ohcs critical improvements needs to help ensure preservation of affordable housing
TRANSCRIPT
Secretary of State Audit Report Jeanne P. Atkins, Secretary of State
Mary Wenger, Interim Director, Audits Division
Report Number 2016‐31 December 2016 OHCS Preservation of Affordable Housing Page 1
Oregon Housing and Community Services: Critical Improvements Needed to Help Ensure Preservation of Affordable Housing for Low‐Income Oregonians
Oregonisinahousingcrisis—housingcostsarehigh,vacancyratesarelow,andlow‐incomeOregoniansstruggletofindaffordablehousing.OregonHousingandCommunityServices(OHCS)ischargedwithbeingthestate’sleaderinhousing,butchallengesarehinderingitsprogressinhelpingtoaddresstheaffordablehousingcrisis.
WefoundOHCSshouldimproveitsaffordablehousingpreservationefforts,strategicplanning,anddatamanagement.Inaddition,OHCSshouldaddressorganizationalchallenges,whichincludepoorcommunication,inconsistentstaffinglevels,andinadequatepoliciesandprocedures.Byimprovingintheseareas,OHCSwillbebetterabletohelpensureaffordablehousingforlow‐incomeOregonians.
Affordable housing is essential to meet Oregon’s low‐income housing needs
Increasingcosts,combinedwithrelativelystagnantincomessincethe2008recession,haveresultedinhousingcoststakingabiggerchunkofOregonians’paychecks.
Becausethehousingmarketgenerallydoesnotproducenewhousingaffordabletohouseholdsmakinglessthan60%ofmedianincome,federal,stateandlocalgovernmentsworkwithnonprofitorganizationsandfor‐profitdeveloperstocreateaffordablehousingforthissegmentofthepopulation.
Housingsubsidiesthatkeeprentsaffordableforlow‐incomeOregoniansareimportant.Asubstantialamountofaffordablehousingcouldbelostinthenext20yearsbywayofexpiringfederalrentsubsidies,userestrictions,maturingmortgagesand/ordeterioration.
Lossofaffordablehousingdamagesprogressonmeetingoverallhousingneedsforthestate.ThelossofevenasinglerentalunitcouldmeanonemoreOregonfamilymaynotbeabletofindahome.
Executive Summary
Report Number 2016‐31 December 2016 OHCS Preservation of Affordable Housing Page 2
Agency efforts to preserve affordable housing fall short
Affordablerentalhousingcreatedwithgovernmentsubsidiesisthemainfocusofourreport.Wefoundtheagencycouldimproveitshousingplanningandpreservationofthisexistinglow‐incomeaffordablehousing.
Since1991,OHCShasbeenrequiredtocompleteanannualcomprehensiveplanforthestate,detailingthehousingneedsofOregonians.Thusfar,statewidehousingplanninghascomeupshort.Agencyleadershipisworkingtobuildonexistingneedsassessmentsandplanningtocreateacomprehensiveplanforthestate.Amajorhurdletoachievingthisgoalisthelackofanaccurateandreliableinventoryofaffordablehousing,anothertasktheagencyiscurrentlyworkingtocomplete.
Preservingfederalrentsubsidiesiscriticaltohelpingpreservelow‐incomeaffordablehousing.Itcannotbeachievedwithoutavarietyofpublicandprivatepartnersworkingtogethercollaboratively.Poorexternalcommunicationaggravatedstrainedrelationshipswithhousingdevelopersandpartnersinthehousingcommunity.Althoughimproved,OHCScoulddomoretostrengthenrelationshipswithpartners.
OHCScouldalsoworkwithfundersinthestatetobetteralignfundingcyclesandapplicationprocessessopreservationprojectsgomoresmoothly.ManyhousingdevelopersrelyonOHCSfundingeachyeartobuildorpreserveaffordablehousing,makingOHCSakeypartner.Fordevelopersinvestingmillionsofdollarsandseveralyearsintoprojects,predictabilityandtransparencyareimportant.ClearfundingprioritieswillhelpdevelopersunderstandandplanfortheaffordablehousingthatOHCSistargeting.
Oregonalsofallsbehindotherstatesinprovidingfundingdevelopersneedtomakeprojectsviable.IncreasedgapfundingcouldexpandtheuseofataxcreditprogramOHCSadministers,resultinginpreservingmorelow‐incomeaffordablehousing.
Strategic planning is not sufficient
TheOregonLegislaturetaskedOHCSwithleadingthestateinhousingpolicyandservingasthecentralsourceofaffordablehousingdata,trainingandtechnicalinformation.WefoundthatOHCSisnotachievingtheseexpectations.
Theagencyneedstoimproveitsstrategicplanningtobetterprovideforaffordablehousinginthestate.Withoutadequatestrategicplanning,OHCS’visionforthefutureandprioritiesareunclear,potentiallyresultinginthelossofaffordablehousing.Improvedplanning,includingsettingmeasurablegoals,willhelpOHCSidentifypriorities,recognizesuccess,detectproblemsandrespondwithcorrectiveaction.
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Better data management needed for informed decision‐making
Thelackofcompleteandaccuratedataonthemultifamilyaffordablehousingportfoliokeptusfromcompletingplannedworkrelatedtoaffordablehousing.ThisincludedevaluatingtheeffectsofOHCSpoliciesaswellasoveralltrendsofpropertiesinneedofpreservation.
Theagencycoulddomuchbetteratusingdatatoinformdecision‐making.Duetoinadequateresourcesdedicatedtodatasystemsanddatamanagementoveranumberofyears,thesystemsareoutdated,notintegrated,andrequireworkarounds.OHCScouldbenefitfromanintegrateddatasystemthattracksprojectsfrombeginningtoend.Thiswouldeliminatetheworkaroundsthatcontributetoerrors,incompletedata,andotherproblemsweidentified.
OHCScouldalsoimproveitscollectionanduseoffinancialdatafromitsaffordablehousingprojectsinordertohelpidentifybestpractices.Suchasystemwasinplace,butwasdiscontinuedbyagencyleadershipin2012andtodate,hasnotbeenreplaced.
Organizational challenges impede agency from addressing affordable housing
WeidentifiedorganizationalissuesaffectingallsectionsoftheagencythatimpedeOHCSeffortstoadequatelyaddressaffordablehousing,includingpreservinglow‐incomeaffordablehousing.Thesechallengesincludepoorcommunication,inconsistentstaffinglevels,andinadequatepoliciesandprocedures.
WefoundsignificantissueswithbothOHCS’toneatthetopandinternalcommunication.Bothareinfluencedbyleadership’soperatingstyleandmanagementphilosophy,amongotherthings.Moreimportantly,botharecriticaltoenablingtheagencytobesuccessfulatmanagingitspriorities.Togainabetterunderstandingoftheagencyworkenvironment,weconductedasurveyofagencystaff.Overall,surveyresultsindicatethatsignificantcommunicationissuesexistbetweenagencyleadershipandstaff.
OHCShasalsoexperiencedcapacityissues,suchaslossofinstitutionalknowledgeduetoturnoverandagencyrestructuring.Atthesametime,theworkloadintheagency’sMultifamilySectionhasincreased.Thecurrentworkloadandcapacityleaveslittletimetoanalyzedecision‐makinganddatatoimproveadministrativesystemsandbolsterbetterpolicy.Havingabetterunderstandingofworkflowandresourceswillhelpidentifycapacityforadditionalworkandtargetareasinneedofadditionalstafforresources.
Inaddition,wefoundthatsomeagencypoliciesandprocedureswereabsent,outdated,orweak.Forexample,OHCSdoesnothavestandardizedorwrittencontractingandprocurementpolicies,resultingininconsistentpractices.
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Recommendations
Tohelpensureaffordablehousingforlow‐incomeOregonians,werecommendOHCSmanagementimprovehousingpreservationefforts,strategicplanning,anddatamanagement.WealsorecommendOHCSmanagementaddressorganizationalchallengesincludingorganizationalculture,communicationwithstaffandstakeholders,workflowandcapacityissues,andinadequatepoliciesandprocedures.
OurdetailedrecommendationsforagencymanagementareincludedonPage31.
Agency Response
OregonHousingandCommunityServicesmanagementgenerallyagreeswiththefindingsandrecommendationsinthisreport.Thefullagencyresponsecanbefoundattheendofthereport.
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Background
Oregonisinahousingcrisis.Housingcostsarehigh,vacancyratesarelow,andlow‐incomeOregoniansstruggletofindrentalunitstheycanafford.
FromJuly2015toJuly2016,homevaluesinthestaterose12.5%whilerentalhousingiscurrentlyincreasingnearly7%amonth.
Increasingcosts,combinedwithrelativelystagnantincomessincethe2008recession,resultinhousingcoststakingabiggerchunkofOregonians’paychecks.AccordingtoOregonHousingandCommunityServices(OHCS)77%ofOregoniansmaking$25,000orlessare“rent‐burdened,”whichmeanstheyspend30%ormoreoftheirincomeforhousing.
Overall,Oregon’svacancyratesarecurrentlymuchlowerthanthe5%vacancythatistypicallyexpectedinabalancedmarket.Lowvacancyrateslimithousingavailabilityanddriveupprices.Forexample,ratesinDeschutes,Crook,andJeffersoncountiesareaslowas.5%andareonlyslightlybetterinJacksonCountyat1.4%.InthePortlandMetroarea,vacancyratesoflatehaveincreasedtoaround6%—thoughratesbyneighborhoodvary.
Generally,thehousingmarketdoesnotproducenewhousingaffordabletohouseholdsmakinglessthan60%ofmedianincome—about$40,000forafamilyofthreeor$30,000forasinglepersonhousehold.Asaresult,federal,stateandlocalgovernmentsworkwithnonprofitorganizationsandfor‐profitdeveloperstocreateaffordablehousingforthissegmentofthepopulation.Thishousingiscomprisedofrentalunitscreatedwithgovernmentsubsidies.
Homelessness, poverty and housing are linked
Thoseexperiencingpovertyarefrequentlyunabletopayforhousingandothernecessitieslikefood,childcare,healthcare,oreducation.Theymustmakedifficultchoiceswhenlimitedresourcescoveronlysomeofthesenecessities.
Agrowingshortageofaffordablerentalhousinghasbeenattributedtotheriseinhomelessness.Oregonisdoingpoorlyonkeyindicatorsofhomelessness,rankinghighwhencomparedtootherstatesandnationalaverages.
