The Post’s HUD Investigation: How Damning?
Over the weekend, The Washington Post published a long expose of the federal department of Housing and Urban Development's HOME Investment Partnership program, which has distributed $32 billion to state and local organizations since 1992 to build or refurbush affordable housing. According to the Post's analysis, $400 million of that has gone towards 700 projects around the country that are way behind schedule, awarded to organizations with inadequate underwriting or experience to finish the jobs (you can see how many are in each state with this graphic, which unfortunately doesn't list each project). The story has already prompted investigations into several stalled projects and demands for money to be returned, and HUD officials sound contrite. “I’m appalled, just appalled,” said Mercedes Marquez, HUD’s assistant secretary for community planning and development. “We’re just not standing for it.”
But on its blog, HUD hit back against reporter Debbie Cenziper's overall conclusion, arguing that the HOME program has been largely successful and failures are a hard-to-avoid consequence of a down economy and the level of trust required in awarding block grants.
Sadly, the Post failed to recognize that, in spite of examples of incompetence and outright mismanagement by certain local governments, overall the HOME Program works. For more than a year, HUD provided data and context to Ms. Cenziper and for all this, she failed to recognize the obvious. Yes, there are problems when local communities pick bad developers and it’s no wonder that projects stall or even fail as a consequence. But to lead readers to believe the whole HOME Program is a failure and that HUD is “looking the other way” is just plain wrong.
Let’s put this into context; these delayed projects that the Post cites are a small fraction (approximately 2.5 percent) of 28,000 active developments. Many of these open projects are newly constructed single-family homes that remain on the market because we’re in the middle of a housing crisis in this country, a reality that is largely unrecognized in Ms. Cenziper’s reporting. Given complex financing, zoning and environmental requirements, it’s not uncommon for larger multi-family construction projects to take 3-4 years to fully complete. Large-scale rehab projects can easily take two years to finish.
Still, there’s more work to do and we’re doing it. We’ve cut the number of these ‘open activities’ by nearly 60 percent since 2005. In the past two months alone, we’ve cancelled nearly 2,000 stalled projects totaling $290 million! We’re providing technical assistance to local communities as never before. AND we’re forcing repayment of misspent money.
Ms. Cenziper was told time and again that despite the limitations of HUD’s legal authority, we always force repayment of HOME funds when a project isn’t completed. Always. Not sometimes but one hundred percent of the time.
In other words, when projects don't work out, it's the fault of local jurisdictions, not the federal overseers.
In the next installment, Cenziper does a deep dive on $3.5 million that HUD loaned to East of the River Community Development Corporation to rehab three apartment buildings. Enthusiastically backed by the Fenty administration, the non-profit bought them at absurdly inflated prices from speculators with criminal backgrounds, and then went bankrupt in 2009 when they couldn't secure enough private financing to finish the renovations. The CDC blames the economy for killing the deal, the District blames the non-profit for trusting an inflated appraisal, and HUD blames the District for picking an inadequate developer (and then allowing East of the River to pay off its debt with the HUD loan, which is a big no-no). Ultimately, big-time developer William C. Smith stepped in to finish the job.
It's a similar phenomenon to the one that I've discovered looking at the District's Home Again program, which disposed vacant properties to developers who cherry picked the best ones and let the rest languish, and the troubled renovation of Mayfair Mansions, which was too much for Marshall Heights Community Development Organization. Obviously, it's a case for going only with the most reputable developers with the greatest capacity and the longest track records—not the politically connected community organizations that the District just wants to help stay alive. Because at the end of the day, wasted money is everybody's fault.
As luck would have it, I'm interviewing new DHCD director and former HUD official John Hall this morning—if you've got questions for him, please send them my way! email@example.com.