1.38
  Don’t know                                0.23          0.08        0.07         0.39
Processing new public
housing applications
  Used                                      2.14          0.40        1.36         2.92
  Not Used                                 70.90          1.22       68.51        73.29
  Became worse                              0.03          0.00        0.03         0.03
  Did not change                            0.50          0.18        0.15         0.85
  Became better                             1.38          0.33        0.73         2.03
                                                              a
  Don’t know                                0.10          0.08        0.06         0.26
Recertifying residents
  Used                                      1.62          0.35        0.93         2.31
  Not Used                                 71.81          1.21       69.44        74.18
  Became worse                              0.00          0.00        0.00         0.00
  Did not change                            0.39          0.16        0.08         0.70
  Became better                             0.95          0.28        0.40         1.50
  Don’t know                                0.15          0.11a      –0.07         0.37
                                                                             (continued)


Page 39                         GAO/RCED-99-210 Private Management for Public Housing
Appendix II
Sampling Errors and Confidence Intervals
for Estimates




                                      Estimate       Sampling    Confidence interval
Survey topic                       (in percent)         error       From            To
Conducting background
checks
  Used                                     10.84          0.77       9.33        12.35
  Not Used                                 62.78          1.29      60.25        65.31
  Became worse                              0.16          0.08       0.00         0.32
  Did not change                            1.79          0.34       1.12         2.46
  Became better                             6.89          0.63       5.66         8.12
  Don’t know                                1.32          0.29       0.75         1.89
Providing training and social
services for residents
  Used                                      9.60          0.65       8.33        10.87
  Not Used                                 62.53          1.28      60.02        65.04
  Became worse                              0.38          0.14       0.11         0.65
  Did not change                            1.74          0.29       1.17         2.31
  Became better                             5.84          0.51       4.84         6.84
  Don’t know                                1.01          0.21       0.60         1.42
Processing evictions and
other legal services
  Used                                     19.42          0.98       17.5        21.34
  Not Used                                 53.69          1.33      51.08        56.30
  Became worse                              0.64          0.21       0.23         1.05
  Did not change                            4.81          0.55       3.73         5.89
  Became better                            10.22          0.75       8.75        11.69
  Don’t know                                2.38          0.37       1.65         3.11
Training PHA employees
  Used                                     22.89          1.02      20.89        24.89
  Not Used                                 49.96          1.33      47.35        52.57
  Became worse                              0.00          0.00       0.00         0.00
  Did not change                            3.05          0.41       2.25         3.85
  Became better                            17.33          0.92      15.53        19.13
  Don’t know                                2.24          0.37       1.51         2.97
Administration of
modernization programs
  Used                                     15.23          0.99      13.29        17.17
  Not Used                                 57.36          1.33      54.75        59.97
  Became worse                              0.82          0.26       0.31         1.33
  Did not change                            1.59          0.35       0.90         2.28
  Became better                             9.89          0.82       8.28        11.50
  Don’t know                                2.20          0.42       1.38         3.02
                                                                            (continued)


Page 40                         GAO/RCED-99-210 Private Management for Public Housing
Appendix II
Sampling Errors and Confidence Intervals
for Estimates




                                      Estimate       Sampling    Confidence interval
Survey topic                       (in percent)         error       From            To
Landscaping/grounds-
keeping
  Used                                     23.75          1.08      21.63        25.87
  Not Used                                 49.95          1.34      47.32        52.58
  Became worse                              1.30          0.30       0.71         1.89
  Did not change                            5.57          0.58       4.43         6.71
  Became better                            15.15          0.90      13.39        16.91
  Don’t know                                0.55          0.18       0.20         0.90
Trash collection
  Used                                     52.81          1.34      50.18        55.44
  Not Used                                 20.40          1.07      18.30        22.50
  Became worse                              1.71          0.33       1.06         2.36
  Did not change                           16.50          0.99      14.56        18.44
  Became better                            17.40          1.00      15.44        19.36
  Don’t know                               11.63          0.85       9.96        13.30
Routine and preventive
maintenance
  Used                                      9.91          0.79       8.36        11.46
  Not Used                                 62.96          1.29      60.43        65.49
  Became worse                              0.52          0.18       0.17         0.87
  Did not change                            2.54          0.39       1.78         3.30
  Became better                             5.32          0.60       4.14         6.50
  Don’t know                                1.21          0.31       0.60         1.82
Protective services
  Used                                     15.75          0.80      14.18        17.32
  Not Used                                 56.78          1.30      54.23        59.33
  Became worse                              0.52          0.18       0.17         0.87
  Did not change                            2.79          0.37       2.06         3.52
  Became better                             9.40          0.62       8.18        10.62
  Don’t know                                2.02          0.31       1.41         2.63
Employee benefit
  Used                                     13.58          0.91      11.80        15.36
  Not Used                                 59.24          1.32      56.65        61.83
  Became worse                              0.33          0.16       0.02         0.64
  Did not change                            3.17          0.47       2.25         4.09
  Became better                             6.28          0.63       5.05         7.51
  Don’t know                                2.93          0.47       2.01         3.85
Annual unit inspections
                                                                            (continued)


Page 41                         GAO/RCED-99-210 Private Management for Public Housing
Appendix II
Sampling Errors and Confidence Intervals
for Estimates




                                      Estimate       Sampling     Confidence interval
Survey topic                       (in percent)         error        From            To
  Used                                      4.17          0.53        3.13         5.21
  Not Used                                 69.27          1.24       66.84        71.70
  Became worse                              0.20          0.12a      –0.04         0.44
  Did not change                            0.96          0.23        0.51         1.41
  Became better                             1.99          0.39        1.23         2.75
  Don’t know                                0.50          0.20        0.11         0.89
Program evaluation
  Used                                      4.18          0.46        3.28         5.08
  Not Used                                 67.11          1.25       64.66        69.56
  Became worse                              0.00          0.00        0.00         0.00
  Did not change                            0.74          0.18        0.39         1.09
  Became better                             2.48          0.36        1.77         3.19
  Don’t know                                0.70          0.19        0.33         1.07
Pest control
  Used                                     60.81          1.31       58.24        63.38
  Not Used                                 14.39          0.93       12.57        16.21
  Became worse                              1.46          0.30        0.87         2.05
  Did not change                           11.11          0.84        9.46        12.76
  Became better                            36.97          1.29       34.44        39.50
  Don’t know                                7.62          0.69        6.27         8.97
Vehicle maintenance
  Used                                     26.62          1.10       24.46        28.78
  Not Used                                 45.31          1.33       42.70        47.92
  Became worse                              0.26          0.08        0.10         0.42
  Did not change                            8.16          0.68        6.83         9.49
  Became better                            12.11          0.81       10.52        13.70
  Don’t know                                4.96          0.55        3.88         6.04
Extent to which PHAs agree
or disagree with statements
about the use of private
management for
developments and/or
scattered site housing
The way to begin
implementing private
management is unclear.
  Strongly disagree/disagree               15.06          0.87       13.35        16.77
  Neither agree nor disagree               31.75          1.25       29.30        34.20
  Agree/strongly agree                     35.99          1.29       33.46        38.52
                                                                             (continued)



Page 42                         GAO/RCED-99-210 Private Management for Public Housing
Appendix II
Sampling Errors and Confidence Intervals
for Estimates