Oregon’snon‐metroareashadthethirdlargestnumberofhomelessOregonianswhencomparedwithsimilarregions.Insomeruralareas,housingissimplynotavailable.CommunityActionAgencies(CAAs),whichaddresshousingstabilizationissues,arestrugglingtofindhousingfortheirclients.OneruralCAAdirectorsaidheragencyhadover50familiesunabletofindhousing.
Housing costs are rising
In 2015, Oregon ranked:
1st for unsheltered families with children 1st in the rise of chronic homelessness 2nd highest in unsheltered homeless—meaning people are living on the streets, in cars, or other places not meant for human habitation 3rd in the rise of overall homelessness Portland Metro ranked 8th in chronically homeless compared to other metro areas
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AffordablerentalhousinginOregonissubsidizedbyfederalandstateprograms.Asubstantialamountofthishousingcouldbelostinthenext20yearsbywayofexpiringfederalrentsubsidies,userestrictions,maturingmortgagesand/ordeterioration.Preservingaffordablehousingmeansensuringrentsstayaffordableforlow‐incomeearnerssotheycanstayintheirhomes.Propertiescanbepreservedwhentheyarerefinancedtoextendaffordabilityorwhenfederalrentsubsidiesarerenewed.Atthesametime,theyaretypicallyrehabilitated.
Existingaffordablehousingrepresentsasubstantialpublicinvestment.Preservingthefederalrentsubsidiesthatkeeprentsaffordableforlow‐incomeOregoniansisimportant,astherearenonewsubsidiesofthiskind.Iftheassistanceisnotrenewedforagivenproperty,itmayreverttomarketrents,whichcurrentlow‐incometenantsmaynotbeabletoafford.
FederalfundingforhousingisawebofprogramsthatincludessubsidiesfromtheU.S.DepartmentofHousingandUrbanDevelopment(HUD),theU.S.DepartmentofAgricultureRuralDevelopment(RD),andtheInternalRevenueService(IRS).Subsidieslikeloans,mortgageinsurance,andrentalassistanceencouragedprivatehousingdeveloperstocreateaffordablehousingbeginninginthe1950s.MostHUDandRDhousingwasdevelopedinthelate1960sthroughthemid‐1980s.Currently,themainfederalsupportforaffordablehousingistheLowIncomeHousingTaxCreditprogram,createdin1986bytheIRS.
Lossofaffordablehousingunderminesprogressonmeetingoverallhousingneedforthestate.ThelossofevenasingleunitofhousingcouldmeanonemoreOregonfamilycannotfindahome.
HUD properties at risk of loss and deterioration
Thefederalgovernmentfirstcreatednationalhousingprogramsinthe1930s.Inthelate1950sandintothe1960s,HUDanditspredecessorcreatedhousingprogramsthatsubsidizedprivatelyownedpropertiesthroughmortgageinsuranceandlow‐interestrateloans.Inexchange,propertyownersofferedlowerrents.HUDalsocreatedthefirstrentalassistanceprogramin1974,knownasproject‐basedSection8,whichpaysownersthedifferencebetweenwhattenantspay(30%oftheirincome)andfairmarketrent.Althoughtheprogramofficiallyterminatedin1983,legislationhascontinuedthesesubsidiesinexistingprojects.Nearlyhalfofthosereceivingproject‐basedSection8inOregonareseniorsorpeoplewithdisabilities,and73%areconsideredextremelylow‐income,withtheaveragehouseholdincomein2015at$11,500.
AccordingtoHUDdata,thereare325HUDpropertiesinOregon.Ofthese,121properties(4,000rentalunits)haveSection8rentalassistanceexpiringbetween2016and2024.Ownersmayrenewthesubsidiesthroughcontractslasting1,5,or20years.ManyOregonownershave
Preserving affordable rental housing is important
Depending on the program, property owners are required to maintain property affordability for 15‐60 years.
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renewedforjust1or5years.Thiskeepstheiroptionsopenshouldtheydecidetorentatmarketrates,selltheproperty,orrecapitalizetheprojecttoextendcontractsforalongerperiod.
DeterminingthenumberofHUDpropertiesatriskforconversiontotheprivatemarketischallenginggivenavailabledata,aseachpropertywouldneedtobeexaminedindividuallytodetermineitsriskfactors.Thoughnotatriskoflosingsubsidies,thereareanadditional72HUDadministeredpropertieswith2,204rentalunits,atriskofdeteriorationduetoageandinabilitytotakeondebttorecapitalizeandrenovate.
USDA Rural Development portfolio is aging
RuralDevelopment(RD)starteditsruralrentalhousingloanprogramin1963.Closetoadecadelater,RDchangedprogramrulestospurprivatesectorparticipation,inadditiontononprofitpropertyowners.Followingthisexpansion,RDprogramsgrewrapidly.
AccordingtotheOregonRDoffice,thereare190RDprojectsinOregon,whichincludes202propertiesandover6,000rentalunits.Thesepropertiesareaging,asmanywerebuiltinthe1970sand1980s.RDpropertieshousesomeofOregon’smostvulnerable.Sixty‐onepercentofRDrentersareseniorsandpeoplewithdisabilities.
Historically,therehavebeenchallengeswithaccurateandreliableRDdata.ThisledtoaGovernmentAccountabilityOfficeaudittodeterminethenumberofmaturingRDmortgagesinthenext10yearsandthepropertiesatriskoflosingaffordability.InSeptember2016,theUSDAreleasednewdatashowing18RDproperties(232rentalunits)inOregonwithexpiringmortgagesbetween2016and2027.Therearealso74properties(1,226unitswithrentalassistance)eligibletopre‐paytheirmortgages.WhenRDmortgagesarepre‐paid,theunitslosefederalrentsubsidiesandaffordability.
Unknown number of Oregon LIHTC properties in need of preservation
TheLowIncomeHousingTaxCredit(LIHTC)programistheprimaryprogramdevelopersusetofundpreservationandrehabilitationprojectsofHUDandRDproperties.Thisprogramisalsousedtofinancenewconstructionofaffordablehousing.Itincentivizeshousingdeveloperstocreaterentalunitsaffordabletothoseearning60%orlessoftheAreaMedianIncome.Fromitsinceptionthrough2014,theprogramcreatedorpreservednearly3millionmultifamilyrentalunits.InOregon,38,783rentalunitswerecreatedorpreservedinthesameperiod.
Therearetwodifferenttypesoftaxcredits—9%and4%.Bothareusedforpreservingandrehabilitatingaffordablehousingandtofinancenewconstructionofaffordablehousing.OHCSawardsthe9%taxcredittohousingdeveloperseachyearthroughacompetitiveprocess,calledtheNoticeofFundingAvailability(NOFA).The4%taxcreditsareallocatedthroughanoncompetitiveprocessandhalftheprojectmustbefundedwithtax‐exemptprivateactivitybonds.InOregon,projectsfundedwiththe9%
When mortgages mature, or expire, subsides are lost and owners are no longer required to keep them affordable.
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taxcreditmustremainaffordablefor60yearsandprojectsfundedwiththe4%mustgenerallyremainaffordablefor30years.Anotherdifferenceisthatprojectsawardedthe9%taxcreditproducemorefundingthanprojectsawardedthe4%taxcredit.Fundingforprojectsbeyondthetaxcreditscomesfromdeveloperinvestmentandgapfinancingsuchasloansorgrants.
LIHTCpropertiesarealsoatrisk.Whenaffordabilityperiodsend,propertyownerscankeeppropertiesaffordablewithoutnewsubsidies,applyfornewtaxcredits,oroptoutoftheLIHTCprogramandconverttomarket‐ratehousing.LIHTCpropertiescanalsobeatriskofdeteriorationwhenrentsarenotsufficienttomaintainproperties.Propertiesmayneedsignificantrepairsormodernizationbeyondthefinancialcapabilityoftheowners,suchasreplacingbuildingsidingorrehabbingkitchens.Withoutrehabilitation,someOregoniansmaybeatriskoflivinginsub‐standardhousing.
AlthoughOHCSmaintainsalistingofLIHTCpropertiesinOregon,wewerenotabletoverifyitsaccuracyduetoproblemswiththeHousingFinanceDivision’sdatasystems.Also,whiletheagencyinspectsLIHTCpropertiesannuallytodeterminetheirperformance,includingphysicalcondition,adatabasethatrecordspropertiesatriskofdeteriorationwasstillbeingdevelopedduringouraudit.
OHCSwascreatedin1971tosetoverallhousingpolicyandtoserveasacentralsourceoftraining,housingandtechnicalinformation.Someofitsoriginaldutiesincludedadministeringinterestfreeloanstononprofithousingsponsors,coordinatingfederalhousingprograms,developingpoliciestoincreaselow‐incomehousing,andadvisingstateandlocalgovernmentsaboutactionsaffectingthecostorsupplyofhousing.
TheOregonHousingCouncil,alsoestablishedin1971,advisesandoverseesOHCS.TheCouncilalsodevelopsprogramguidelines,providespolicydirectionandbudgetaryoversight,andapprovesfinancialtransactionssuchasloans,grants,andtaxcredits.In2016,HB2442transitionedtheCouncilfromanadvisoryboardtoapolicy‐settingboard,nowreferredtoastheHousingStabilityCouncil.Inthesamelegislation,otherOHCSadvisoryboardsweredisbandedwiththeCouncilabsorbingtheirresponsibilities.
TheCommunityActionPartnershipofOregon(CAPO),comprisedofdirectorsofCommunityActionAgencies,providesadviceandrecommendationsregardingadministrationandfundingofantipovertyprograms.
Oregon Housing and Community Services created to be the state leader on housing
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Financing housing and providing stability to vulnerable populations
OHCSisdividedintotwomajordivisions—HousingFinanceandHousingStabilization.HousingFinance,whichhasabout$12millioninoperatingcostsand$349millioninprogrampaymentsinthe2015‐17biennium,administersprogramsrelatedto:
debtmanagement; multifamilyprogramsandlendingincludingtheLIHTCprogram; homeownershipprogramsandsinglefamilylending; assetmanagementandcompliance,includingmonitoringpropertiestheagencyhasfunded;and theOregonHomeownershipStabilizationInitiative,whichimplementsforeclosurepreventionprograms.
TheMultifamilySection,locatedwithintheHousingFinanceDivision,administersthedepartment'slow‐interestloanprograms,grants,andtaxcreditprogramsforthepurposeofdevelopingorpreservingaffordablemultifamilyrentalprojects.
