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City audit finds trouble with affordable housing

Tuesday, November 17, 2015 by Elizabeth Pagano

A city audit has found that Austin does not have an effective strategy to meet its current affordable housing needs.

The audit of the Neighborhood Housing and Community Development Department found that NHCD “has not adopted a clear goal, established timelines, or developed affordable housing numerical targets to evaluate its efforts in fulfilling the City’s adopted core values” and that “(k)ey information needed to evaluate program effectiveness is incomplete, inaccurate, or unavailable.” Auditors also determined that the department’s monitoring practices are lacking and don’t “ensure consistent compliance” with affordable housing requirements.

Members of the Audit and Finance Committee discussed the findings at their Monday meeting.

One of the most notable findings of the audit was that NHCD has “significantly overstated its accomplishments in creating affordable housing.” To be precise, the department overstated the production of affordable units by 58 percent, or about 3,000 units.

According to the audit, this misrepresentation was due to the fact that NHCD reported all units for “SMART” and “UNO” (University Neighborhood Overlay) projects as affordable “regardless of whether they had affordability requirements or not,” which resulted in the mistaken inclusion of about 2,600 units. (Although some SMART housing units are affordable, the acronym stands for developments that are “Safe, Mixed-Income, Accessible, Reasonably Priced, Transit-Oriented.”) Auditors also found duplicate reporting of about 400 affordable units.

This overstatement has had a ripple effect, which the audit also details. As a consequence of the inflation, the number of households served by housing services was overstated by 28 percent, and the number of households served by NHCD in general was overstated by 15 percent.

Assistant City Auditor Niki Raggi noted that the number was reported in “several documents,” including budget documents and a presentation to City Council about the city’s SMART housing program.

“Honestly, that was just a mistake,” explained NHCD Director Betsy Spencer. She told the committee that someone incorporated that number into a chart that was then used, but the number was not included in the department’s performance measures.

Mayor Pro Tem Kathie Tovo, the committee’s chair, said that she was “very concerned” about the prospect of numbers being overstated, particularly given the conversations currently taking place around density bonus programs and affordable housing. She stressed the need for updated information that accurately reflects how many affordable units have expired. Spencer acknowledged that market-rate SMART housing units and expired affordable housing units were included in a chart recently distributed to the Planning and Neighborhoods Committee and the Housing and Community Development Committee for reference during discussion of the city’s density bonus programs.

Additionally, auditors found gaps in NHCD’s monitoring of affordable units. Specifically, the audit discovered that the actual income of affordable housing residents and length of time that units remained affordable was not tracked in developer incentive programs.

Spencer told the committee that her department did confirm that affordable units were rented at an affordable level and that tenants met eligibility requirements, though the department had limited resources to do so. She suggested that, because that confirmation process is not something that’s done immediately and also can take some time to complete, the timing of the audit may have been off.

Raggi disagreed. “There were some that were not monitored in a timely fashion, and some that were not monitored at all,” said Raggi.

Tovo suggested that there be a discussion about this matter, in particular, on Thursday. She noted, “If we have established density bonus programs and we’re not providing departments with the tools to make sure that the individuals who occupy them are income-qualified, then we really have a failure of the system.”

The audit also revealed that the majority of “developer-assisted” affordable housing (59 percent) resulted in units that rented to households that make 50 to 80 percent of median family income, or between $34,600 to $55,350 for a family of four. Additionally, the majority of those units (51 percent) were affordable for a period of five years or less.

Developer-assisted affordable housing consists of systems like density bonus programs. Spencer explained that developer incentives are not designed for either long-term or deep affordability, unless combined with capital investment.

Council Member Ellen Troxclair, the committee’s vice chair, expressed concern that Spencer’s explanation “is not the impression that the majority of Council has.”

“I think that when we are looking at developer incentives, most of us, if not all of us, are looking at these incentives as a means for affordable housing,” said Troxclair.

Spencer told the committee that she had “mixed feelings” about the audit. She said that a policy discussion about the core values and density bonus ordinances was something that should take place with both stakeholders and Council.

The complete audit and a response from NHCD is embedded below.

Download (PDF, 2.13MB)

Graph courtesy of the city of Austin.

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