                                      Estimate       Sampling    Confidence interval
Survey topic                       (in percent)         error       From            To
Current PHA employees may
be displaced if private
management is used.
  Strongly disagree/disagree                8.52          0.76       7.03        10.01
  Neither agree nor disagree               11.64          0.87       9.93        13.35
  Agree/strongly agree                     63.70          1.29      61.17        66.23
Performance of contractors is
difficult to monitor.
  Strongly disagree/disagree               24.03          1.07      21.93        26.13
  Neither agree nor disagree               18.97          1.06      16.89        21.05
  Agree/strongly agree                     40.35          1.32      37.76        42.94
Your PHA’s properties would
not benefit from private
management.
  Strongly disagree/disagree                6.50          0.61       5.30         7.70
  Neither agree nor disagree               19.62          1.02      17.62        21.62
  Agree/strongly agree                     57.23          1.31      54.66        59.80
There is a lack of competent
management firms in your
area.
  Strongly disagree/disagree               10.41          0.73       8.98        11.84
  Neither agree nor disagree               30.83          1.21      28.46        33.20
  Agree/strongly agree                     42.75          1.33      40.14        45.36
Private management is more
costly than managing with
in-house staff.
  Strongly disagree/disagree                6.96          0.61       5.76         8.16
  Neither agree nor disagree               33.44          1.23      31.03        35.85
  Agree/strongly agree                     43.33          1.33      40.72        45.94
Property management is a
PHA responsibility.
  Strongly disagree/disagree                2.60          0.41       1.80         3.40
  Neither agree nor disagree               10.97          0.82       9.36        12.58
  Agree/strongly agree                     70.36          1.21      67.99        72.73
HUD’s procurement
processes make using
private management difficult.
  Strongly disagree/disagree                9.76          0.70       8.39        11.13
  Neither agree nor disagree               44.12          1.33      41.51        46.73
  Agree/strongly agree                     29.52          1.22      27.13        31.91
                                                                            (continued)




Page 43                         GAO/RCED-99-210 Private Management for Public Housing
Appendix II
Sampling Errors and Confidence Intervals
for Estimates




                                           Estimate           Sampling      Confidence interval
Survey topic                            (in percent)             error           From               To
HUD does not support
private management.
  Strongly disagree/disagree                   14.51                 0.86        12.82        16.20
  Neither agree or disagree                    60.22                 1.30        57.67        62.77
  Agree/strongly agree                           7.77                0.74         6.32          9.22
Residents in your PHA are
not in favor of private
management.
  Strongly disagree/disagree                     2.72                0.42         1.90          3.54
  Neither agree or disagree                    48.46                 1.32        45.87        51.05
  Agree/strongly agree                         32.29                 1.27        29.80        34.78

a
 Because the lower bound of the confidence interval falls below zero, this sampling error and the
associated confidence interval should not be considered reliable.




Page 44                              GAO/RCED-99-210 Private Management for Public Housing
Appendix III

Very Large Housing Authorities’
Experiences With Private Management

                       This appendix includes case study analyses of four very large housing
                       authorities’ views on and experiences with private management. We
                       visited these four housing authorities—in Atlanta, Boston, Chicago, and
                       Washington, D.C.—to gain an in-depth understanding of issues associated
                       with hiring contractors to manage specific housing developments and
                       perform discrete housing management functions in these jurisdictions. We
                       selected these four housing authorities because of their varying
                       experiences with private management.


                       The Housing Authority of the City of Atlanta (AHA) operates over 14,000
Housing Authority of   units of public housing in Atlanta, Georgia. To address long-standing
the City of Atlanta    management problems, including excessive vacancies and poor
                       maintenance, AHA developed and implemented over the past 4 years a
                       comprehensive site-based housing management system, which merged
                       management and maintenance functions at the site level. During this
                       period, AHA also implemented a plan for private management. In 1996, AHA
                       executed contracts with four private management companies to
                       administer and operate 16 properties for families and the
                       elderly—approximately one-third of its public housing stock. As a result,
                       AHA officials believe that they have experienced a wide range of changes,
                       most of which are positive and include improvements in the properties’
                       overall financial management, day-to-day physical maintenance, curb
                       appeal, and occupancy rates. Moreover, AHA officials believe that the
                       majority of the residents living in privately managed developments now
                       have a favorable opinion of private management.


Background             AHA was organized in 1938 to provide safe and sanitary dwellings to
                       low-income people. As of January 1, 1998, AHA operated 14,308 units of
                       public housing,1 located in 42 developments throughout the city.
                       According to HUD’s Office of Inspector General, AHA had significant
                       management problems for years. Because of these problems, which
                       included excessive and lengthy vacancies, poor maintenance, and
                       inadequate rent collection, AHA consistently scored below 60 percent under
                       HUD’s Public Housing Management Assessment Program (PHMAP) and was
                       classified as a troubled housing agency in November 1990. AHA’s troubled
                       status, coupled with Atlanta’s designation in September 1990 as the site of
                       the 1996 Olympic Games, created a sense of urgency for the authority to
                       improve its operations and the condition of its properties.

                       1
                        Of the 14,308 public housing units that AHA operates under its contract with HUD, 5,340 had been
                       demolished or approved for demolition by HUD as of Jan. 1, 1999.



                       Page 45                              GAO/RCED-99-210 Private Management for Public Housing
                        Appendix III
                        Very Large Housing Authorities’
                        Experiences With Private Management




                        To address the housing authority’s long-standing problems, HUD and AHA
                        entered into a memorandum of agreement and a cooperative recovery
                        agreement on September 12, 1995. AHA desired to improve its management
                        performance and eliminate its troubled status by accomplishing the goals
                        and strategies outlined in the two agreements. The memorandum of
                        agreement, for instance, contained an overall goal to reduce vacancies and
                        increase occupancy. The memorandum outlined several strategies and
                        tasks for meeting this goal, including (1) developing and implementing a
                        comprehensive site-based management system with merged management
                        and maintenance functions at the site level and (2) implementing a plan
                        for private management.

                        In December 1995, AHA initiated an extensive procurement process to
                        place approximately one-third of its conventional public housing stock
                        under private management. AHA officials considered several factors in
                        selecting these sites, including the properties’ day-to-day operations and
                        capital improvement needs and the residents’ social service needs. AHA
                        also sought and considered residents’ input. Finally, AHA officials chose
                        some sites with severe challenges and some that were easier to manage to
                        encourage management agents to bid in certain sectors.

                        In April 1996, AHA executed contracts with four private management
                        companies to administer and operate 13 sites. AHA also contracted with
                        one company to provide interim management services while residents
                        were being relocated at a site that was going to be demolished. Also in
                        April 1996, AHA initiated a second procurement process to place two
                        additional sites under private management. In June 1996, AHA executed
                        contracts for these sites, bringing the total number of developments under
                        private management to 16 out of the citywide total of 42 developments.
                        These developments included a mix of properties for families and the
                        elderly, and these initial contracts expired in June 1999. AHA rebid the
                        contracts in December 1998 and plans to enter into 2-year contracts for a
                        portfolio of 15 properties consisting of 4,144 units of public housing.


AHA’s Experience With   AHA‘s experience with private management has been positive. Private
Private Management      management companies have helped to improve the financial management
Companies               and operating efficiency of the developments. In addition, customer
                        service at the privately managed developments has improved.
                        Decentralization, combined with monitoring and appropriately rewarding
                        (or penalizing) the private management companies’ performance, has
                        encouraged efficient operations and responsiveness to residents’ needs.



