July 13, 2006
INSPECTOR GENERAL REPORTS ON HUD’S MOVING TO WORK DEMONSTRATION RAISE SERIOUS QUESTIONS
By Will Fischer and Barbara Sard
A series of reports by HUD’s Inspector General
have found serious flaws in the implementation of the Moving to Work (MTW)
housing demonstration, including ineffective oversight by HUD and poor use of
funds by some local housing agencies. These findings, considered together with
other risks posed by MTW, suggest that sharply expanding MTW’s size and scope —
as some members of Congress are seeking to do — would be unwise. Instead, MTW
could be improved by strengthening accountability while maintaining the
demonstration at roughly its current size.
Background
Established by Congress in 1996, MTW permits HUD
to grant broad waivers to up to 30 state and local housing agencies allowing
them to experiment for a fixed (but extendable) time period with different
policies in their voucher and public housing programs, not only to promote work
but also simply to achieve “greater cost effectiveness.”
Several proposals to expand HUD’s authority to
grant MTW waivers have been introduced in Congress in recent months. The
House-passed FY 2007 Transportation-Treasury-HUD appropriations bill (H.R. 5576)
would allow HUD to increase the number of MTW agencies from the current 24 to
32, largely by addressing a technicality that has prevented HUD from using all
of the slots allowed by the current statutory cap.[1]
Legislation recently approved by the House Financial Services Committee (H.R.
5443) would let HUD give MTW waivers to a total of 40 agencies. Senator John
Sununu (R-NH) has introduced a bill (S. 3508) that would expand MTW much more
extensively (to 250 agencies) and provide “charters” permanently exempting
agencies from most federal rules and standards.[2]
Inspector General Reports Criticize MTW
Implementation
From 2004 to 2006, HUD’s Office of the Inspector
General (OIG) completed a series of audits of MTW, including a general audit of
HUD’s design and implementation of MTW, as well as four audits covering
individual local MTW programs.[3]
The OIG audit reports contain a number of sharp criticisms of MTW, dealing both
with HUD’s oversight of the demonstration and with the policies implemented by
some local housing agencies.
While OIG’s general audit of the design and
implementation of MTW covers the entire MTW demonstration, the OIG reports
regarding local implementation of MTW should not be taken as representative of
all 24 MTW agencies. Other sources — including a 2004 Urban Institute
evaluation of the original “cohort” of MTW agencies that HUD selected in 1997 —
suggest that some of these agencies have used their waivers to conduct
innovative, promising housing policy experiments. However, the OIG audit
reports offer the only detailed assessment of HUD’s implementation of MTW and of
MTW activities at agencies that developed their demonstration programs under the
current administration. They thus provide valuable insights as Congress
considers whether HUD should be given authority to expand MTW.
HUD Oversight of MTW Was Weak
The OIG reports found that HUD provided
inadequate monitoring to ensure that MTW agencies complied with basic federal
rules, and insufficient oversight to ensure that MTW activities furthered the
demonstration’s goals and made effective use of federal funds.
Even though the reports looked at details of MTW
implementation at only a handful of local agencies, they found evidence that the
weaknesses in HUD’s oversight had serious consequences on the ground. OIG
concluded that two of the agencies examined — neither of which was actually
subject to the monitoring by HUD regional field offices that HUD’s oversight
plans called for on paper — made poor use of tens of millions of dollars of
federal funds. One audit found that the Pittsburgh MTW program accumulated
large amounts of federal housing funds in its reserve accounts from 2001 to
2004, rather than using them to issue available Section 8 vouchers to needy
families on its waiting list or meet other pressing local housing needs.
Pittsburgh was able to leave these badly needed resources unused in part because
its MTW waiver exempted it from federal rules that would have required it to use
them promptly to serve needy families.[4]
Another report concluded that millions of dollars in voucher funds that the
Philadelphia Housing Authority has been reallocating each year under its MTW
program for “non-traditional” uses (such as housing development) could be better
spent issuing available vouchers to needy families for use in the city’s ample
vacant rental housing.[5]
OIG also found that some agencies failed to
follow some of the limited, basic federal rules that were not waived under MTW,
including requirements regarding environmental reviews of new housing
developments and a stipulation in the MTW statute itself that public comments
must be taken into consideration in developing an application to participate in
MTW. OIG attributed these failures in part to spotty oversight by HUD.
The reports noted several reasons for the
weakness of HUD’s oversight:
- HUD resistance to the concept of federal
oversight. Under MTW, HUD has substantial authority to review agency plans
for MTW demonstrations and ensure that planned activities have the potential
to further the goals of the demonstration. The OIG audit reports suggest,
however, that HUD objected to the concept of providing such oversight. In
informal comments on the audit of HUD’s oversight of Philadelphia’s MTW
program, HUD told OIG that one reason for its failure to ensure that
Philadelphia made effective use of its federal funds was a belief that such
oversight would run counter to the “philosophy” of the MTW demonstration.