TheHousingStabilizationDivisionadministersprogramsthataimtopreventandendhomelessness,andprovideenergyandweatherizationservices.Theseprogramsareprimarilydeliveredthroughgrantsandcontractswithcommunitypartners.StaffinthisdivisionalsooverseetheHUDprojectbasedSection8contractadministrationforthestate.Thedivisionhasabout$6millioninbiennialoperatingcostsand$283millioninprogrampayments.
Expanding responsibilities and shrinking resources
IntheyearsfollowingOHCS’creation,programswereaddedandexpanded,growingitsresponsibilities.In1987,OHCSbecameOregon’sindependenthousingfinanceagencyadministeringtheLIHTCprogram.
In1991,theagencymergedwiththeCommunityServicesDivision,doublinginsizeandbroadeningitsmissionbyaddinghomelessnessandfoodassistanceprograms.Morestateandfederalprogramswereaddedthroughthe1990s,includingtheHousingDevelopmentGuaranteeGrantProgram,EmergencyHousingAssistancetohomelesspersons,andtheOregonRuralRehabilitationProgramforfarmworkerhousing.Inaddition,OHCSoverseestheOregonVolunteersprogram,whichadministersCourtAppointedSpecialAdvocatesforchildren.
By2001,OHCSadministered37programs.Theagencycontinuedtopursueandreceivedfundingfornewprograms,andwasassignedadditionalprogramsbytheLegislature.Bythe2009‐11biennium,theagencywasresponsibleforadministeringapproximately50programs.
In2013,ourauditofOHCSrecommendedtheagencyevaluatethebenefitsandcostsofreducingduplication,overlapandfragmentationamongits
OHCS mission: We provide stable and affordable housing and engage leaders to develop integrated statewide policy that addresses poverty and provides opportunity for Oregonians.
OHCS vision: All Oregonians have the opportunity to pursue prosperity and live free from poverty.
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programs.In2016,theLegislaturemovedfoodassistanceprogramstootheragencies,leavingOHCSstilloperating49otherprograms.
Mostoftheagency’sprogramsarefundedwithfederalandotherfunds.Stategeneralfundsaccountforonlyabout1%oftheagency’sbudget.
Inthepast,OHCSuseddistributionsofrevenuesfromMultifamilyandSinglefamilyhousingbond‐financedloanprogramstosubsidizeadministrativecostsofotherprograms,suchasfoodandrentassistance.Inthe2011‐13biennium,thesedistributionssubsidizedmorethan25%oftheotherprograms’administrativecosts.Thisincluded100%ofadministrativecostsfortheLowIncomeRentalHousingAssistanceprogramandover90%ofthesecostsfortheVerticalHousingProgram.Administeringtheseotherprogramsbecamefiscallyunsustainablefortheagency,asavailablerevenuessignificantlydecreasedduetoeconomicfactors.In2016,theagencymadeprogressidentifyingandaligningfundingsourcesaspartofanefforttobecomemorefiscallysustainable.
Foryears,theOregonVolunteersprogramhadbeensubsidizedwithotheragencyfunds.Forthefirsttimesinceacquiringtheprogram,OHCSobtainedgeneralfundsforOregonVolunteers’administrativeexpensesinthe2015‐2017biennium.
Overthelastfiveyears,OHCShasexperiencedsignificantchange,impactingworkloadandcontributingtolowstaffmorale.
Manychangesbeganaseffortstobringtheagency’sexpensesinlinewithrevenue.InOctober2011,anewdirectorwasappointedtoaddressthesefinancialchallengesanddetermineiftheagencyshouldbedismantled.Thedirectorremoved12positionsin2011,eliminatingtheirdutiesorshiftingthemtootherstaff.Halfofthesepositionsweremanagementpositions.Otherpositionssuchastheinternalauditor,wereleftunfilled.InJanuary2012,thedirectorrestructuredthedepartment,dividingtheagencyintothreedivisions:policy,businessoperations,andprogramdelivery.ByApril,anentirelynewexecutiveteamwasinplace.Inlate2013,thedirectorrecommendedtheagencyremainintact.
However,uncertaintyabouttheagency’sfuturecontinued.Theagency’sfundingforthesecondyearofthe2013‐2015bienniumwaswithheldbytheLegislature,pendingareportbythedirectoronsustainableprogramdelivery.Aspartofthistask,managementdevelopedatransitionplantomovetheagencytowardimprovedservicedelivery,effectiveness,andfiscalsustainability,whichtheypresentedtotheLegislaturein2014.Followingthis,theLegislatureapprovedthesecondyear’sfunding.
Shortlyafterward,executivemanagementbeganstrategicplanning.InJulyofthatyear,managementpresentedanewlycreatedmissionandvisionfor
OHCS experienced a significant amount of organizational change
2011
October New Director
November Portland Office Closes
2012
January 1st Restructuring
April New Executive Team
2013
February Transition Planning Begins
2014
February Transition Plan to Legislature
March Strategic Planning Begins
July 2nd Restructuring
September Strategic Operations Plan
November 3rd Restructuring
2016
January HB2442, strengthening
Housing Stability Council May
Director Resigned
November New Director
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theagency.Thatsamemonth,thedirectorrestructureddivisionswithintheagencyagain.
InNovember2014,thedirectorrestructuredtheagencyforthethirdtimeintoitscurrentstructure.Asnotedabove,legislationpassedinJanuary2016changedtheroleoftheHousingStabilityCouncilfromanadvisoryboardtoagoverningandpolicy‐settingboard.Duringthecourseofouraudit,theagency’sdirectorresignedandaninterimdirectorwasappointed.AnewdirectorbeganNovember1,2016,shortlybeforethereleaseofthisaudit.
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Audit Results
OHCScoulddomoretopreserveaffordablehousingforlow‐incomeOregonians.Toeffectivelyaddresspreservationandaffordablehousingneedsinthestate,theagencyshouldimproveitshousingplanningandrelationshipswithhousingpartners.
OHCSmanagementhasnotcompletedahousingplanthatdetailsthestate’shousingsupply,needs,andresources—allessentialforeffectiveaffordablehousingleadership.Tosuccessfullyplan,theagencyshouldhaveacompleteinventoryofaffordablehousingalongwithanupdatedassessmentofhousingneedsinthestate.
Relationshipswithpartnersarealsoessentialtopreservingaffordablehousing,andOHCScoulddomoretostrengthenrelationshipsandcommunicationwithitspartners.Inaddition,OHCScouldworkwithotherfundersinthestatetobetteralignfundingcyclesandapplicationprocessessothatpreservationprojectsgomoresmoothly.Clearfundingprioritieswillhelpdevelopersbetterunderstand,andplanfor,theaffordablehousingOHCSistargeting.Expandingtheuseoffederalandstatetaxcreditprogramswillalsohelppreservationefforts.
Comprehensive statewide housing plan is incomplete
Since1991,statestatutehasrequiredOHCStoprepareacomprehensivestateplanforhousing.Thestatuteclearlystatesthestatehousingplanshouldincludeaninventoryofaffordablehousing,andinformationonmarketandinventoryconditions,populationtrends,householdcompositionandhousingconditions.Inaddition,theplanistoincludeanaccuratepictureoftheaffordablehousinginthestate,orataminimum,OHCS’owninventory.Theplanshouldalsoincludeaneedsassessmentthatsummarizesdataonthehousingneedsofhomelessandincome‐eligiblefamilies.
OHCSleadershipexplainedthattheirConsolidatedPlanistheagency’sefforttofulfillthestatute.However,becausetheplaniswrittenspecificallytoshowhowOHCSusesHUDadministereddollars,itdoesnotrepresentacompleteviewofthestate’shousingneedsandresources.ThoughtheConsolidatedPlanhasfulfilledalltheHUDrequirements,itfallsshortofacomprehensivestateplanasdescribedinstatute.
TheConsolidatedPlanlacksclearimplementationstrategiestoachievegoals.Forexample,preservationisidentifiedasahighpriority,buttheplanlacksaroadmapofhowtogetthere.Italsodoesnotspecifythenumber,typeandlocationofrentalunitstheagencyintendstopreserve.Without
Agency efforts to preserve affordable housing fall short
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clearlydefinedgoalsandinformation,itisdifficulttomeasurehowwellOHCSisdoingatpreservingaffordablehousinginthestate.
OtherhousinginformationintheConsolidatedPlanisincomplete.Itsstatewidedatadoesnotaccountforsignificantdifferencesinhousingissuesbetweenregions,counties,citiesormunicipalities.Itlacksareviewofallfinancialresources,asrequiredbystatute.FinancialresourcesreviewedintheplanarelimitedtofourHUDadministeredprogramsandseveralOHCSprograms.Inaddition,localandprivatefundingsourcesarenotreviewed.
Thoughtheagencydoesnothaveacomprehensivestateplan,managementreportsstaffarebuildingontheConsolidatedPlantocreateone.
Oregon does not have a complete statewide housing inventory
Asinglereliablesourceofdataforpropertiesisanessentialmanagementtoolforanyhousingfinanceagency.Thisisimportantinformationforthecomprehensivestatewideplan.Acompleteinventoryallowsastatetoidentifyitshousingandpreservationchallengesandprioritizewhereactionisneeded,bothatthepropertylevel—todeterminepropertiesthatneedtobecontactedandofferedincentivestoremainaffordable—andatthecommunitylevel—toidentifyneighborhoodstotargetforpreservationofaffordablerentalhousing.Forexample,officialsinFloridausestateandfederaldatatocreateacomprehensivedatabaseofaffordablehousingtoaidplanningefforts.
Acompleteinventoryshouldincludebasiccharacteristicsofthesubsidizedhousingportfolioincluding:
propertynameandaddress; housingtypeortargetpopulation,suchasincome‐level; totalnumberofrentalunitsandnumberofaffordableunits; yearsaffordabilityrestrictionsbeginandexpire; fundingsources;and physicalconditionoftheproperty.
AlthoughOHCSdoesmaintainanaffordablehousinginventory,theyareworkingtomakeitmorecomplete.Themostrecentaffordablehousinginventorywasusedin2016toscoreapplicantsonthe9%LIHTCapplication.Inadditiontobeingincomplete,theinventoryhadmultipleerrors.Forexample,welearnedthedatawasnotvettedwithpartnerstoensureaccuracybeforeitwaspublished.Onehousingprovidertoldustheinventoryshowedapropertyfortheirorganizationthatdidnotexist.