                        Page 46                       GAO/RCED-99-210 Private Management for Public Housing
                            Appendix III
                            Very Large Housing Authorities’
                            Experiences With Private Management




                            Planning for the transition to private management helped to overcome
                            residents’ fears of change and concerns about displacing housing authority
                            personnel.

Improved Financial          Private management helped to improve the authority’s overall financial
Management and Operating    management, according to agency officials. Before private management,
Efficiency                  for example, AHA did not have available monthly reports that compared the
                            budgeted amounts for each development with the actual expenditures.
                            Private management companies submit these reports each month for AHA
                            to review. AHA’s asset director will review any line item that differs by
                            more than 10 percent from the budgeted amount. Although AHA officials
                            believe overall financial management improved, they do not believe
                            operating costs changed as a result of using private management. A senior
                            private management company official said that savings are difficult to
                            document because a significant portion of the benefits are costs that the
                            properties have avoided. For instance, the senior official believed that one
                            of the developments his company manages would have been demolished if
                            private management had not made it viable.

                            Private management also helped to improve the operating efficiency and
                            the revenue generated by the public housing properties, as demonstrated
                            by improvements in AHA’s vacancy rate, timeliness of rent collection,
                            enforcement of lease provisions, and results of unit inspections.
                            Furthermore, AHA officials said that the quality and timeliness of unit
                            inspections improved because of private management.

Improved Customer Service   According to a vice president of one of AHA’s private management
                            companies, pleasing public housing residents is of critical importance. A
                            regional property manager at another private management company stated
                            that private firms focus on customer satisfaction. For example, that
                            company requires its property managers to contact three residents each
                            week to obtain their comments.

                            The curb appeal of the developments improved as a result of private
                            management, according to AHA officials. Private management companies
                            installed fencing and gating at many of the properties and landscaped the
                            properties. AHA officials also believe that the developments’ day-to-day
                            physical maintenance improved under private management, as evidenced
                            by decreases in both the backlog of work orders and in the time needed to
                            complete them. An elected resident leader at one of the privately managed
                            developments told us that maintenance requests are filled more quickly
                            under private management. However, a resident leader at another



                            Page 47                       GAO/RCED-99-210 Private Management for Public Housing
                             Appendix III
                             Very Large Housing Authorities’
                             Experiences With Private Management




                             development said the quality of maintenance is about the same under both
                             private and housing authority management.

                             AHA officials also believe that services for residents improved under
                             private management. One of the private management companies, for
                             example, provides a training program to teach residents construction and
                             business skills. That company also trains residents in interviewing skills.
                             Another private management company implemented a welfare-to-work
                             program at one of its properties. More than 100 residents have graduated
                             from this program and most are still employed, according to one of the
                             company’s senior managers. AHA’s Deputy Executive Director for Housing
                             Operations pointed out that each private management company has a
                             resident services department or at least a strong resident services
                             coordinator. When resident services are decentralized, service
                             coordinators can focus on the needs at individual properties.

Decentralized Management     As part of its site-based management approach, AHA placed a portion of its
                             public housing stock under private management to achieve more efficient
                             operations. According to AHA’s Deputy Executive Director for Housing
                             Operations, centralized management was not working. Because AHA could
                             not effectively manage 42 properties from a central location, services were
                             not being provided to the residents.

Monitoring of Contractors’   AHA  believes that it gives its private management companies as much
Performance                  flexibility as possible in providing management services within all
                             applicable HUD regulations. As agreed with HUD, AHA included performance
                             measures in its private management contracts. Management companies
                             that meet agreed-upon performance goals may receive a performance
                             bonus over and above their monthly management fee. However,
                             management companies are also subject to penalties for not meeting
                             performance standards. To monitor contractors’ performance, AHA
                             officials review monthly reports submitted by the private management
                             companies. According to AHA’s Deputy Executive Director for Housing
                             Operations, the authority is moving towards an automated reporting
                             system that will tie into its central computer. Site visits, which occur at
                             least monthly, are also part of AHA’s monitoring activities.

Residents’ Fears of Change   According to AHA officials, residents initially feared the idea of private
                             management. Many believed that the rules would change, rents would
                             increase, and tenants would be evicted. AHA recognized that these fears
                             would present an obstacle to the effective implementation of private
                             management and took several measures to mitigate the fears. For



                             Page 48                       GAO/RCED-99-210 Private Management for Public Housing
                              Appendix III
                              Very Large Housing Authorities’
                              Experiences With Private Management




                              example, AHA explained that the goal of private management was to
                              provide better services to the residents. Furthermore, AHA would still own
                              the properties, and the management companies would be subject to the
                              same federal public housing requirements. Finally, before procuring
                              private management, AHA transported some resident leaders to Dade
                              County, Florida, to tour privately managed public housing developments
                              and talk with local resident leaders.

                              AHA officials believe that the majority of the residents now have a
                              favorable opinion of private management and want to retain private
                              management for their developments. In fact, AHA officials told us that some
                              residents are now concerned that they might lose their private
                              management company. We spoke with the resident leaders of two
                              privately managed developments. One of the leaders said that residents
                              were generally pleased with private management. According to that
                              resident leader, before private management one never knew when or if AHA
                              would cut the grass in front of one’s unit. Now, the grass is cut on
                              schedule and never gets knee-high as it did before. The other resident
                              leader, however, did not notice a difference when private management
                              took over.

Concerns About Displacing     AHA achieved a smooth conversion to private management, according to
Housing Authority Personnel   AHA officials, because it planned ahead for the change. AHA reduced its staff
                              by 125 people when it switched to private management. However, AHA
                              encouraged the private companies to hire these staff if they met the
                              companies’ pre-employment requirements. More than 2 years later, about
                              75 percent of the former-AHA staff were still employed by the private
                              management companies. AHA directed the private companies hiring AHA
                              employees to recognize and honor each employee’s years of service in
                              determining eligibility and benefit levels under the companies’ group
                              insurance and leave accrual plans. Furthermore, all staff who took jobs
                              with the private management companies were eligible to reapply to AHA
                              within 1 year; however, according to AHA officials, few people took
                              advantage of this offer. According to a senior official of one of AHA’s
                              private management companies, the company hired all housing authority
                              employees at the development who passed the drug and background
                              checks. Once hired, the employees had to meet the company’s work
                              standards.


HUD’s Views on AHA’s          Although AHA has been using private management for over 2 years, HUD has
Experience With Private       not reviewed AHA’s experience and could not provide us with detailed
Management                    comments on it. Public housing officials at the Georgia field office did tell


                              Page 49                       GAO/RCED-99-210 Private Management for Public Housing
                           Appendix III
                           Very Large Housing Authorities’
                           Experiences With Private Management




                           us, however, that they believe the curb appeal of the developments has
                           improved. In addition, HUD staff saw improvements in rent collections.


Lessons Learned            The following describes the lessons learned by AHA officials involved in the
                           private management effort.

                       •   Educating residents on a continual basis about the goal of private
                           management is very important.
                       •   Hiring local private management companies with experience in public
                           housing is advantageous because the companies need time to learn public
                           housing regulations.
                       •   AHA would recommend private management to other large housing
                           agencies, especially those with centralized operations. A partnership with
                           private management can promote effective and efficient management of
                           the public housing stock.