- Lack of clarity regarding oversight
responsibilities. HUD’s oversight also was undermined by confusion about what
entities under HUD were responsible for monitoring the demonstration,
according to the audit reports. HUD relied in part on consultants to monitor MTW agencies but did not ask the consultants to collect all of the information
needed for adequate monitoring. HUD policies called for the department’s
field offices around the country to conduct the additional monitoring needed,
but some offices indicated that they did not receive clear instructions to
carry out this task and (as noted in the examples above) did not do so
consistently.
- Lack of resources. Providing effective
oversight of MTW is a difficult and resource-intensive job. Under the
demonstration, HUD can waive not only a broad range of program rules but also
many of the reporting requirements that enable HUD to know whether state and
local agencies are properly using funds. HUD’s informal comments on the
Philadelphia audit noted “lack of resources” at HUD as an impediment to
adequate monitoring. HUD’s written response to OIG’s general report on HUD
implementation explained the inadequate monitoring conducted by HUD field
offices by noting that “because of its comprehensive nature the demonstration
is complicated to monitor,” and that given this complexity, providing adequate
MTW oversight had to be balanced against “the extensive workload and
conflicting priorities” the field offices faced.
HUD Gave Waivers to Failure-Prone Agencies,
Ignoring Congressional Intent
HUD increased the risk that violations of federal
rules and misuse of federal funds would occur by selecting agencies to
participate in MTW that were unlikely to administer successful demonstrations.
The legislation authorizing MTW requires that HUD take into account an agency’s
performance relative to other agencies and its potential to succeed in carrying
out a demonstration program when selecting agencies to participate, but does not
indicate how HUD should take these factors into account.
In MTW’s early years, HUD implemented this
statutory requirement rigorously by limiting participation in the demonstration
to agencies rated as high performers under HUD’s performance measurement
system. This requirement was not consistently applied after 2000, however, and
OIG’s reports indicate that the agencies admitted later included some relatively
poor performers: “HUD placed more emphasis on filling remaining vacancies in
the demonstration program with large housing authorities, such as the
[Philadelphia Housing] Authority, rather than objectively evaluating the
performance history and the merits of the proposed programs.” In some of HUD’s
recent selection decisions, it is difficult to discern how HUD took agency
performance into account at all.
HUD staff told OIG that one reason HUD ignored
congressional intent regarding selection of MTW agencies was that a senior HUD
official with authority over selection decisions simply believed that Congress
had made the wrong policy choice. They reported that the assistant HUD
secretary responsible for MTW from 2001 to early 2005 “believed that the way
Congress established the program to benefit high performing agencies was not
beneficial.”
Policy Lessons Generated by MTW Demonstration
Were Limited
MTW’s stated purpose was to test innovative
policies, and Congress instructed HUD to evaluate the demonstration with the
goal of generating findings that would help guide the future direction of
housing policy. OIG found, however, that HUD failed to collect crucial data for
use in the evaluation, and that the limited information that was available “did
not provide measurable and comparable results showing how activities reduced
costs, promoted self sufficiency, and increased housing choice.” This failure
reduced the ability of the evaluation to identify which MTW activities could be
considered models for replication in other areas.
According to OIG, HUD failed to collect
quantitative data on effects of MTW on individual tenants largely because its
initial plan for collecting these data turned out not to be feasible.
OIG sharply criticized HUD for this failure.[6]
However, it should be noted that MTW’s basic structure — which provided little
guidance regarding which policies should be tested under the demonstration and
did not require that demonstration programs be designed in a manner that allowed
rigorous evaluation — would have limited the findings of the evaluation even if
HUD had collected adequate data.
Audits Suggest a Major MTW Expansion Would
Carry Serious Risks and Few Benefits
The findings of OIG’s audits strongly suggest
that a major expansion of MTW would be unwise. The audits attribute HUD’s poor
implementation of MTW — and the misallocation of funds and violation of basic
federal standards by local agencies that OIG blames in part on weak HUD
oversight — to a variety of factors, ranging from inadequate monitoring
resources to simple mistakes to willful disregard of congressional intent.
There is every reason to expect that HUD
implementation of an expanded MTW would, if anything, be even more problematic.
HUD’s limited monitoring resources would be stretched even further, and it would
be far more difficult for Congress or OIG to provide the kind of oversight of
HUD that would be needed to ensure that it implements MTW competently and as
intended by Congress. (Senator Sununu’s bill to greatly expand MTW and allow
MTW “charters” to last indefinitely would make it even less likely that agencies
would be held accountable, since the defined but renewable terms allowed under
the current demonstration at least ensure that agencies must occasionally obtain
approval from HUD or Congress to continue their waivers.)
