HUD projects waste millions

WASHINGTON - The federal government's largest housing construction program for the poor has squandered hundreds of millions of dollars on stalled or abandoned projects and routinely failed to crack down on derelict developers or the local housing agencies that funded them.

Nationwide, nearly 700 projects awarded $400 million have been idling for years, a Washington Post investigation found. Some have languished for a decade or longer even as much of the country struggles with record-high foreclosures and a dramatic loss of affordable housing.

The U.S. Department of Housing and Urban Development, which oversees the nation's housing fund, has largely looked the other way: It does not track the pace of construction and often fails to spot defunct deals, instead trusting local agencies to police projects.

The result is a trail of failed developments in every corner of the country. Fields where apartment complexes were promised are empty and neglected. Houses that were supposed to be renovated are boarded up and crumbling, eyesores in decaying neighborhoods.

In Inglewood, Calif., a sprawling, overgrown lot two blocks from city hall frustrates senior citizens who were promised a state-of-the-art housing complex more than four years ago. Although the city invested $2 million in HUD funds, the developer doesn't have the financing to move forward.

In Newark, N.J., two partially completed duplexes sit empty in a neighborhood blighted by boarded-up homes lost to foreclosure. The city paid nearly $400,000 to build the houses, but after a decade of delays, the developer folded and never finished. The money has not been repaid.

In Orange, Tex., 35-year-old laborer Jay Breed lives next to a dumping ground littered with tires and other trash, where a non-profit developer was supposed to build 50 houses for the poor. Five years later, with $140,000 in HUD money gone, no homes have gone up.

"It's a wasteland," Breed said.

The Post examined every major project currently funded under the HUD program, analyzing a database of 5,100 projects worth $3.2 billion, studying more than 600 satellite images and collecting information from 165 housing agencies nationwide.

The yearlong investigation uncovered a dysfunctional system that delivers billions of dollars to local housing agencies with few rules, safeguards or even a reliable way to track projects. The lapses have led to widespread misspending and delays in a two-decade-old program meant to deliver decent housing to the working poor.

The Post found breakdowns at every level:

• Local housing agencies have doled out millions to troubled developers, including novice builders, fledgling nonprofits and groups accused of fraud or delivering shoddy work.

• Checks were cut even when projects were still on the drawing boards, without land, financing or permits to move forward. In at least 55 cases, developers drew HUD money but left behind only barren lots.

• Overall, nearly one in seven projects shows signs of significant delay. Time and again, housing agencies failed to cancel bad deals or alert HUD when projects foundered.

• HUD has known about the problems for years but still imposes few requirements on local housing agencies and relies on a data system that makes it difficult to determine which developments are stalled.

• Even when HUD learns of a botched deal, federal law does not give the agency the authority to demand repayment. HUD can ask local authorities to voluntarily repay, but the agency was unable to say how much money has been returned.

The national capital region has a particularly troubled track record. In suburban Prince George's County, Md., the non-profit Kairos Development Corp. received $750,000 in 2005 to build dozens of homes. Six years later, Kairos has not built a single house.

Dozens of housing agencies nationwide acknowledge botched deals and often blame the economy for leaving developers without financing to finish the work.

But hundreds of stalled projects predate the troubled financial markets, with developers tapping HUD's program for easy money and then escaping even rudimentary oversight from local and federal authorities. The agency's inspector general for years has chronicled scores of delayed projects and millions in waste.

"We need to reduce the risk for HUD funding in development deals," said Annemarie Maiorano, who manages HUD money for Wake County, N.C. "There needs to be basic standards."

HUD officials said they have recently tried to determine why developments are delayed and have begun to cancel projects. In response to inquiries from the Post, the agency last month launched investigations into a series of defunct deals, finding questionable payments and excessive delays, and in recent weeks has sought the return of more than $4 million from housing agencies in the District of Columbia and Prince George's County.

"We can do better and we will," said Mercedes Marquez, HUD's assistant secretary for community planning and development, who was nominated by President Barack Obama in 2009. "HUD, the Congress and every taxpayer I know expects these funds to be put to work. ... I won't hesitate to do what's necessary."

The Post's investigation is the first systemic look at the progress of construction in HUD's affordable-housing fund, known as the HOME Investment Partnerships Program.

The program launched with great promise two decades ago, when Congress vowed to fund the construction or renovation of thousands of apartments and houses for working-poor families.

HUD's money typically doesn't cover all construction costs. The program is meant to provide partial funding for developers who are expected to draw additional financing from banks and other sources.

But hundreds of current projects have faced years-long delays, with a similar pattern playing out in city after city.

Behind many of the deals are developers who didn't have land, permits, financial capacity or commitments for private financing. HUD has few underwriting standards: Housing agencies are required to ensure that developers have a proposed budget and construction schedule - but not proof that they have the money to start building.

Other developers have had little housing experience or were dogged by foreclosures, cost overruns, liens and allegations of defective work.

by Debbie Cenziper and Jonathan Mummolo Washington Post May. 15, 2011 12:00 AM



HUD projects waste millions