                           The District of Columbia Housing Authority (DCHA), under the
District of Columbia       management of a court receiver since May 1995, has placed 12 of its 56
Housing Authority          developments under private management. These 12 properties (5 for
                           families, 4 for the elderly, and 3 for both families and the elderly) account
                           for about 22 percent of the District’s 11,338 public housing units.
                           According to the receiver, these properties include slightly more
                           distressed than nondistressed developments. With some exceptions, the
                           privately managed companies have been effective in reversing physical
                           and financial decline at the properties by implementing basic maintenance
                           and financial systems and controls. But DCHA officials do not believe the
                           private firms operate more economically than in-house staff. Instead, they
                           believe that under a recently decentralized management structure and a
                           new pay-for-performance plan, in-house property managers can operate at
                           or below the cost of private management companies, which receive an
                           additional management fee. Meanwhile, the private management
                           companies believe they could operate more economically and manage
                           more effectively if they could control enough funding for capital and
                           support services to meet the needs of the properties they manage.


Background                 Created by court order in May 1995, DCHA replaced the District of
                           Columbia Department of Public and Assisted Housing, which had been on
                           HUD’s list of troubled housing authorities since January 1979. By order of
                           the District of Columbia Superior Court, the receiver is solely responsible



                           Page 50                       GAO/RCED-99-210 Private Management for Public Housing
                         Appendix III
                         Very Large Housing Authorities’
                         Experiences With Private Management




                         and accountable to the court rather than the city government and has
                         authority over all of the agency’s operations.

                         When the court ordered the takeover, the former housing authority had a
                         management performance score of 38 out of 100 points, well below the
                         60-point standard for passing. Twenty percent of the units were vacant,
                         modernization funds were not being spent, and a number of housing
                         officials had been indicted or arrested. According to the receiver, the
                         failing score reflected a housing authority that was “top heavy,
                         inadequately skilled, and fundamentally incapable of measurable
                         production.” The score for fiscal year 1997 was 67. To obtain its passing
                         score for 1997, DCHA made significant improvements in its modernization
                         work, housing inspections, and operating reserve level, but it lost points
                         for delays in completing maintenance work orders and collecting rent. For
                         fiscal year 1998, DCHA raised its score to 79, failing only in the uncollected
                         rent category. By court order, if the score for fiscal year 1999 remains over
                         70 percent, the housing authority will be returned to local control over a
                         6-month period, and the receivership will then be terminated.

                         DCHA was reorganized in October 1998. The Department was divided into
                         three regions, each headed by a regional administrator responsible for a
                         workplan containing objectives and performance standards for both the
                         region and each development within the region.


DCHA’s Experience With   The receiver told us that he took over the housing authority in the summer
Private Management       of 1995, intending to turn the management of most of the District’s housing
Companies                developments over to private companies. He said, however, that he has
                         since changed his mind. His workplan, updated as of January 1999, reports
                         that the housing authority has “achieved an appropriate balance between
                         in-house and private management.” He said he no longer plans to privatize
                         beyond the 12 developments already under contract because he believes
                         that (1) qualified in-house staff can manage as efficiently and effectively as
                         the private sector and (2) the better private firms in the area do not have
                         the capacity to take on more work.

                         The receiver does not doubt that the private firms have played a part in the
                         improved performance scores. He said the private firms have been very
                         efficient in increasing rent collections, reducing the time to prepare a
                         vacated housing unit for occupancy (unit turnaround time), making
                         repairs, and making properties more energy-efficient. He also believes that
                         private firms have an advantage in that they do not have to deal with



                         Page 51                       GAO/RCED-99-210 Private Management for Public Housing
Appendix III
Very Large Housing Authorities’
Experiences With Private Management




unions or government bureaucracy. But he added that he was uncertain
whether the savings accrued were sufficient to offset the management fees
paid to the private firms to manage the developments. The receiver also
believes that the private firms under performance-based contracts are
outperforming those without performance standards. He maintained that
the use of performance standards would similarly enhance the
productivity of in-house staff.

In February 1999, the receiver announced a pay-for-performance
agreement tying the pay increases of all housing authority staff to their
success in meeting predetermined indicators in five areas: occupancy, rent
collection, unit turnaround, work order closeouts, and employee
attendance. Under this agreement, which resembles a corporate
profit-sharing plan, housing authority employees will receive salary
increases based on agencywide scores for each of the five indicators. The
raises will be funded by the additional revenue the authority will take in if
the lower vacancy rate, higher rent collection, and other performance
goals are met. The receiver also believes DCHA’s new in-house staff can
make the performance-based system work. For example, 14 of the 29
manager positions turned over—primarily through terminations,
demotions, and resignations—during the 17 months from July 1997
through November 1998. One of the three DCHA regional managers who
report to the receiver said that these personnel changes were part of an
agencywide effort to eliminate patronage, incompetence, and, in some
cases, salary payments to employees who never came to work.

The management companies agree with the receiver’s view that their firms
have been very efficient, but they also believe that they are saving more
than the cost of their management fees. For example, one firm noted that
in the first few weeks of its contract, it eliminated a backlog of 1,600 work
orders, barred 45 nonresidents from the property, and returned accuracy
to the rent rolls. Another firm told us that it evicted over 70 residents for
nonpayment of rent within its first 60 days and began documenting rent
collections. According to the regional manager for that housing
development, his management company can now sue to collect rent that
has been unpaid since the date that his firm began managing the
development. However, the company cannot press for unpaid rent from
prior years because the housing authority’s rent records were not kept
well enough to prove nonpayment. A third management company said that
it took over a property whose annual operating budget had been $290,000
and reduced it by over $80,000 during the first year, a reduction of almost
30 percent. Management company officials point to property



Page 52                       GAO/RCED-99-210 Private Management for Public Housing
Appendix III
Very Large Housing Authorities’
Experiences With Private Management




improvements that they made at year-end using funds that they saved by
reducing their costs. These improvements included new carpeting and a
fish tank in the lobby of a building, new tables and chairs in the recreation
room, and a new rooftop card room.

While DCHA officials acknowledge these savings and the many management
improvements that private management staff have incorporated at the
properties they manage, one regional manager said that, on balance, he
believes private management is more costly than in-house management.
He said that private firms’ balance sheets can be deceiving because the
firms classify some cost items as “extraordinary” in the accounting sense,
meaning that they are not included in the total cost figure. This
classification makes the private firms’ costs of operation seem lower at
first glance. For example, a private management firm might classify an
unusually large expense to repair a housing unit after a tenant’s departure
as extraordinary, when it was simply higher than average. He believes that
the frequency and magnitude of the differences between the accounting
entries by private firms and by DCHA argue against the validity of the
private firms’ claims of savings.

Officials at two of the private companies managing DCHA properties told us
that if their companies were given control over all funding for the
property—including the capital budget, the modernization funds, and the
funds for support services programs—they could show that their savings
would exceed their management fee. One added that his firm is performing
as an extension of DCHA, acting as a maintenance operation and rent
collection agency rather than as a proactive private management company.
He believes that his firm could show significant savings if DCHA allowed it
to manage all aspects of the properties. In response, a DCHA official stated
that the authority does give each housing development its own capital
budget and could assign each development a total capital plus operating
budget at the beginning of the year. However, the authority likes to be able
to move funds among developments within the year, as needs change. The
official added that DCHA would consider requests for access to the capital
budget on a case-by-case basis and would also consider embarking on a
pilot program to explore the usefulness and practicality of assigning all
funds to a privately managed development.