As a result, implementation problems under an
expanded MTW would likely be even more severe than under the demonstration to
date, while the useful policy lessons generated would be equally sparse.
Moreover, an expansion of MTW would carry
significant risks beyond those discussed by OIG. Many of the policy changes
allowed by MTW waivers can seriously harm low-income families. For example, MTW
agencies can impose substantially higher rent burdens on needy families than are
allowed under current law, and can impose time limits on housing assistance even
for working-poor families that cannot afford market-rate housing on their own. MTW
agencies also can shift assistance from the neediest households to those with
higher incomes, which saves agencies money because higher-income households are
cheaper to serve. Because funding for the public housing and voucher programs
has been cut significantly in recent years, the risk that MTW agencies would
take actions that reduce costs but harm poor families and individuals would be
high — considerably higher than in the early years of the demonstration, when
the budget environment was not as tight.
MTW Should Be Kept at Roughly Its Current Size
and Improved
Rather than radically expanding MTW and allowing
waivers to continue indefinitely, Congress should maintain the demonstration at
roughly its current size, continue to set defined-but-renewable terms for
waivers, and strengthen MTW so Congress can be confident that it will generate
meaningful policy lessons without creating unnecessary risks for low-income
people. Several changes in the law governing MTW would help to provide the
needed accountability and focus on high-quality housing policy experiments,
including:
- permitting only agencies that are high
performers under HUD’s performance measurement system to participate in the
demonstration;
- specifying clear performance standards for
agencies that have been admitted to MTW and providing for termination of MTW
participation for agencies that do not meet the standards;
- limiting the degree to which MTW agencies may
shift funds between the voucher and public housing programs, a step that makes
it more difficult to track agency activities and does little to facilitate
improvements in policies for either program;
- requiring annual public hearings on MTW plans
with adequate opportunity for public and resident input into important
changes, and annual reports on MTW activities;
- requiring HUD to make information available to
the public concerning the waivers granted to participating agencies and the
agencies’ local policies;
- establishing priorities regarding the types of
policies that would be tested;
- placing limits on policy changes (like shifts
of vouchers to higher-income households or rent increases that deeply
undermine affordability) that would be especially harmful to needy families
but have little potential to result in useful lessons; and
- adding clear requirements that the
demonstration be rigorously evaluated and providing the resources needed to do
so.
End Notes:
[1] HUD’s website lists 24 agencies as
current MTW participants. See
http://www.hud.gov/offices/pih/programs/ph/mtw/mtwparticipants.cfm. Some
years ago, Congress instructed HUD to admit another agency, the Charlotte
Housing Authority, which is currently listed as “in negotiation.”
[2] For further information on MTW and
analysis of the MTW provision in H.R. 5443, see Barbara Sard and Will Fischer,
“Bipartisan Bill in House Would Make Marked Improvements in Housing Voucher
Program,” Center on Budget and Policy Priorities, May 30, 2006, available at
https://www.cbpp.org/5-30-06hous.htm.
[3]
In addition to the general audit of MTW design and
implementation (available at
http://www.hud.gov/oig/ig500001.pdf), OIG conducted audits examining the
Seattle (http://www.hud.gov/oig/ig401004.pdf)
and Pittsburgh (http://www.hud.gov/oig/ig531008.pdf)
MTW programs, an audit of HUD’s oversight of the Philadelphia MTW program (http://www.hud.gov/oig/ig430003.pdf),
and an audit of HUD’s decision to admit the Housing Authority of Baltimore City
to MTW (http://www.hud.gov/oig/ig630002.pdf).
[4] HUD data indicate that in 2005,
Pittsburgh was no longer leaving voucher funds it received unspent. The
Authority indicated that it had taken steps to address the problem of unspent
funds, and use of those funds appears to have accelerated sharply after OIG
released its audit. Several other housing agencies with MTW waivers, however,
did leave substantial amounts of voucher funds unused or used the funds for
other purposes in 2005. Philadelphia, Atlanta, Chicago, and New Haven all spent
less than 90 percent of their voucher funds on voucher subsidies. Insufficient
information is available to determine the details of the activities for which
these funds may have been used.
[5] According to OIG, the Philadelphia
Housing Agency sought to justify the diversion of voucher funds into development
activities by arguing that blight and a lack of affordable housing made it
difficult to use the funds for vouchers. OIG, however, argues that the
authority struggled to use funds for vouchers because of poor program
administration rather than lack of adequate housing. It cites earlier OIG
audits of the housing authority, Census data on housing vacancies, and a 2003
study by University of Pennsylvania researchers to support that conclusion.
[6] OIG did not criticize the
HUD-sponsored Urban Institute MTW evaluation, which in the absence of adequate
quantitative data used other, primarily qualitative, sources of information to
assess the activities of the first cohort of MTW agencies. |