After completion of his confirmation hearings, the U.S. Senate as well as various housing advocates seemed happy with President George Bush’s choice for HUD secretary, Melquiades Martinez.

Speaking before he was confirmed by the Senate unanimously, the Cuban immigrant promised to make improved HUD management his top priority and also voiced his concern for a shortage of affordable housing that he called “a crisis.”

According to a report by the National Low Income Housing Coalition (NLIHC), Martinez said that there are too many homeless and that housing for the aging population needs to be addressed.

His major interests are in homeownership, however, and he noted that home ownership levels for African-American and Latino citizens remain below 50%, a level he deemed unacceptably low.

Previously, Martinez was the elected chief executive of Orange County, Fla., and chairman of the Orlando Housing Authority.

As a local government CEO, Martinez described himself as “a HUD consumer” who is familiar with the frustration with the agency.

He said he is encouraged by recent improvements in HUD management, but acknowledges that there is more to do.

Martinez said his “first priority” will be to continue the management improvements at HUD, and he also promised to work “in a bipartisan manner.”

“We were encouraged that he understands the country is facing a serious problem that there is not enough affordable housing for low-income families,” said Sheila Crowley, president of the NLIHC, in a report by the New York Times.

GAO Removes HUD’s High-Risk Designation

Outgoing HUD Secretary Andrew Cuomo got a going-away present from the U.S. General Accounting Office (GAO) when the congressional watchdog agency removed HUD’s designation as a high-risk agency.

The GAO put the high-risk label on the department in 1994, and Cuomo fought hard — and finally successfully — to erase it. “HUD’s department-wide high-risk designation is a thing of the past,” Cuomo said. “We’ve transformed a monolithic government agency into a model of government reinvention.”

In its latest report on departmental operations, the GAO had some kind words for Cuomo’s management reforms.

HUD “has taken important steps” to address its management problems, the report says. “Its top management has given high priority to implementing the department’s 2020 Management Reform Plan, the department’s reorganization is substantially complete, and the department’s reform efforts have resulted in some improvements.”

Despite the improvements, HUD didn’t get a clean bill of health, however. The GAO continued to list HUD’s rental assistance programs and FHA single-family program as high-risk areas, while dropping the high-risk designation from the programs of the Office of Community Planning and Development.

In the rental assistance programs, the GAO called for additional efforts to reduce excess subsidy payments — estimated at $3.1 billion over the past four years — by making sure that only eligible families are assisted and that those families pay the correct rents. HUD has taken steps in that direction though a computerized program to match the income tenants’ reports for housing purposes with the income reported on their tax returns.

In addition, the report says, HUD must ensure that housing providers maintain decent, safe, and sanitary units and that the department itself has the funds and management controls to detect and deal with problems in its subsidized inventory.

“Because of their size and complexity and the opportunity to provide assisted housing to more low-income households through better management, these programs remain at high-risk,” the report says. “HUD must continue to strengthen its internal controls by completing its efforts to ensure that correct rental subsidies are paid.

It must also complete actions on our recommendations aimed at improving the quality of contractors’ physical inspections of the condition of public and multifamily housing. This includes revising its quality assurance activities to ensure that they provide the timely, reliable, and useful information needed for HUD to assess, among other things, compliance with inspection contracts.”

HUD Issues Final Rules for Physical Inspections

HUD has issued final regulations establishing uniform physical inspection standards for subsidized and FHA-insured multifamily properties that will classify projects according to their point scores. The rules don’t apply to public housing.

Properties receiving scores of 90 points or higher will be designated as standard  1; those scoring at least 80, but less than 90 will be designated as standard  2; and those scoring below 80 will be standard 3.

Fractional scores of 0.5 or higher will be rounded up; scores below 0.5 will be rounded down.

The proposed rules would have graded projects “on the curve,” classifying them by percentile groupings. For example, projects in the top 20 percent, regardless of absolute score, would have been classified standard 1.

In explaining the change, HUD noted it received considerable comment in opposition to the percentile classification.

The department acknowledged that fixed-point ratings provide a clearer standard, and it noted that they can also provide an incentive for improvement since raising a score above the next threshold can mean a reduced inspection schedule.

Under the rules, standard 1 properties must undergo a physical inspection every three years; standard 2 properties, every two years; and standard 3 properties, every year.

HUD’s Real Estate Assessment Center (REAC) will provide inspection results to the project owner, including any exigent health and safety deficiencies, which must be corrected immediately.

An owner who believes a property has been improperly classified because of an inspection error may request a technical review of the inspection results.

The burden of proof is on the owner to show that an error was made.

Expanded Project-Based Voucher Program Now in Effect

The fiscal 2001 HUD appropriations act expanded the statutory authority for the project-based Sec. 8 voucher program, and HUD has determined that a number of changes are effective immediately, without the need for implementing regulations.

Two of the most important changes that are now in effect are the increase in the ceiling on project-based assistance from 15% to 20% of a public housing agency’s tenant-based funding and the extension of the program to previously constructed units. Previously, project-based vouchers were limited to newly constructed and rehabilitated units.

The statute limits project-based vouchers to 25% of the units in any building, with exceptions for one-to-four-family properties, housing for the elderly and disabled, and housing for families receiving supportive services.

At this time, only the exceptions for one-to-four-family and elderly and disabled housing are available. HUD plans to issue regulations covering the exception for housing with supportive services.

A public housing authority’s use of project-based vouchers must be consistent with its plan and with the goals of de-concentrating poverty and expanding housing and economic opportunities. To comply with the de-concentration goal, HUD is limiting new project-based assistance to census tracts with poverty rates of less than 20%, unless the department grants an exception.

Barry G. Jacobs is editor of Housing and Development Reporter, the nation’s premier source for in-depth, factual coverage of all aspects of affordable housing and community development. The two-part publication includes informed reports and insightful analyses in “HDR Current Developments” and an always up-to-date compilation of essential documents in the “HDR Reference Files.” Jacobs is also author of the annually updated HDR Handbook of Housing and Development Law. Both titles are published by West Group. For more information, call (800) 723-8077 or (202) 973-7756.