The management companies also disagree with the receiver’s position on
the management companies’ capacity. For example, an official at a
national firm interested in managing properties for DCHA said that the firm
could manage a number of the housing authority’s properties if given



Page 53                       GAO/RCED-99-210 Private Management for Public Housing
                             Appendix III
                             Very Large Housing Authorities’
                             Experiences With Private Management




                             adequate time to plan for expansion. An official at a firm that already
                             manages DCHA properties said his firm is ready today to take on many more
                             DCHA properties.



Obstacles to Privatizing     Several obstacles to effective private management at DCHA still exist. First,
Public Housing               DCHA has not effectively implemented HUD’s requirement that all housing
                             authorities with more than 500 housing units adopt project-based or
                             cost-centered accounting. Second, some management companies believe
                             that they have not been treated fairly or have not been given as much
                             responsibility as they could successfully accept.

                             The receiver has decentralized the housing authority’s organization by
                             creating three autonomous regional housing agencies, thereby producing
                             friendly competition among the regions and among in-house managers and
                             private management companies within the regions. Moreover, DCHA has
                             regionalized the asset management function and developed separate
                             budgets for each development. However, the receiver does not expect full
                             project-based accounting until after 2000. Without accurate financial
                             performance data for each development, asset managers cannot perform
                             site-by-site financial analyses, including breakdowns of the operating
                             resources spent for individual properties and for central office overhead.

                             According to officials of private management companies under contract to
                             DCHA, some of DCHA’s managers see them as a threat and have tried to
                             undermine their companies’ efforts. For example, one firm believes it was
                             unfairly hit with a surprise audit, without being given the scoring criteria
                             ahead of time. Employees at another firm believe they have many insights
                             to offer but are not given the opportunity to share their ideas with DCHA’s
                             in-house managers.


DCHA’s Experiences With      At developments that are managed in-house, DCHA contracts with private
Hiring Private Contractors   firms for very few individual functions. Management officials believe that
                             DCHA now has the resources and ability to manage most housing
                             development operations. For example, DCHA has expanded its in-house
                             police force, which in November 1988 was given authority to operate
                             citywide. Previously, housing authority officers had jurisdiction only on
                             DCHA property or within 300 yards of a public housing site. In addition,
                             routine and preventive maintenance programs are being developed for
                             each of the three new regions, and the receiver is confident that the
                             in-house staff will stay ahead of maintenance problems. Outside contracts



                             Page 54                       GAO/RCED-99-210 Private Management for Public Housing
                          Appendix III
                          Very Large Housing Authorities’
                          Experiences With Private Management




                          are limited to legal services, such as processing evictions; trash removal;
                          and vehicle maintenance.


HUD’s Role in the         HUD  has not taken an active role in DCHA’s private management activities
Privatization of Public   since the court receiver took over. Before that time, HUD reviewed all
Housing at DCHA           requests for proposals and was supportive of private management as an
                          option for improving DCHA’s poor performance. According to the Director
                          of Public Housing in HUD’s District of Columbia Office, since the receiver
                          arrived, the Department’s role has been limited to dealing with legitimate
                          complaints about private management, such as helping to resolve a
                          stalemate over the final pay for a private firm whose contract was
                          terminated. He said he tells his staff to take a neutral position on private
                          management. Above all, he said, HUD wants to ensure that the housing
                          authority is managed effectively, and whether it is managed by private
                          companies or by in-house staff is not important. But if a decision is made
                          to switch one way or the other, the housing authority should document the
                          expected improvements and/or savings.


                          According to the Chicago Housing Authority (CHA), it has derived
Chicago Housing           qualitative benefits from placing nearly half of its public housing units
Authority                 under private management. Private management at CHA has tangibly
                          improved living conditions at some of the developments and made
                          operations more effective. Although CHA officials cannot quantify dollar
                          savings from using private management, they believe it has allowed them
                          to streamline their operations and reduce overhead. CHA and the
                          management companies it contracts with are still learning ways to manage
                          public housing more efficiently. As this learning process continues, CHA
                          plans to transfer more of the property management responsibilities to the
                          private companies—something the management companies say will help
                          them manage the properties more effectively.


Background                The state of Illinois established the Chicago Housing Authority in 1937,
                          and it is the second largest public housing agency in the continental
                          United States.2 Besides federal low-income housing programs, CHA
                          administers several parallel programs that are funded and regulated by the
                          state of Illinois and the city of Chicago. The authority not only manages
                          seven city-state public housing developments but also operates the Section

                          2
                           Only the New York Housing Authority and the Puerto Rico Housing Authority have larger numbers of
                          low-income housing units.



                          Page 55                             GAO/RCED-99-210 Private Management for Public Housing
                        Appendix III
                        Very Large Housing Authorities’
                        Experiences With Private Management




                        8 substantial rehabilitation program funded by the city and the state.
                        Under this program, the authority serves as a landlord to provide housing
                        to qualified applicants. The authority currently manages about 35,000
                        public housing units, located throughout the city of Chicago, for
                        approximately 90,000 low-income residents. Compared to other public
                        housing agencies, CHA is one of the most difficult and challenging public
                        housing agencies to operate because of its large concentration of severely
                        distressed high-rise developments.

                        CHA  has had long-standing management problems in virtually all aspects of
                        it operations. These include problems with housing management,
                        maintenance of the housing stock, and financial management. Frequent
                        turnover in CHA’s management has contributed to CHA’s operational
                        problems and has made it difficult to implement needed management
                        improvements. Because of these problems, HUD initiated a takeover of CHA
                        in May 1995.

                        CHA’s Department of Private Management monitors and supervises the
                        private management firms that manage CHA properties. CHA currently has
                        16 management firms under contract to manage approximately 17,000
                        public housing units in 45 developments—about half of all its 35,000 public
                        housing units. CHA operates the second largest private management
                        program in the nation—only the Puerto Rico Housing Authority has a
                        larger program. CHA first introduced private management in the 1980s,
                        after a consent decree required CHA to build scattered-site housing. CHA
                        expanded its private management program to a limited number of socially
                        distressed high-rise family properties in the late 1980s. In 1995, CHA’s
                        private management program expanded significantly when the authority
                        sought additional private management companies for scattered-site
                        housing and for senior and family properties. In 1998, CHA again sought
                        additional contractors to manage more of its portfolio.


CHA’s Experience With   CHA officials believe that their use of private management companies has,
Private Management      on balance, benefited the residents of public housing and the housing
Companies               authority. Although CHA’s expectations at some of the privately managed
                        developments have not been met, living conditions at some of the
                        developments have improved, as have CHA’s operations. Although CHA is
                        not able to measure the quantitative benefits of private management, the
                        asset manager at the authority believes that operating costs are lower.
                        And, according to the private management companies, costs could be even
                        lower if they were given greater operating and financial responsibilities.