AlthoughPreserveOregon,anonprofitprogram,maintainsthemostcomprehensiveinventorydatabaseofaffordablehousinginthestate,staffwhomaintainthedatabasestatedtheycannotguaranteeitsaccuracybecauseitisbasedonpublicallyavailabledata,includingOHCSdata.Thedatabasealsodoesnotoffertheproperty‐leveldataOHCSneedstoinformtheirplanningefforts.
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Housing needs assessment could be improved
Athoroughassessmentofhousingneedsisanimportantelementofanycomprehensivestatehousingplan.Aneedsassessmentisasystematicprocessfordeterminingandaddressinggapsbetweencurrentconditionsanddesiredconditions.
WhilethecurrentOHCSConsolidatedPlancontainsasectiononhousingneedsinthestate,itdoesnotincludeananalysisofthecurrenthousingsupply,anessentialelement.
Thecurrentneedsassessmentwouldalsobenefitfromupdatedandimproveddemographicdata.OHCSmanagementtoldustheassessmentlackedstatewidedataandincludedoutdateddata.Theinformationintheassessmentfor2016‐2020isbased,inlargepart,onHUDdatafrom2007‐2011.Communityneedssurveysandassessmentsfromvariouscountiesareused,butmaynotbethoroughorcurrentinallareasofthestate.Forexample,weheardfromsomehousingdevelopmentleadersthatcommunitieslackcapacityandresourcestoputtogetherupdatedneedsassessments.Inaddition,theOHCScurrentneedsassessmentreliesheavilyonestimatesofpovertyandhousingcostburden,butlacksactualnumbersofOregonfamiliesorindividualsinneedofhousing,typeofhousingtheyneed,andinwhichareasofthestate.
Inourinterviewswithotherstatehousingfinanceagencies,wefoundexamplesofneedsassessmentsthatbetterinformstatewidehousingplansandhelpdecisionmakersdirectfundingtothemostcriticalareas.Delaware’s2014NeedsAssessmentrevealedtwocategoriesofhousingneeds:elderlylow‐incomeandcoastalmarket‐ratehousingforretirees.Theassessmentalsoshowedanaginghousinginventoryatriskofbecomingunaffordable.Asaresult,thestatecontinuedtomakepreservationahighpriority.
Amorethoroughunderstandingoflow‐incomehousingneedsinthestatewouldhelpOHCSbettertargetresourcestomeetregionalneeds,andthoseofspecialpopulations,suchaselderlyOregoniansorveterans.
Stronger partnerships beneficial to preservation efforts
Preservingfederalhousingsubsidiescannotbeachievedwithoutavarietyofpublicandprivatepartnersworkingtogethercollaboratively.Strongerrelationshipswithconsistentcommunicationwouldhelptheagencybetterunderstandpreservationneedsacrossthestateandplanaccordingly.AlthoughOHCShashadsuccessfulpartnershipsinpreservationinitiatives,thereisroomfortheagencytostrengthenitsrelationshipandcommunicationwithitspartners.
In2007,OHCS,thePortlandHousingBureau,andotherpartnersbeganworkingonstrategiestopreserveproperties.Anonprofitorganization,NetworkforOregonAffordableHousing,administeredtheeffortcalledPreserveOregon.Itincludedanewfundtosupportpurchasesofproperties
Components of a Comprehensive Housing Needs Assessment
Demographic data Economic trends Housing inventory Housing need by
region and population Policies and incentives Community services Input of stakeholders Recommendations on
how to achievehousing goals
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at‐riskoflosingtheiraffordability.OHCScontributedaninitial$1millionbuthasnotcontributedsince.
In2008,thePortlandHousingBureaubegananinitiative,calledthe11x13PreservationCampaign,topreserve11privatelyownedbuildingsatriskoflosingHUDrentalsubsidiesby2013.Becauseoftheirdesirablelocation,manyofthepropertieswereatriskofbeingconvertedtomarket‐ratecondominiums,whichwouldhavedisplacedhundredsofverylow‐incomeresidents,manyofwhomwhowereelderlyordisabled.Foritspart,OHCSprovidedvaluablefundingthroughtheLIHTCprogram,HousingPreservationFund,andMultifamilyWeatherizationprogram.Whenitwascompleted,thePortlandHousingBureauandpartnerswereabletopreserve700rentalunitsin11buildingsforanother60yearsofaffordability,allowingresidentstostayintheirhomes.
Outsideoftheselargerinitiatives,OHCShasstruggledtomaintainworkingrelationshipswithpartners.USDA’sRuralDevelopment(RD)isakeypartnerinpreservationefforts,butwefoundcommunicationandcollaborationbetweenRDandOHCStobeminimaland,attimes,strained.In2012,OHCSincludedasignedagreementwithRDintheLIHTCQualifiedAllocationPlan.Theagreementestablishedtheconditionsforcooperation,informationexchange,andprogramsupport.However,theformalagreementappearedtoendwithinayearanddoesnotappearinsubsequentLIHTCdocuments.Withthelapseoftheagreement,communicationbetweentheagenciesbecameinfrequentandcoordinationsuffered.
Similarly,theOHCS‐HUDrelationshipneedsstrengthening.HUDofficialstoldustheyhadapositiveworkingrelationshipwithOHCSbuttheywelcomedacloserworkingrelationshipwithOHCSstafftoshareinnovativeideasaswellassomelessonslearned.
WhenOHCSeliminatedthefiveRegionalAdvisorpositions,theywerereplacedwithtwohousingintegrators.However,theirfunctionsdifferandthereappearstobealackofunderstandingwithpartnersonwheretogoforcapacitybuildingandtechnicalassistance,whichagencyleadershipstatescouldbeacommunicationissue.
AnexampleofsuccessfulcollaborationcomesfromGeorgia’sHousingFinanceAgency,whichworkedwithfundersandpartnerstodevelopathree‐yearprogramtohelpsmaller,mostlyruralcommunitiescreateandlaunchalocallybasedplantomeettheirhousingandneighborhoodrevitalizationneeds.Aspartofthisprogram,partnersreceivetrainingandtechnicalassistance.
DevelopersacrossOregontoldustheywouldlikeacloser,morepositiveworkingrelationshipwithOHCS,butfeelstrainedstaffcapacityandahistoryofmistrustpreventsit.
Exterior of Bronaugh Apartments, a property rehabilitated and its subsidies preserved as part of the 11x13 campaign.
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OHCS acknowledges issues with external communication
Agencymanagementacknowledgestheneedfortransparentandconsistentcommunicationtobuildcredibilitywithstakeholders.Effectiveexternalcommunicationensuresimportantinformationcomesin,whilemakingsurerelevantinformationflowsout.Thoughimproved,poorexternalcommunicationhasaggravatedstrainedrelationshipswithhousingdevelopersandpartnersinthehousingcommunity.OHCSadministersacustomerservicesurveytotheirpartnersonasemiannualbasis,whichforyearshasshownfrustrationwithcommunication.
Inboththe2016OHCScustomerservicesurveyandinourconversationswithpartners,wefoundtheytrulydesirecollaborationandpartnershipwiththeagency,butdonotfeeltheyaregettingit.Onerespondentsaidtheyfeltlikeaproblemtobedealtwith,ratherthanapartner.
Inaddition,stakeholdersreportednotreceivingtimelyinformationorresponsestoquestionsfromstaff;somesaidtheysimplyneverreceivedanswers.Respondentstothe2016customerservicesurveyalsoreportedtheydidnotfeeltheagencywastransparent,aconcernweheardduringinterviews.
Management’seliminationofthefiveRegionalAdvisorpositionsin2014wasamajorsetbacktoexternalcommunication.Thischangeeliminatedtheprimarymechanismfortwo‐waycommunicationbetweenOHCSandpartnersandaddedtotheworkloadofMultifamilyandAssetManagementandCompliancestaffwhobecameresponsibleforrespondingtohousingdeveloperandotherstakeholderquestions.ContinuedproblemswithcommunicationcanbeseenintheresultsofasurveyweconductedofOHCSstaffin2016.Just52%ofstaffthoughtinformationandcommunicationflowedwellfrompartnerstoOHCS,andonly61%thoughtitflowedwellfromOHCStopartners.
Otherstatesfacilitatecommunicationmoreeffectively.InMinnesota,aPreservationManagermonitorsandcoordinatespreservationeffortswithstakeholderstohelpensurelong‐termsuccessofpreservationeffortsacrossthestate.
Streamlining and coordinating processes could help preservation projects run smoothly
Intentionalandconsistentprocessescouldalsohelpwithfundingforpreservation.Whendevelopersapplyforfunding,theyoftenapplyforlocal,state,andfederalfunding—eachwithadifferentapplicationprocessanddeadline.Disjointedtimelinesbetweenfundingstreamscanbeasignificantchallengefordevelopers,especiallythoseworkingonpreservationprojects.Inearly2016,fourRD‐approvedpreservationprojectswereplacedonholdbecausedevelopersneededadditionalfundsfromthe9%LIHTCprogrambeforetheprojectscouldbecompleted.AsignificantdelayinthereleaseoftheLIHTCfundingresultedindevelopershavingtoreapplyfortheirRDfunding,whichhadexpiredduetothelengthydelay.
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Wefoundthatanumberofotherstatesstreamlineandcoordinatetheapplicationprocess.InWashington,localjurisdictionsandthestatehousingfinanceagencycreatedajointsystemforapplicationsandreporting.Montanacreatedauniformapplicationasaone‐stopshopforstatehousingloans,grants,andtaxcredits.
Frequent LIHTC policy shifts make it difficult for developers to plan
Fordevelopersinvestingmillionsofdollarsandyearsintodevelopingpotentialpreservationprojects,predictabilityandtransparencyareimportant,especiallyintheLIHTCprogram.EachyearOHCSmustmakedecisionsonhowtoallocatetaxcredits,andinrecentyears,theyhavenotalwaysbeenconsistent.Developersfindtheinconsistencyfrustratingandchallengingtodealwith,giventhetimeandmoneynecessarytomakeprojectsviable.
Intheabsenceofadequatehousingplanning,developerslooktohowOHCSspendstheirmoneytodetermineagencyprioritiesandpredictwhethertheirproposedprojectswillreceivefunding.
