Objectives

To determine whether Homes and Community Renewal (HCR) has established and maintains adequate internal controls to oversee and monitor the federally funded Section 8 Housing Choice Voucher Program (HCV), the Section 8 Performance-Based Contract Administration Program (PBCA), and the COVID Rent Relief Program (COVID RRP) to ensure they meet requirements; and whether HCR is obtaining federal reimbursements on time and in a manner that recovers all eligible costs. This audit covers the period from January 2017 through March 2022.

About the Programs

HCR is the State’s affordable housing agency, with a mission to build, preserve, and protect affordable housing and increase homeownership throughout the State. HCR is comprised of several different offices and agencies, including the Housing Trust Fund Corporation (HTFC). Through HTFC, HCR receives federal funding from the U.S. Department of Housing and Urban Development (HUD) to administer the HCV and the PBCA across the State. HCR also administered the COVID RRP, which was established by the State as part of the Emergency Rent Relief Act of 2020 to provide emergency rental assistance to eligible low-income households experiencing a severe rent burden due to loss of income during the COVID-19 pandemic.

While HCR administered a variety of programs prior to the COVID-19 pandemic, the unprecedented housing crisis caused by the pandemic escalated the need for programs that provide housing stability. As such, the Coronavirus Aid, Relief, and Economic Security Act of 2020 (CARES Act) provided funding for emergency economic relief for individuals, families, and businesses affected by the COVID-19 pandemic. HCR received about $9.5 billion in federal funding, including about $78.9 million through the CARES Act, for the three programs, as follows:

• $2.6 billion in standard HCV funds with an additional $31.7 million in CARES Act funding between April 1, 2017 and June 9, 2021;
• $6.8 billion in PBCA funds between April 1, 2017 and June 9, 2021; and
• $47.2 million through the CARES Act for the COVID RRP, which HCR administered between July 2020 and January 2022.

Key Findings

• We found improvements could be made in several areas, including voucher allocation and utilization and management of reserves. HCR has not met HUD’s standard 95% HCV voucher utilization threshold at the statewide level during any full year covered in our scope. We also found that a significant number of geographic areas have utilization rates below HUD’s standard threshold of 95%, and the number of geographic areas with low voucher utilization has increased significantly since 2018. Geographic locations with low utilization vary, with some areas having a high number of issued and unused vouchers and others having allocated fewer vouchers than were available. For example, on average, less than 83% of available vouchers were used in the eastern area of New York City for all five years during our scope and the utilization rate in rural Schuyler County decreased from 85% to 78% during the last three years of our audit scope. In eastern New York City, between April 2017 and March 2022, only about 82% of allocated vouchers were issued, but about 99% of families that were issued vouchers were able to use their vouchers and find suitable housing. In Schuyler County, about 99% of allocated vouchers were issued and only 87% of the vouchers were used by the families they were issued to.
• During the same period when voucher utilization was low, HCR had significant reserves available to improve utilization. This included reserves available to directly fund housing subsidies as well as administrative reserves that could have been used to increase participation throughout the State. We estimate that HCR could have used approximately $16 million to $36 million in Housing Assistance Payment surplus to fund between 1,360 and 3,062 additional vouchers for calendar year 2021. In addition, rather than accumulating reserves, some of HCR’s excess administrative fee reserves (which doubled to about $131 million during our scope) could be used for a variety of activities to increase program participation, such as outreach activities, and for dedicated staff to help participants find affordable housing or making owners and others involved in the rental process aware of the benefits of the program as well as State and local voucher non-discrimination laws.
• Although HCR has developed some controls to monitor Local Administrator (LA) compliance with inspection standards, we found several areas that HCR could improve to better address health and safety concerns, which could otherwise potentially result in injury to tenants and in HUD recouping excess reserves or reducing allocations for future award years. We found 36 instances of owners and/or tenants failing to remediate deficiencies within the appropriate time frames, including 10 emergency deficiencies not repaired within 24 hours as required, with the longest taking 70 days to be remedied – exposing tenants to prolonged safety risks. Serious deficiencies in housing quality standards (HQS) that were not remediated timely included: no gas, exposed electrical wires, and faulty carbon monoxide detectors.

Key Recommendations

• Fully investigate and identify barriers to optimizing HCV vouchers and funding and, based on the results, develop and implement strategies to increase utilization and prevent potential reduction or loss of federal funds. This should include but not be limited to increased use of reserve funds.
• Improve controls over HQS inspections to ensure that deficiencies identified during inspections are remedied within HUD-prescribed time frames and that inspection standards are consistent across LAs.