                        Page 56                       GAO/RCED-99-210 Private Management for Public Housing
                                 Appendix III
                                 Very Large Housing Authorities’
                                 Experiences With Private Management




CHA’s Selection and Monitoring   In implementing private management, CHA has tried to match the skills and
Philosophy                       experiences of management companies with the needs of CHA’s housing
                                 developments. Under that philosophy, CHA chose management companies
                                 on the basis of their track record at other properties, their level of
                                 experience in a particular type of housing (senior, family, or
                                 scattered-site), and their experience and familiarity with the local market.
                                 For example, CHA matched a company with a very good track record in
                                 senior housing but no experience in the Chicago market with a small
                                 number of senior developments in good condition. CHA awarded another
                                 company the contracts to manage several developments that included
                                 housing stock in the worst physical condition because this firm had
                                 several years of experience with the Chicago market and with public
                                 housing.

                                 CHA  monitors the performance of the management companies through site
                                 visits and monthly reports that include financial and narrative information
                                 on the operations of the buildings. Although CHA’s formal policy is to
                                 conduct quarterly site visits, in practice such visits have typically occurred
                                 each month. According to CHA’s asset manager, monthly monitoring helps
                                 the companies prepare for the more extensive quarterly site visits.

Performance of Private           According to CHA officials, the performance of the 16 private management
Managers Mixed, but Results      companies has been mixed. Some have performed very well and brought
Generally Positive               improvements to their housing units, while others have not performed as
                                 well. The better performers have improved the living conditions of the
                                 developments that they manage. For example, according to CHA, some
                                 private companies have increased the curb appeal and therefore the
                                 marketability of their buildings. In some cases, they have increased
                                 residents’ satisfaction and provided better social services. The two
                                 resident representatives we spoke with agreed that the residents are
                                 generally happier with private management and that living conditions have
                                 improved with the management change. For example, one management
                                 company built a laundry room for the residents, who previously had to
                                 travel 10 blocks to the closest laundromat.

                                 The authority has also benefited from the use of private management.
                                 According to CHA’s asset manager, she can identify instances in which the
                                 authority’s operations became more businesslike after private
                                 management began. Private management has forced CHA to keep more
                                 accurate information on its properties so that it can support the
                                 management companies—information such as current occupancy and rent
                                 collection rates. According to the asset manager, a compatible computer



                                 Page 57                       GAO/RCED-99-210 Private Management for Public Housing
                              Appendix III
                              Very Large Housing Authorities’
                              Experiences With Private Management




                              system is necessary for the housing authority and the management
                              companies to have current information on all of the properties. In
                              addition, some degree of competition now exists between CHA’s in-house
                              development managers and their private counterparts. This competition
                              has led to better property management among the CHA-managed
                              properties, according to CHA’s asset manager.

                              Although CHA officials agree that private management has qualitative
                              benefits, they cannot quantify the cost savings they have realized from its
                              use. And CHA will not be able to compare the costs of private and in-house
                              management until it can more precisely determine its own management
                              costs. CHA is moving toward project-based budgeting, which will provide
                              the authority with baseline information on the costs of managing its public
                              housing developments, but it has not progressed far enough to determine
                              baseline costs. Currently, CHA has begun project-based budgeting at 16
                              developments, according to the asset manager. She believes that
                              restructuring the budgets of all of the authority’s developments will take
                              time. Even though direct cost-savings are not quantifiable at this time, CHA
                              has reduced its overhead costs (for salaries and employee benefits) by
                              reducing its workforce through contracting with private companies to
                              manage its developments.

Management Companies          Representatives of the management companies reported that they are able
Seeking More Responsibility   to manage public housing more effectively than CHA and at a lower cost,
                              but they are constrained by CHA’s control over funding and over some
                              services. The management companies expressed the desire to control their
                              developments’ share of CHA’s federal grant for modernizing public housing
                              properties. They believe they could accomplish repairs and renovations
                              more quickly, cheaply, and effectively than CHA.

                              Some of the representatives also believe they could operate more
                              efficiently if they had control over other aspects of the properties’
                              management, such as evictions. For example, some of the management
                              companies would like to be able to evict residents for reasons other than
                              nonpayment of rent, such as drug or gang-related activity. One private
                              manager wanted control over such evictions so that he could remove
                              problem residents more quickly than CHA has been able to do. However,
                              according to CHA’s asset manager, the private companies would probably
                              not be able to handle these evictions faster than CHA. The delays occur
                              because of legal requirements and procedures that provide the residents
                              with several days of notice throughout the eviction process.




                              Page 58                       GAO/RCED-99-210 Private Management for Public Housing
                                  Appendix III
                                  Very Large Housing Authorities’
                                  Experiences With Private Management




                                  Currently, a private management company’s duties include (1) collecting
                                  rent and maintaining rental collection records that conform to CHA’s
                                  regulations; (2) recertifying each resident’s income annually;
                                  (3) inspecting all units annually; (4) executing leases; (5) purchasing and
                                  contracting for needed services, supplies, materials, and equipment;
                                  (6) managing the property so as to maximize residents’ safety and security;
                                  (7) working with the Local Advisory Council and other residents’
                                  organizations; and (8) completing a management plan describing the
                                  training and employment opportunities the company will provide for CHA
                                  residents.

CHA’s Plans for Private           CHA  intends to keep the number of units it has under private management
Management                        at about the current level but plans to give the management companies
                                  more autonomy in running their properties. Because of its ongoing effort
                                  to demolish and redevelop high-rise properties, the authority does not plan
                                  to increase the number of developments under private management. CHA
                                  can operate buildings that are being redeveloped or demolished more
                                  easily than a private firm because of the high cost of these activities and
                                  the diverse funding sources that are used for demolition or rehabilitation.
                                  CHA does, however, plan to devolve more of the responsibility for
                                  managing the properties to the private firms and move closer to simply
                                  monitoring the management companies. The CHA asset manager believes
                                  these steps will reduce in-house labor costs and make CHA’s operations
                                  more efficient.

Obstacles to Privatizing Public   According to CHA officials, there are no serious operational obstacles to
Housing                           privatizing their housing stock. They said, however, that shifting to a new
                                  way of doing business with the private management companies involves
                                  normal “growing pains,” which must be understood and dealt with.
                                  Anecdotes illustrating these growing pains follow.

                                  Overcoming CHA’s internal bureaucracy. According to one CHA official,
                                  when private management began, CHA staff tended to treat the private
                                  companies as if they were another department within CHA, providing all the
                                  oversight they would normally apply to CHA departments.

                                  Learning how to be a better contract administrator. One official suggested
                                  adding specific performance standards to contracts in the future, holding
                                  the companies to these standards, and imposing penalties for
                                  nonperformance.




                                  Page 59                       GAO/RCED-99-210 Private Management for Public Housing
                             Appendix III
                             Very Large Housing Authorities’
                             Experiences With Private Management




                             Better defining the respective roles and responsibilities of the housing
                             authority and the private management companies. One management
                             company did not budget for trash collection because it was not aware that
                             it was responsible for providing this service. CHA officials agreed that such
                             confusion could be averted in the future by more carefully specifying the
                             respective roles of CHA and the management companies.


CHA’s Experience With        CHA has privatized those activities for which it lacks adequate in-house
Hiring Outside Contractors   expertise or needs to obtain better service. For example, CHA sometimes
                             needs outside counsel for specific legal issues. It also contracts with
                             private firms that have the expertise to administer pension plans, workers
                             compensation, and deferred compensation. The benefits of contracting
                             include a lower administrative burden on CHA staff, a wider choice in
                             obtaining needed services, and clearer expectations and responsibilities
                             provided by the contractual relationship, according to CHA officials.