TheLIHTCprogramprovides$8.7milliontothestateperyearinfederaltaxcreditsandisoneofthelargest,mostconsistentfundingsourcesattheagency’sdisposal.OHCSdetermineshowthecreditsareallocated,includinghowmuchissetasideforpreservationprojects.Eachyear,OHCSpublishesitsallocationcriteriainoneormoredocuments:theQualifiedAllocationPlan(QAP),LIHTCProgramManual,andtheNoticeofFundingAvailability(NOFA).Ourreviewof2012‐2016documentsshowedfrequentlychangingcriteria,priorities,andallocationscoringmethods.
OHCShasinconsistentlyallocatedthe9%LIHTCprogramfundingtopreservationprojects,makingitdifficultfordeveloperstoplantheiraffordablehousingprojects.In2010,OHCSsetaside50%ofitsfederaltaxcreditallocationforpreservationprojects.In2012,thepreservationset‐asidewasreducedto25%andin2013,itwasremovedcompletely.In2014,therewasnomentionofanypreservationset‐asideinitspublishedallocationplan.However,inresponsetoaletterfromastakeholder,OHCSclarifiedtherewasa35%preservationset‐asideandattachedtheresponsetothepublishedplan.In2016,the35%set‐sidewasclearlystatedinthepublishedallocationplan.
Awareofdeveloper’sconcerns,OHCStriedtoprovidestabilityandpredictabilitybykeepingthe2015publishedplan,manualandapplicationthesameas2014.However,thestabilitydidnotlastlong.Inresponsetostakeholderfeedback,OHCSmadesignificantchangestothe2016allocationplan,whichdrivesthescoringandallocationprocess.Developerstoldusthiscausedmoreconfusionandfrustration.Toaddressstakeholderconcernsregardingthe2016plan,OHCStookadditionaltimemakingrevisions,resultinginan18‐monthdelaybetweenLIHTCprojectawards.BecausemanydevelopersrelyonLIHTCfundingforprojects,thisstalledmanyofthestate’saffordablehousingprojects.Movingforward,theagencyintendstoprovideconsistencyandpredictability.
“It is hard to nail down [the agency’s] priorities. The only real way is to look at what they fund.”
‐OHCS partner
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Housingfinanceagencieswithmorerobustandcomprehensivehousingplanningaddresspreservationinamorestableway.Theirplanslayoutlong‐termstrategiesforpreservingaffordablehousingintheirstates,clearlystatingprioritiesonwhichtobasechanges.Ifchangesareneededtoallocationcriteria,theycanbebasedontheplans.Minnesotapublishestheirallocationplanoneyearinadvancetoallowenoughtimefordeveloperstoplantheirprojects.Utaheasesdevelopersintomajorchangesbybeginningconversationswithdeveloperstwoyearsinadvance.
OHCS’ attempts to address Oregon’s unique geographic needs affect preservation efforts
Housingchallengesvarythroughoutthestate.Forexample,inBeaverton,thereislittlelandavailablefordevelopment.IncoastalareassuchasYachats,communitiesstruggletobalancepermanenthousingwithvacationrentals.InIslandCity,asmallcommunitynearLaGrande,demandforworkforceandaffordablehousingishigh.Low‐incomerentersinPendletonstruggletoaffordevenaffordablehousing.Duetotheirhousingcrises,PortlandandBenddeclaredhousingstateofemergenciesin2016.
Inanattempttousethe9%LIHTCprogramtoaddressdifferingneedsacrossOregon,OHCSbegandividingfundingbetweenfivegeographicregionsin2013:CentralOregon,EasternOregon,MetroOregon,SouthernOregon,andtheValley/NorthCoast.Thetaxcreditwasmeanttobeequitablydistributedacrossthestatebasedonpercentageofneed.Theresultsofthe“need”formulashowedthattheCentralandEasternregionsdidnothaveenough“percentageofneed”toallocatecreditstofundafullproject.Toalleviatethis,OHCSsetaminimumcreditamountfortheCentralandEasternregions.Thismeantreallocatingcreditsfromotherregions.
Inasecondattempttomoreequitablyaddressvaryingneedsacrossthestate,OHCSdecidedtoaligntheirgeographicLIHTCdistributionmethodwithHUD’sfundingallocationstrategy.In2014andcontinuingtoday,thestatewasdividedintothreegeographicalregions:MetroOregon,Non‐MetroHUDHOMEparticipatingjurisdictions,andtheBalanceofState.
ShiftingtothreegeographicregionsmayhaveadisparateimpactonRDpreservationefforts.DevelopersofmostRDprojectsinneedofpreservationarelikelytoapplyforLIHTCfundingandarelikelytobeintheBalanceofState.Basedonthelatest2016LIHTCallocationmethod,theBalanceofStateregionisallocated$3.2millionofwhich$1.1millionisset‐asideforpreservation.Incomparison,theMetroRegionisallocated$4.0millionofwhich$1.4millionissetasideforpreservation.Itislikelytherewillbemorecompetitionfor9%LIHTCinRDpreservationprojectsintheBalanceofStateRegionthanintheMetroRegion.
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ChangesinLIHTCpolicydirectlyinfluencewhichhousingprojectsreceivefundingacrossthestate.Byfollowingacomprehensivestatewidehousingplanwithmeasurablegoals,OHCSwillbeabletostrategicallyadjustpreservationset‐asidesandotherLIHTCpoliciestoreachpreservationgoals.
Increased gap funding could help expand use of 4% LIHTC
Tohelpprovideformorepreservationprojects,itisimportantforOHCStotakeadvantageofavailablefundingsourcesandexpandtheuseofthe4%LIHTC.Ofaproject’stotalcost,30%isfundedwithLIHTCequity,aminimumof50%isrequiredtobefundedwithtax‐exemptprivateactivitybondfunds,andtheremainingpercentageispaidwithdevelopercontributionsandgapfunding,whichistheremainingfundingnecessarytocompletetheproject.Theonlylimittothisfundingsourceisthebondcap.
Toencouragethedevelopmentofprojects,moregapfundingneedstobeidentifiedandpursued.Althoughcurrentfundingstreamsprovidesomegapfunding,stakeholdersstatedthereareinsufficientlevelsofgapfundingtomeetdemand.Thiswasaprimaryreasondevelopersdidnotinitiatemore4%LIHTCpreservationprojects.Anotherlargebarriertoprogramusageisthattheprogramisnotconducivetosmallerprojects.
ThelackofgapfundingalsoplayedapartinOHCSnottakingadvantageofavailableprivateactivitybondauthority.Between2011and2015,OHCSonlyused22%oftheprivateactivitybondauthorityavailable.Asaresult,OHCSdidnottakeadvantageofnearly$1.7billioninavailablebondmoniesthatcouldhelpfundpreservationprojects.Giventhatthesemoniesmaynotalwaysbeavailable,thestatecouldbemissingoutonfundingopportunitiestopreserveaffordablehousing.
Oregonfallsbehindotherstateswhenitcomestoprovidinggapfunding.Somestates,likeVermont,IndianaandNewJersey,targetpreservationbysettingmoneyasideintrustfunds.WashingtonState’sHousingTrustFundatitsheightwas$200million;butinmorerecentyearshasbeen$70million.Incomparison,in2016,theOHCShousingtrustfundwasabout$15million.
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Expanding the state housing tax credit program could help preservation efforts
TheOregonAffordableHousingTaxCreditProgramwascreatedin1989toprovideOregontaxcreditstolendersofhousingloans.Thetaxcreditsallowlenderstoreducetheinterestratesonloansforhousingprojectsbyasmuchas4%.Inmostcases,propertyownerspassthesavingstheyreceiveontheirloanstotheirtenantsinreducedrents.Whenpairedwiththe4%LIHTCprogram,thestatetaxcreditprogramcanincreasefeasibilityofpreservationprojectswithfederalrentsubsidies.Thestatetaxcreditprogramisarevolvingfundwithalimitof$17million;asownersrepaytheirloans,creditsbecomeavailableforfutureawards.
OHCSstaffreportedthestatetaxcreditprogramisagoodvehicleforfederalrentsubsidypreservation,andstakeholdersagree.Staffalsostatedthatavailableprogramfundswerenotsufficienttomeetthedemand.Theprogramisscheduledtosunsetin2020,butwillbeunderlegislativereviewin2017.Continuingthisprogram,potentiallywithmorefunding,couldbenefitpreservationefforts.
Strategic planning is not sufficient
StatelawtaskedOHCSwithbeingthestateleaderinhousingpolicyandservingasthecentralsourceofaffordablehousingdata,trainingandtechnicalinformation.
Throughourreviewoftheagencyandcomparisonstohousingfinanceagenciesinotherstates,wefoundOHCSisnotachievingtheexpectationssetoutforthembytheLegislature,public,stakeholders,andpartners.WealsofoundthatOHCSneedstoimproveitsstrategicplanningtobetterprovideforaffordablehousinginthestate.
Improved strategic planning critical to fulfilling agency priorities
Inadequatestrategicplanningresultsinunclearpriorities,lackofvisionforthefuture,andpotentially,lossofopportunitiestopreserveaffordablehousing.ImprovedplanningwillhelpOHCSidentifyprioritiesforitslimitedresources,recognizesuccess,detectproblems,andrespondwithcorrectiveaction.
Housingfinanceagenciesusestrategicplanstosetpriorities,carryoutcomprehensiveplans,allocateinternalresourcesbasedonpriorities,andguidestaffinday‐to‐daydecision‐making.Forexample,inMinnesota,eachsectionwithinthehousingfinanceagencyhasavisionstatementthattiesbacktothestrategicplan,showingstaffhowtheirworktiesintothelargervisionandmissionoftheagency.
AspartoftheOHCStransitionprocessin2013and2014,managementcreatedanoperationsplanwithstrategicpriorities,onwhichtheagencyreportstheyhavemadeprogress.However,theplanlackedmanyoftheelementsexpertsagreeareessentialtothestrategicplanningprocess.This
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hasledtoanagencyunabletoclearlyarticulatestrategicprioritiesorfocusonhighestprioritywork.
OHCSmanagementidentifiedfive“imperatives”intheoperationsplan:
1. Implementaneffectiveandintegratedgovernancemodel;2. Deliverremarkableservice;3. Increaseleadershipskillsatalllevels;4. Implementafiscallysustainablebusinessmodel;and5. Becomeadataandresearchdrivenagency.
