NAHRO has learned from HUD staff that HUD is planning to address concerns that stemmed from a 2014 OIG report that questioned the underpinning and validity of asset management in public housing. Among other things, the report recommended that HUD “refederalize” fee revenues from the Operating and Capital Funds that public housing authorities’ (PHAs’) Central Office Cost Centers (COCC) have earned since they began implementing asset management and eliminate the asset management fee. While nothing has been publicized, HUD is currently looking to address the recommendation to refederalize COCC money with a planned implementation date of December, 2017.

Asset management was initially proposed in a 2003 study released by the Harvard University Graduate School of Design, then authorized by the Conference Report of the 1999 HUD Appropriations Bill of the United States Congress. The report recommended that “[a] shift to a property-based model for public housing must be accompanied by major changes in how HUD manages and evaluates PHAs.” It further stated that:

HUD too must become more property-focused … HUD does not review on an annual or otherwise regular basis the performance of individual properties with respect to physical condition, occupancy levels, rent collections, expenditures, etc. While HUD requires the submission of much of this data, information is provided … only on a PHA-wide basis. HUD evaluates public housing organizations, not properties. Changes needed in HUD’s business processes to bring about a stronger real estate focus will be as large as the changes needed in public housing’s management practices, and will take several years to implement.

Asset management allows PHAs to give greater attention to the performance of each public housing development. This was accomplished through a fee for service model that allowed PHAs to focus on outcomes as opposed to processes. The fee structure moved public housing to a structure more closely resembling the Mutifamily Housing program and private sector property management practices. As HUD notes in the OIG report, “[the] fee for service model is one of the pillars of the Public Housing program’s conversion to asset management. The OIG’s recommendation to [refederalize fee revenues] would undermine this massive accomplishment.”

Both NAHRO and HUD expressed significant concerns with the OIG report after its release. In addition to the OIG’s findings and recommendations, the report included HUD’s Office of Public Housing and Voucher Programs response, which included a full-throated defense of the asset management system. The program office noted the government-wide effort, under the direction of the Office of Management and Budget (OMB), to use fee-for-service models whenever appropriate to incentivize efficient program management and operations. The program office noted that no federal restrictions are placed on the way in which recipients may use management fees earned as a result of participation in HUD’s multifamily programs or on development fees earned from tax credit properties; “[r]ather, it is standard industry practice that…the recipient of those fees can spend those amounts according to their mission, charter, or business purpose.”

At the time, NAHRO commented that OIG’s report was “only the latest example of a pattern of specious, ill-informed actions on the part of the Office of the Inspector General, serving to underscore the distance from which that office views PHAs and the programs they operate.”  NAHRO also noted that “[t]‘he report demonstrates a deep misunderstanding of the nature of the relationship between HUD and PHAs, repeatedly blasting HUD for its failure to ‘monitor charges to its housing authorities’ central office cost center because those fees were considered defederalized and no longer subject to HUD’s requirements.” NAHRO further stated that “the report also hinge[d] on confusion over the essential nature of the fees charged by PHAs, arguing that PHAs, unlike the private owners of HUD-assisted Multifamily properties, should not earn asset management fees because ‘a public housing authority does not have a vested interest in its asset management projects because it does not run those projects for profit.’” NAHRO still substantially disagrees with this report.

Although it is disappointing HUD is stepping back from their original defense of the asset management system by responding to OIG’s misinformed concerns through changes to the asset management program, NAHRO will be at the forefront of HUD’s process to ensure that PHAs remain able to utilize the asset management system in the way it was originally intended. NAHRO will also continue to ensure that its members are updated on this matter as soon as HUD releases new information.

Questions? Contact Eric Oberdorfer at eoberdorfer@nahro.org.

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