HUD’s Role in the            After becoming increasingly concerned about the management problems
Privatization of Public      at CHA, HUD initiated a takeover of the authority on May 31, 1995,
Housing at CHA               appointing a top HUD official to oversee its day-to-day operations. HUD also
                             appointed a five-person advisory board with representation from the city
                             of Chicago, CHA residents, the business community, and the religious
                             community. CHA signed a memorandum of understanding with HUD
                             covering the period from April 1996 through December 1997, the long-term
                             goal of which was to remove CHA from HUD’s “troubled list.” During this
                             period, CHA expanded its private management program. HUD removed CHA
                             from the troubled list in August 1998, and the authority is scheduled to
                             return to the city’s control in 1999.

                             According to CHA and HUD officials, the local HUD office did not have much
                             direct involvement in CHA’s private management, although it did provide
                             some assistance to CHA. The local HUD purchasing office assisted CHA in
                             preparing its first request for qualifications for the private management
                             companies. For the management companies’ staff, HUD also provided
                             training in the area of federal regulations and reporting requirements. The
                             Director for Public Housing in HUD’s local field office expects that her
                             office will have a greater role in monitoring the private management
                             companies in the future. Now that CHA is off of the troubled list, local HUD
                             officials will begin to work more closely with CHA. They will begin
                             conducting site visits at the public housing developments and will
                             eventually have enough information on the private companies to make



                             Page 60                       GAO/RCED-99-210 Private Management for Public Housing
                      Appendix III
                      Very Large Housing Authorities’
                      Experiences With Private Management




                      some comparisons. (During the years that HUD took over CHA, the local HUD
                      office did not have much contact with CHA because HUD headquarters
                      officials were handling CHA’s operations.) According to the Director for
                      Public Housing, HUD’s role should be to adequately oversee the private
                      management companies and ensure that penalties for poor performance
                      are included in their contracts.


Lessons Learned       Through its initial experience with private management, CHA has learned
                      how to deal more effectively with the private companies and has adjusted
                      to its role with respect to them. The following are lessons learned by CHA
                      officials involved in the privatization effort. These lessons have been or
                      will be incorporated in changes to CHA’s private management program:

                  •   Contracts with the private management companies need to specify their
                      roles and responsibilities and should include performance incentives.
                  •   Housing authorities need to monitor the management companies rather
                      than try to directly control them.
                  •   The management companies need to study the properties before they
                      prepare their budgets to learn of preexisting conditions they will need to
                      address. For example, the companies managing very poor housing need to
                      fully assess the extent of the repairs they will need to make over time and
                      to factor the costs of these repairs into their budgets.
                  •   The management companies need to have a good relationship with the
                      leaders of the resident groups, particularly in Chicago, where these groups
                      are very strong.
                  •   A compatible computer system that gives the housing authority and all the
                      management companies access to the same information on the properties
                      is a must.


                      About one quarter of the Boston Housing Authority’s (BHA) 12,600 public
Boston Housing        housing units are under private management. BHA has been involved in
Authority             private management since the early 1970s. BHA officials believe private
                      management has helped to relieve the strain on the authority’s
                      overextended resources and has had a positive competitive influence on
                      BHA employees. BHA officials cautioned that a great deal of monitoring is
                      needed to obtain optimal results and that not all of BHA’s experiences with
                      private management have been successful.




                      Page 61                       GAO/RCED-99-210 Private Management for Public Housing
                 Appendix III
                 Very Large Housing Authorities’
                 Experiences With Private Management




Background       As of January 1, 1999, BHA administered 12,600 units of public housing in
                 57 developments.3 BHA also administered 68 units at scattered sites. BHA’s
                 first experience with private management occurred in 1973, when a tenant
                 management corporation assumed responsibility for managing Boston’s
                 largest public housing development. BHA’s next experience with private
                 management occurred in 1980, when poor performance placed BHA in
                 receiver status. At that time, BHA entered into a three-party contract with a
                 management company and a resident association to manage
                 Commonwealth—a development for families. The contract is often cited as
                 a model of a successful private management partnership, although the
                 three parties do not always agree on capital funding priorities. All parties
                 are involved in major decisions, and the resident association can terminate
                 the private management contract if it is not satisfied.

                 In 1994, the mayor of Boston created a special task force to make
                 recommendations to improve the management of BHA’s housing
                 developments for the elderly and disabled. These developments had a
                 history of poor management. At the mayor’s request, BHA contracted with
                 private firms to manage 11 developments—about one-third its properties
                 for the elderly. BHA could then focus its energy and work on a smaller
                 number of developments, giving its managers a smaller ratio of units to
                 staff. BHA also reorganized its properties for the elderly and disabled into
                 three management clusters (two in-house and one private), each headed
                 by a senior manager, to provide additional direction and support on a
                 day-to-day basis. Currently, BHA has 3,456 units in 17 developments under
                 private management.

                 In January 1999, BHA issued its “BHA 2001 Report”—the result of a
                 yearlong effort by hundreds of BHA employees. This report represents BHA’s
                 rethinking of how the organization can best fulfill its mission. It is also part
                 of a comprehensive plan for improving BHA from top to bottom. Early in
                 the process, senior BHA managers developed seven goals for the authority:

             •   to improve its personnel and operational systems;
             •   to improve its management and maintenance systems;
             •   to improve its management information and technology systems;
             •   to reorganize and strengthen its comprehensive modernization and
                 redevelopment functions;
             •   to decentralize BHA in accordance with the real estate industry’s practices
                 and standards;

                 3
                  Of the 12,600 public housing units that BHA operates under its contract with HUD, 1,332 had been
                 approved for demolition by HUD as of Jan. 1, 1999.



                 Page 62                              GAO/RCED-99-210 Private Management for Public Housing
                               Appendix III
                               Very Large Housing Authorities’
                               Experiences With Private Management




                           •   to improve BHA’s financial planning initiative and seek new related
                               resources; and
                           •   to improve customer service and encourage more user-friendly behavior
                               on the part of staff.

                               BHA established six task forces for each of the goals except
                               decentralization. Each task force was to study and make
                               recommendations to BHA on how it could best achieve the task force’s
                               assigned goal by the end of 2001. Since it was assumed that the task forces
                               would identify solutions that depended on decentralization, senior
                               managers believed that decentralization realistically could not be
                               addressed until the task forces had completed their recommendations. The
                               task forces presented their findings to senior management in
                               September 1998. The next step in the BHA 2001 process will be to review
                               and approve the BHA 2001 Report and develop an implementation strategy
                               that will be completed by December 31, 2001.


BHA’s Experiences With         BHA’s experience with private management has generally been positive. A
Private Management             BHA official stated that private management helped BHA achieve

Companies                      authoritywide improvements. The interaction of private and BHA
                               management improved the organization, increasing communication and
                               reducing isolation. For instance, BHA officials believe that the contact with
                               private management led to a more service-oriented approach at the
                               in-house developments, resulting in performance gains similar to those
                               associated with private management. According to resident leaders at
                               BHA’s privately managed developments, most residents prefer private
                               management and are pleased with the improvements in customer service it
                               has brought. However, BHA experienced problems with three of its private
                               management companies. At developments managed by these companies,
                               day-to-day physical maintenance, services for residents, and residents’
                               satisfaction declined under private management. Because of these and
                               other problems, BHA had to take back the management of these
                               developments.