Whilethesearelaudablegoals,theyarenotspecificandaredifficulttomeasure.WhenOHCSmanagementupdatedtheirplan,theyaddedasixthimperative.Liketheotherimperatives,itlackedspecificity:
6. Developandimplementnewprograms.
Further,executivemanagementwasunabletoprovidedocumentationofkeyelementsofastrategicplanningprocess,suchasanenvironmentalscan.Environmentalscanningisavitalelementwithinthestrategicplanningprocess.Ithelpsanorganizationidentifyandaddressinternalstrengthsandweaknesses,whileanticipatingandplanningforexternalthreatsandchallengessuchassocial,economic,politicalandtechnologicalchanges.
SomeOHCSstaffindicatedtheywereunclearonthepriorities,vision,ordirectionoftheagency.Manyfeltleadershipdidnotlistentoconcerns;othersstatedtheywerenotinformedaboutorincludedinthestrategicplanningprocessandwereconfusedonhowtheirworkconnectedtotheagency’sstrategicplan.
Staffalsovoicedfrustrationaboutthelackofupdatestotheplanningprocess.Onestaffmemberstated,“Sometimesitfeelslikewearestuckinthingswedecided2‐3yearsago.Thingshavechangedsincethen,butwearen’ttakingthatintoaccount.”
Alongwithstaff,stakeholdersagreedtheagencydidnotclearlycommunicateitspriorities.
Wefoundexamplesofotherstatehousingfinanceagenciesthatconnecttheirstatewideplanwithstrategicprioritiestoaddresschallenges,includingpreservation.Duringstrategicplanning,Delaware’shousingagencyfoundthatsignificantfundstopreservefederallysubsidizedhousingwereneeded.Itlinkedthephysicalconditionofpropertiesandcostofpreservationtofederalfundsthismoneywouldleverageifallocated.Asaresult,thestateLegislatureapproveda$7.5millionbondbillforpreservation.
Essential Elements of Successful Strategic Planning
Documentation Continuous and evolving Environmental scan Targeted strategies Specific, measurable, and realistic goals
Action‐oriented Implementation plan Evaluation plan Clear mission and vision Prioritization Participatory Effective communication
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Strategic planning excluded staff and key stakeholders
Followingtheappointmentofanewdirectorandtransitionplanning,theagencybeganastrategicplanningprocessin2014.Onlytheexecutiveteam,guidedbyconsultants,wasinvolvedincreatinganewmissionandvisionfortheagency.Staff,theHousingStabilityCouncil,andkeyexternalstakeholderswerenotincludedinthesediscussions.Researchsuggeststhiskindoftop‐downapproachcanleadtorigidityandinabilitytostrategizeappropriatelywithinanevolvingenvironment.
Harnessingstaffknowledgeandpassionisapowerfultooltheagencycanusetoengageinsuccessfulstrategicplanning.Bynotincludingstaffinthestrategicplanningprocess,OHCSleadershipmissedakeyopportunitytolearnfromandmotivatestaffandtoboostmorale,whichislowaccordingtoourconversationswithstaff.
Inadditiontoagencystaff,theHousingStabilityCouncilwasnotincludedinthestrategicplanningprocess.Weweretoldtheydidnotknowtheexecutiveteamwascreatinganewmissionandvisionuntilitwaspresentedtothem.AlsoexcludedfromtheprocesswasCAPO,theagency’spartnerindeliveringhomelessnessassistanceprograms.MembersofCAPOstatedthatduringthetransitionplanningprocessleadinguptostrategicplanning,agencymanagementwas“unwilling”toarticulateprioritiesorsharestrategiesofhowtoaccomplishsharedgoals.
Better data management needed for informed decision‐making
InadequateresourcesdedicatedtodatasystemsanddatamanagementresultedinOHCSnoteffectivelyusingdatatoinformplanninganddecisions.Thiscanaffectprogramsuccess,includingthepreservationofaffordablehousing.
ResultsfromoursurveyandinterviewswithOHCSstaffrevealedtwobigchallengesstaffface—outdatedITsystemsandagenerallackofdata.ThesesentimentswerealsoechoedinarecentOHCSannualcustomerservicesurveywithstakeholdersandpartnerscitingconcernsarounddataanddecision‐making.Forexample,onecommentindicatedOHCShas“prematureandinaccuratepublicationofdata”andthereisa“lackofeffortandfundstokeepdatasystemscurrentandhighfunctioning.”
Thelackofcompleteandaccuratedataonthemultifamilyaffordablehousingportfoliokeptusfromcompletingplannedworkrelatedtopreservation.ThisincludedevaluatingtheeffectsofOHCSunderwritingpolicies,aswellasoveralltrendsofpropertiesinneedofpreservation.
Information technology resources have not kept pace with demand
Inrecentyears,OHCSrecognizedtheneedforbetterdatatoimprovedecision‐making.Ina2014presentationtotheLegislature,OHCSidentifiedthelackofanintegratedsystemasacauseofpoordata.Effortstomove
“Improved systems, databases, and enough staff to manage these systems is key to understanding the effectiveness of the agency's work and making improvements.” ‐Respondent, 2016 OHCS Customer Service Survey
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towardanintegratedsystembeganin2015andcontinuedthroughoutouraudit.
Additionally,OHCSexpresseditsintenttomovetowarddataandresearchdrivenpolicyprioritiesandoutcomemeasuresin2014.Whilethisintentwasincludedinanoverallstrategicplan,theplandidnotincludestepstheagencywouldtaketoachievethisgoal.Nordiditidentifylimitations,suchascapacity,thatmightneedtobeaddressed.Littletangibleprogresshasbeenmadeonthisinitiative.
StaffcapacitywithintheOHCSInformationTechnology(IT)unithasdeclinedfrom18to10positionssincethe2009‐2011biennium.OHCSmanagementbelievesahandfulofstaffsoughtpositionsatotheragenciesduetoconcernstheagencywouldbedissolved.Somepositionsweresimplynotfilledandotherswereeliminated,whichcouldimpedetheagency’sabilitytoaddressdataissues.Managementreportedturnoverandstaffingconstraintsalsoimpactedtheireffortstointegratedatasystems.
Unreliable inventory and data silos contribute to data issues
ThetwoITsystemswithintheOHCSHousingFinanceDivision,whicharekeytotrackingmultifamilyaffordablehousingprojects,arenotintegrated.Asaresult,OHCSisnotabletogatherandreporthistoricalinformationandtrendsonexistingproperties.Inaddition,theseparatesystemshavecontributedtoanunreliableinventoryofOHCS‐fundedhousingprojects.
Ideally,onedatasystemshouldbeusedbyboththeMultifamilyandtheAssetManagementandComplianceSectionstotrackthehousingportfoliofromapplicationtoassetmonitoring.Currently,housingapplicationinformationisenteredintotheagency’sInformationSystemforHousing(DISH).Ifaprojectisfunded,itisrecordedinHousingDevelopmentSoftware(HDS).TheAssetManagementandComplianceteamusesHDStomonitorandinspectpropertiesfortheMultifamilyhousingportfolio.Ifthetwosystemswereintegrated,historicalinformationandtrendsonpropertiesandfinalloanfigurescouldbecomparedtofrontendestimatestoassistindevelopingunderwritingguidelinesforloanofficers.Thisinformationcouldalsohelpdeterminewhatfinancialunderwritingfactorsmightcontributetopropertydeteriorationorjeopardizelong‐termfinancialstability,aswellasinformthedevelopmentandmaintenanceofunderwritingstandardsgoingforward.
Duringtheaudit,werequestedacompleteinventoryoftheOHCSmultifamilyhousingportfoliobuttheagencycouldnotprovideconsistentinformation.Forexample,weweretoldthenumberofpropertiesintheOHCSportfoliowas987,andthenlaterinformeditwas1,289.TheOHCSwebsiteindicates1,243fundedproperties.ApresentationtotheHousingStabilityCouncilinMarch2016showedtheOHCSportfolioincluded1,343propertiesvaluedat$6billion.Laterweweretoldthisamountmaybeinaccurate.Accordingtotheagency,partoftheinventoryproblemwasthattherehasnotbeenacommonunderstandingofwhatportfoliomeans.
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Systemsthatarenotintegratedincreasetheriskforinaccuraciesandtheinabilitytotrackinformationfromsystemtosystem.Theuniqueidentifierornumbercreatedtotrackprojectsfromonesystemtoanotherhadnotbeenconsistentlyenteredovertime.Atthecompletionoftheaudit,theagencywasabletodevoteresourcestoreconciledataforthemajorityofprojectsrecordedinthetwosystems,HDStoDISH.However,theywerestillworkingtoensuretheHDSsysteminformationwascompleteandallpropertiesthatshouldberecordedarerecorded.
Outdated data systems, cumbersome workarounds, and untracked performance indicators cause problems
ThesystemsthatOHCSusestotrackpropertiesweredesignedintheearly2000s.Overthelast10years,cumbersomeworkaroundshaveevolved,includingtrackinginformationinseparatespreadsheetsbymultipleindividuals.Theageofthesystemsandtheseworkaroundsmakeitdifficultforstafftoextractinformation;onlyafewstaffhavethelong‐termknowledgeandexpertisetodoso.
Forexample,HDSdoesnothavetheabilitytorecordaffordabilityexpirationdates,soinformationistrackedinaseparatespreadsheet.Thesedatesareimportanttoassetmanagementbecausetheysignalwhenapropertymaybeatrisktoconverttomarketrate.Trackingthesedatesenablestheagencytoidentifyandplanforupcomingpreservationneeds.Whenwereviewedthespreadsheet,wefoundmanyexpirationdateswereblankormissing.Projectidentificationnumbersneededtomatchexpirationinformationbacktothesystemofrecordwerealsonotincluded.
Therearevariousperformanceindicatorsandmeasuresthat,iftracked,couldhelpOHCSmeasureitssuccessandplanforthefuture.Informationsuchasthenumberofapplicationsbyfundingcycleversusthenumberofprojectsfundedisanimportantmeasuretodeterminethelevelofneedinthestate.Thiscomparisoncouldalsobeusedtodetermineiftheagencyisabletomeetthedemandthroughprojectfunding.