Improved Financial             According to BHA officials, in general, neither the authority’s financial
Management and Operating       management nor its operating costs changed as a result of using private
Efficiency                     management. However, BHA and private management company officials
                               said that private management did lower some personnel and maintenance
                               costs. At most of the privately managed developments, operating
                               efficiency improved, as demonstrated by reduced vacancy rates and more
                               timely rent collection. For instance, in April 1995, the vacancy rate in



                               Page 63                       GAO/RCED-99-210 Private Management for Public Housing
                          Appendix III
                          Very Large Housing Authorities’
                          Experiences With Private Management




                          developments for the elderly and disabled was 8 percent, according BHA
                          officials. In October 1998, the vacancy rate had dropped to 3 percent. BHA
                          officials attribute a portion of this reduction to private management.

                          According to BHA officials, private management companies excel at
                          improving the curb appeal of public housing properties. In addition,
                          according to BHA officials, private management companies can perform
                          many repairs more efficiently and economically than in-house
                          maintenance staff. For example, the officials said, a private firm can send
                          one maintenance employee to make a simple repair, such as mend a
                          broken pipe in a wall; however, labor agreements require that the housing
                          authority use several skilled tradespeople for relatively minor repairs. In
                          addition, BHA officials noted that the backlog for BHA-managed properties is
                          about 2 weeks while the backlog for privately managed properties is a
                          week or less. The officials attributed this difference to the flexibility of
                          maintenance staff and the absence of union labor at the private
                          management companies. However, to increase the flexibility and
                          responsiveness of its maintenance staff, BHA implemented a new job
                          description for mechanics. Under this description, people can work in a
                          variety of trades, performing a variety of neutral activities that do not
                          require licenses and are not highly specialized. BHA has implemented this
                          mechanics program at all in-house management clusters.

Private-Sector Business   BHA  officials pointed out the benefits of competing with private-sector
Practices                 managers. For example, after noting the positive impact of improved curb
                          appeal at its privately managed properties, BHA improved the curb appeal
                          at the properties it manages in-house. BHA officials also began inviting
                          private managers to their management retreats to facilitate the sharing of
                          management practices. In addition, BHA is changing its maintenance
                          program to focus on prevention rather than respond to crises.

Cost-Effective Size       BHA  eased its large workload by using private managers for a portion of the
                          developments it operates for the elderly and disabled. This step reduced
                          the typical workload of BHA’s site managers to three developments, a level
                          of responsibility that is more in line with private-sector practices.
                          Previously, the site managers at Boston’s housing developments for the
                          elderly were responsible for four to seven developments. Because of this
                          large workload, according to BHA officials, the site managers had time for
                          collecting rents and providing basic maintenance but not for providing
                          services and outreach to tenants.




                          Page 64                       GAO/RCED-99-210 Private Management for Public Housing
                             Appendix III
                             Very Large Housing Authorities’
                             Experiences With Private Management




Decentralized Management     BHA historically has been centralized, according to a BHA official. However,
                             as noted, the organization is moving toward decentralization. A major
                             mandate of the mayor’s task force was to move BHA from a centralized to a
                             development-based management model. BHA split its elderly and family
                             housing portfolios and placed a portion of each under private
                             management. By decentralizing management, BHA was able to devolve
                             responsibility and accountability for individual developments so that
                             managers could focus on analyzing the physical, structural, and marketing
                             needs of their housing portfolios. In addition, the use of private property
                             managers has instilled competition, and exchanges between private and
                             in-house managers have enhanced performance throughout entire
                             agencies. As part of BHA 2001, one task force proposed establishing
                             site-based programs to reduce vacancy rates and prepare units for new
                             residents, collect rents, and fill work orders more quickly. Locating
                             services as close as possible to the users is an essential step in fulfilling
                             BHA’s mission.


Monitoring of Contractors’   BHArequires its private management companies to submit periodic
Performance                  management and financial reports for their sites.

Residents’ Fears of Change   BHA included the residents when it reviewed the qualifications of
                             companies bidding on its private management contracts. According to
                             resident leaders at BHA’s privately managed developments, most of the
                             residents now prefer private management and are pleased with the
                             additional social services and improved living conditions provided by the
                             private management companies.


HUD’s Views on BHA’s         According to a public housing official in HUD’s Massachusetts office, HUD
Private Management           supports efficient and effective management, regardless of whether that
Experience                   management is provided by the housing authority or a private
                             management company. The HUD officials were not aware of any current
                             problems with BHA’s private management activities. To monitor these
                             activities, HUD reviews BHA’s PHMAP reports, which contain scores for each
                             management company on the functions it provides. BHA officials noted that
                             HUD did not play a role in its private management activities. BHA preferred
                             this hand-off approach taken by HUD.


Lessons Learned              The following describes the lessons learned by BHA officials in the private
                             management effort:




                             Page 65                       GAO/RCED-99-210 Private Management for Public Housing
Appendix III
Very Large Housing Authorities’
Experiences With Private Management




Housing authorities need to clearly specify performance expectations for
their private management companies. The authorities can then monitor the
performance of the management companies against a clear set of
expectations.

Housing authorities need to convince residents of the need for and the
benefits of private management. Authorities also need to involve residents
in implementation efforts.

Site-based budgeting is essential to meeting BHA 2001 goals. Site-based
budgeting makes property managers more responsible and more creative
in their activities.




Page 66                       GAO/RCED-99-210 Private Management for Public Housing
Appendix IV

GAO Contacts and Staff Acknowledgments


                   Judy A. England-Joseph (202) 512-7631
GAO Contacts       Eric Marts (202) 512-6771


                   In addition to those named above, Gwenetta Blackwell, Anne Eichhorn,
Acknowledgements   Elizabeth Eisenstadt, Andy Finkel, Jackie Garza, and Lynn Musser made
                   key contributions to this report.




(385755)           Page 67                   GAO/RCED-99-210 Private Management for Public Housing
Ordering Information

The first copy of each GAO report and testimony is free.
Additional copies are $2 each. Orders should be sent to the
following address, accompanied by a check or money order
made out to the Superintendent of Documents, when
necessary. VISA and MasterCard credit cards are accepted, also.
Orders for 100 or more copies to be mailed to a single address
are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office
P.O. Box 37050
Washington, DC 20013

or visit:

Room 1100
700 4th St. NW (corner of 4th and G Sts. NW)
U.S. General Accounting Office
Washington, DC

Orders may also be placed by calling (202) 512-6000
or by using fax number (202) 512-6061, or TDD (202) 512-2537.

Each day, GAO issues a list of newly available reports and
testimony. To receive facsimile copies of the daily list or any
list from the past 30 days, please call (202) 512-6000 using a
touchtone phone. A recorded menu will provide information on
how to obtain these lists.

For information on how to access GAO reports on the INTERNET,
send an e-mail message with "info" in the body to:

info@www.gao.gov

or visit GAO’s World Wide Web Home Page at:

http://www.gao.gov




PRINTED ON    RECYCLED PAPER
United States                       Bulk Rate
General Accounting Office      Postage & Fees Paid
Washington, D.C. 20548-0001           GAO
                                 Permit No. G100
Official Business
Penalty for Private Use $300

Address Correction Requested