TrackingthenumberofpreservationprojectsfundedbyyearandbygeographicareawouldalsohelpOHCSdetermineareastotarget.Wefoundthisinformationwaseithertrackedinaspreadsheetthatdidnotagreetoothersystems,orwasnottrackedconsistently.Forexample,theagencyhasafieldtoindicateifaprojectwasapreservationproject.Ourreviewshowedthatthedatawasnotconsistentlyrecordedanddidnotagreefromspreadsheettospreadsheet.Otherimportantinformationsuchaslengthoftimefromapplicationsubmissiontofunding,whichwouldgivegoodinformationonworkloadandcapacity,wasnottrackedorusedconsistently.
Dataentryintospreadsheetsalsoresultedintime‐consumingprocesses.Forexample,onestaffentersinformationinDISHthenentersthesameinformationintoseparatespreadsheets.Thisdualentryisnotefficientandincreasesthelikelihoodoferrorsandinconsistencies.
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Alackofcontrolsoverdataentryledtoinconsistententriesacrossdatabasesandspreadsheets.Wenoteddifferencesinprojectnamingconventionsanddifferencesindateswhenhousingdevelopersreceivedfundinginmultipleyears.Wealsofoundnumerousdataerrors,duplicateproperties,andothermissingorincompleteinformation.
Collection and analysis of data to guide decisions needs improvement
OHCScouldimproveonthecollectionanduseoffinancialdatafromaffordablehousingprojectsplacedinservice.Thisdatacouldhighlightcommoncharacteristicsofsuccessfulandunsuccessfulpropertiesandhelpidentifybestpractices.
TheHousingDevelopmentCenter,anonprofitorganization,withhelpfromMeyerMemorialTrustandfundingfromChaseBank,compiledfinancialinformationon140affordablehousingpropertiesinOregonwith5,967rentalunitsplacedinservicepriorto2012.Oneofthemostimportantoutcomesfromthisprojectwasthehighneedforpreservationfundingandresources.Thisnonprofitwillbeworkingwithdevelopersinthehousingindustrytocontinuestudyingtheneedfor preservationandstrategiestheycanemploytoimproveperformance.Additionalkeyfindingsincluded:
financingdecisionsaffectlongtermprojectviability; 20%ofpropertieswereunabletocoverexpensesanddebtinatleasttwoofthethreeyearsanalyzed;and somevulnerablepropertiescouldberefinancedtoallowfundingforrepairsandimprovements,butsignificantpublicinvestmentwillbenecessarytopreservetheportfolio.
Beginningin2016,OHCS’AssetManagementandComplianceSectionbeganafinancialriskassessmentprojecttoclassifyallpropertieswithintheOHCSportfolioasperforming,troubled,orpotentiallytroubled.Oncethisinformationisobtainedandenteredintothedatabase,OHCScanuseittoidentifytroubledproperties.Itcanalsodeterminecommonfinancialcharacteristicsoftroubledpropertiestohelpguideunderwritingstandardsandpolicydecisionssuchashowpropertiescanremainaffordableforthe60yearsaffordabilityperiod.
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Eliminating an award winning system leaves OHCS without important information
OHCSdevelopedtheAnalysisofIncomeandExpenseSystemin2006totrackoperatingexpensesonaproject‐by‐projectbasis.OHCSusedittoreportinformationonprojectoperatingexpensesbyregionandprojecttype.In2010,theNationalCouncilofStateHousingAgenciesgaveOHCSaprogramexcellenceawardforthissystem.
In2012,theOHCSleadershipdiscontinuedthesystemandtodate,ithasnotbeenreplaced.Asaresult,loanofficershavebeenunabletoassessoperatingexpensesduringtheunderwritingprocessandassetmanagementstaffhavenotbeenabletodeterminewhetherpropertiesarefinanciallyviable.
OHCSishopefulareplacementsystemwillprovidestaffsupportforunderwritingdecisionsmovingforward,aswellasprovideinformationdevelopersappreciated.
MuchofourauditfocusedonOHCS’MultifamilySectionwithintheHousingFinanceDivision.However,weidentifiedorganizationalissuesthatcutacrossallsectionsoftheagency,includinglackofcommunication,unclearroles,inconsistentstaffinglevels,andinadequatepoliciesandprocedures.TheseareasneedtobeimprovedsothatOHCScansucessfullymanageitsprograms,includingpreservingaffordablehousinginOregon.
Managementshoulddemonstratecommitmenttoimprovinginthesecriticalareasthroughleadershipandeffectivecommunicationwithstaffandstakeholders.
Tone at the top and internal communication can be improved
WefoundsignificantissueswithbothOHCS’toneatthetopandinternalcommunication.Bothareinfluencedbyleadership’soperatingstyleandmanagementphilosophy,amongotherthings.Moreimportantly,botharecriticalfortheagencytosuccessfullymanageitspriorities,whichincludepreservingaffordablehousing.
Earlyon,weweretoldexecutiveleadership’smanagementstyledidnotbuildtrust.Togainabetterunderstandingoftheagencyenvironmentweconductedaworkplaceenvironmentsurveyofagencystaff.Thesurveyincludedquestionsregardingthecurrentworkculture;83%ofstaffrespondedtothesurvey.
Duringinterviewsandinthesurveystaffstatedthatexecutiveleadershipwastop‐down,reactionary,unsupportive,andlackedtransparency.Thesethingspreventedexecutivemanagementfrombuildingtrustwithstaff.One
Organizational challenges impede agency from addressing affordable housing
“Agency leadership should trust their experienced and dedicated staff more. Leaders have come and gone, but the workers have been there through thick and thin. Valuing the staff will in turn lead to better services to customers.”
‐Respondent, 2016 OHCS Customer Service survey
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staffmemberstatedstaffusedtobevocalandsharetheirconcerns,butarelesssonowbecausetheirsuggestionswerenotactedonortakenseriously.
Inaddition,manystaffindicatedmostexecutivemanagersareinaccessibleorunapproachable,makinginternalcommunicationachallenge.Somealsostatedthattheirexpertiseisdisregarded,asexecutiveleadershipmakesdecisionsinavacuumwithouttappingintostaffexpertiseandwithlittletwo‐waycommunication.Internalcommunicationamongstaffcouldalsobeimproved.Onlyabouthalfofstaffwhorespondedtooursurveythoughttheirco‐workerssharedjobknowledgeacrossworksections.
Further,somestaffstatedtheydonotalwaysreceivethenecessaryinformationtheyneedtodotheirjobandareoftennotinvolvedindecisionsimpactingtheirday‐to‐daywork.IntheMultifamilySection,programstaffstatedthattheirinputwasnotalwayssoughtforprogramdevelopment.Forexample,keystaffresponsibleforimplementingthenewLocalInnovationandFastTrackprogram,whichisdesignedtofundprojectsthatcanquicklyproducehousinginhighneedareas,toldustheywerenotconsultedonitsdesign.Also,responsestooursurveyshowedaworkplacewithsignificantchallengeswherestafffeltstressedandunsupportedbyexecutivemanagement,especiallystaffintheHousingFinanceDivision.
Figure 1: OHCS Challenges with Internal Communication as Indicated in Audits Division 2016 Workplace Environment Survey
Decreased staff levels and increased workload stress staff
Althoughourauditfocusedontheagency’sMultifamilySection,wesawcapacityissuesthroughouttheagency,includingthelossofinstitutionalknowledgeandexperience.Thecurrentworkloadandcapacityleaveslittletimeformanagementandstafftoanalyzedecision‐makinganddatathatcouldhelpimproveadministrativesystemsandpolicy.
MultifamilySectionstaffunderwriteprojectsforaffordablehousingresources,reviewapplications,andmanageprograms—allprocessescriticaltopreservingaffordablehousing.Thesectionhasexperiencedaloss
Workplace Environment Survey, Executive Team section Housing
Finance Staff Agreement
Agency Staff Agreement
Executive team is open and honest in communication 40% 53%
Executive team encourages staff to communicate suggestions for improvements
48% 60%
Staff in my workplace communicate openly and honestly to the Executive team
37% 41%
I receive information that will affect OHCS as a whole from the Executive team
43% 54%
Executive team understands my job well 19% 34%
Executive team is accessible to staff 32% 41%
Executive team cares about staff concerns 37% 57%
Executive team is aware of staff concerns 34% 43%
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ofinstitutionalknowledgeduetoturnoverandagencyrestructuring,andincreasedworkloads.
Overthepastfiveyears,thenumberofMultifamilystaffhasremainedrelativelysteady,buttheworkloadhasincreasedconsiderably.Duringinterviews,staffsaidtheystruggletokeepupwiththeworkandareburnt‐outandtired.Inoursurvey,40%ofHousingFinancestaff,whichincludesMultifamily,reportedtheirworkrelatedstresswastoohigh.Inaddition,37%reportedtheywereassignedmoreworkeachweekthantheycouldreasonablyaccomplish.LessthanhalfofHousingFinancestaffthoughttheirsectionhadsufficientresourcestodotheirjobwelland67%thoughttheyhadthetools,suchastechnologyandequipment,todotheirjobwell.Despitethis,84%ofHousingFinancestaffreportedtheywereproudtobeapartoftheagency.
TheMultifamilySection’sturnoverrateincreaseddramaticallysince2012,resultinginacompleteturnoverofthe4%LIHTCteam,andabouthalfofthe9%LIHTCTeam.Thoughnewstaffhavebeenadded,thereisasteeplearningcurveastheylearnprocessesandbecomeasefficientintheirworkasmoreseasonedstaff.
Multifamilystaffmustscoreapplications,underwriteandcloseprojectsselectedforfunding.Asthenumberoffundingopportunitiesandapplicationshasincreased,sohasstaffworkload.In2013,theagencymovedtoanewfundingprocess.Asaresult,theagencywentfromoneortwofundingopportunitiesayeartoeightinasingleyear,withindividualapplications,processes,andtimelinesforeachfundingstream.
AsofJuly2016,therewere71fundedprojectsinvariousstages;projectscantakeabouttwoyearsfromstarttofinish.Managementexpectstheworkloadtocontinueincreasingthroughtheendof2016andintoearly2017asseveralmorehousingprojectsarefunded.
Togaugetheagency’sabilitytotakeonadditionalpreservationefforts,anevaluationofworkflowandresourcesisneeded.OnepossibleapproachforevaluatingworkflowisLean,whichfocusesonidentifyingandthenimplementingthemostefficient,value‐addedprocesses.HavingabetterunderstandingofworkflowandavailableresourceswillaidtheagencyanditsMultifamilySectioninidentifyingexistingcapacityforadditionalwork,aswellasareaswheretheymayneedadditionalstafforresources.
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Outdated, absent, and weak policies and procedures hinder agency programs
Wefoundsomeagencypoliciesandprocedureswereabsent,outdated,orweak.Policiesandproceduresareimportanttoensuringrisksaremitigatedandobjectivesaremet.
ApproximatelyhalfoftheHousingFinancestaffreportedpracticesandprocedureswerenotup‐to‐date.Whenwedugindeepertounderstandtheissue,welearnedloanofficersarestrugglingwithoutdatedorundocumentedprocedures.Forexample,thedeskmanualforloanofficershasnotbeenupdatedinseveralyears,whichisproblematicgiventhefast‐pacednatureofthechangeswithintheagency.Inaddition,loanofficersdonotreceiveanytraining.
Underwritingstaffalsoreportedmanypracticesandproceduresintheirdepartmentarenotdocumentedinpolicy,whichcanleadtoinconsistencyacrossloanofficers’work.OHCSdoesnothaveaprogrammanualforthe4%LIHTCprogram,butreportstheyareworkingtodevelopone.
Therearealsoinstancesofpoliciesthatcouldbeimproved,suchastheconflictofinterestpolicy.Thepolicydirectsstafftobringactualorpotentialconflictstotheirsupervisor’sattentioninwriting.However,welearnedsupervisorsarenotalwaysawareofconflictsinvolvingOHCSstaff.Forexample,duringtheauditanemployeealsoservedastheboardchairofanonprofitorganizationthatappliedforfundingfromOHCS.Whentheorganizationdidnotreceivethefunding,theemployeequestionedanotherOHCSstaffmemberastowhy.Thestaffmemberfeltuncomfortablediscussingtheinformationwiththeirco‐workerandreportedtheissuetotheirsupervisorwhohadnoknowledgeordocumentationofthisperson’spotentialconflictpriortotheissuearising.
Amorerobustwaytodetermineconflictsofinterestattheagencywouldbetosurveystaffonanannualbasistodocumentanyactualorpotentialconflicts.Itisimpossibletoavoidallconflictsofinterest,buteachinstanceshouldbedocumentedandmanagedtoensureemployeedecisionsareimpartialanduntaintedbyconflictsofinterest.
Housing Stability Council unclear on role
RecentlegislationtransitionedtheHousingStabilityCouncilintoapolicy‐settingboard,settingthestagefortheCounciltoplayabiggerleadershiprole.Despitethislegislation,thereislackofclarityaboutitsrole.
Inaddition,thecommunicationbetweenOHCSleadershipandtheCouncilcouldbeimproved.Ingeneral,Councilmembersdonotfeeltheyreceiveinformationtheyneedtomakecomplexdecisionsinatimelymanner.
WhileCouncilmembersareeagertobemoreinvolvedandfulfillthenewrole,theydonotfeeltheagencyinvolvestheminpreliminarydiscussionsaroundprogramandpolicydevelopment.Forinstance,in2016,Council
Report Number 2016‐31 December 2016 OHCS Preservation of Affordable Housing Page 30
memberswereaskedtoapprovetheManufacturedHomeParkNOFAapplicationbeforetheyhadthechancetodiscussunderlyingpolicy.
Movingforward,theCouncilbelievesafundamentaldiscussionwithagencyleadershipaboutitsrolewouldbebeneficial.
Agency contracting policies and practices need improvement
OHCSdoesnothavestandardizedorwrittencontractingpoliciesandprocedures.Withoutclearpoliciesandproceduresoutliningoversightresponsibilities,contractsmaynotbevettedappropriately,deliverablesmaynotbereceived,andcontractsmayextendbeyondtheagreedupontimeandmonetarylimits.
WefoundthatOHCScontractingisinconsistentbothinadministrationandresults.Wealsofoundlittleevidencethattheagencymonitorscontractstoensuredeliverablesarereceived.
OHCShascontractedwithandoverseenthecontractwithNeighborhoodPartnerships,anonprofitinPortlandthathasmanagedthesuccessfulIndividualDevelopmentAccount(IDAs)Initiativesince2003.Thecontracthasbeencontinuouslyrenewed.Ithasneverbeenputouttobid,whichiscontrarytostandardcontractingpractices,thoughOHCSassuredourteamthecontractwillgotobidnextyear.
Inanotherexample,wefoundaconsultantwashiredinearly2013toassistwiththeagencytransition.Thecontractlimitstartedatapproximately$150,000butwasamendedfourtimesextendingthetimelineandtotaldollaramountto$428,000.Accordingtotheformerdirector,thecontractors’workproductscenteredonorganizationaldevelopmentaswellastwostaffsurveys.Itwasnotclearwhythedollaramountwasincreasedorwhetheralldeliverableswereultimatelyreceived.Despitethesequestions,theagencyhiredtheconsultantagainin2015.
Inathirdexample,OHCShiredacontractorinJanuary2016andpaidover$6,000toimproveacustomerservicesurveyforexternalstakeholdersandpartnersusing“bestpracticesandemergingresearch”regardingsurveydesign.Thegoalwastoachieveahigherresponseratethaninpreviousyears.However,theresponserateactuallydeclined—only155outof1,514responded,a10%responserate,comparedto13%in2014and19%in2011.Additionally,thecontractordidnothelpagencystaffanalyzeresponsesasoutlinedinthecontract.
IDAs are matched savings accounts that build the financial management skills of qualifying Oregonians with lower incomes while they save towards a defined goal.
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Recommendations
Addressingthefollowingrecommendationswilltaketimeandacoordinatedapproach.
WerecommendOregonHousingandCommunityServicesmanagementaddressthefollowingfourrecommendationsfirst,followedbythoselistedbelow.
Laythegroundworkforimprovedtoneatthetopandinternalcommunicationbybuildinganinclusiveculturewherecommunication,trustandtransparencyareembracedandmanagementisaccessibletostaff. Strengthenorganizationalculture.Discussthe2016WorkplaceEnvironmentsurveyresultswithstaffandtheHousingStabilityCouncil,andaddressissuesidentified,payingspecialattentiontointernalcommunicationandfeedbackmechanisms. UseasystematicapproachtoevaluateworkflowandresourcesintheMultifamilySection.Thisincludesassessingfinancialandadministrativecapacitytoachievethesection’sprimaryfunctions. Createanewsinglesystemofrecordtohelpmanageproperties.ConsultwithstafftodeterminedataelementsneededforanewITsystem.
Preservation
BuildontheexistingConsolidatedPlantodevelopacomprehensivestatehousingplanandensureitincludes: informationonmarketandhousinginventoryconditions; anaccurateinventoryofallaffordablehousinginthestate; aneedsassessment; strategiestoaddressneedandhousingcondition; analysisofallprivate,federal,state,andlocalgovernmentresources; aplanforcoordinationofresources;and an implementationplanthat includesmeasurablegoalswithplans
onhowtoachievethem.
Strengthenpartnershipswithstakeholdersinvolvedinpreservation,especiallyHUDandRD. Developaclearchannelforexternalcommunicationtoandfrompartnersandstakeholders,especiallyfortheHousingFinanceDivision. Considerdedicatingstafftomonitorandcoordinatethestate’spreservationeffortstoensureeffortsareconsistentandfocused. Considercoordinatingapplicationfundingandtimelineswithfederal,state,andlocalfunders. MoreclearlyarticulatepreservationstrategiesandprioritiesintheLIHTCQualifiedAllocationPlan. ConsiderworkingwiththeLegislaturetoincreasegapfundingtousewiththeLIHTC4%program.
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ConsiderworkingwiththeLegislaturetoexpandtheOregonAffordableHousingTaxCreditprogram.
StrategicPlanning
Engageinlong‐term,comprehensivestrategicplanningtocreateavisionforaffordablehousingandsetthestagefortheagencytoprovideleadershiponhousingissues.Developaplanwithinputfromalllevelsoftheorganizationthatincorporatestheagency’smission,performancemetrics,andgoalsspecifictoeachsectionoftheagency.
DataManagement
ReviewcurrentITcapacityandincorporatestrategiestoaddresscapacityneedsandissuesintotheformalstrategicplan. Defineportfolioandidentifypropertieswithinit. Identifyandcollectdataelementstoinformdecision‐makingforunderwritingandassetmanagement. Considerdevelopingsystemstotrackoperatingexpensesonanongoingbasistoprovideafoundationforunderwritingstandards. Continuetocollectpropertyinformationtodevelopasinglereliablesourceofallaffordablepropertiesinthestate.
OrganizationalChallenges
Considerfillingtheinternalauditorpositiontohelpconductriskassessmentsandtoensurestronginternalcontrolsareinplace. ImprovecommunicationandtransparencywiththeHousingStabilityCouncil. Involvestaffandincorporatetheirfeedbackindecisionsthatimpacttheirwork. WorkwiththeLegislatureandHousingStabilityCounciltoclarifyinstatutetherolesoftheOHCSdirectorandHousingStabilityCouncilinleadingtheagency. Updateanddocumentprocessesforunderwriting,includingformalwrittenpoliciesandprocedures,andguidanceforloanofficers. Strengthentheconflictofinterestpolicyandensureitisfollowed. Improveanddocumentprocessesforcontracting,includingformalwrittenpoliciesandprocedures. Ensurecontractors’performanceisadequatelymonitoredanddeliverablesarereceived.
WerecommendtheHousingStabilityCouncil:
WorkwiththeagencyandLegislaturetoclarifyitsrole. CommunicatetheCouncil’strainingandinformationneedstoagencymanagement.
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Objectives, Scope and Methodology
TheobjectiveofthisauditwastodeterminehowOHCScouldbestpreserveaffordablehousinginOregon.Wefocusedoureffortsontheagency’sMultifamilySectionwithintheHousingFinanceDivisionandcompletedourfieldworkinSeptember2016.
Thelackofcompleteandaccuratedataonthemultifamilyaffordablehousingportfoliokeptusfromcompletingsomeplannedworkrelatedtopreservation.ThisincludedevaluatingtheeffectsofOHCSunderwritingpoliciesaswellasoveralltrendsofpropertiesinneedofpreservation.
Toaddressourauditobjective,wereviewedapplicablestatelaws,andrulesastheyrelatetomultifamilyhousingandpreservationofaffordablehousing.Wereviewedtheagency’sprogrammanuals,policiesandprocedures,contracts,staffsurveys,externalcustomersurveys,andplanningdocuments.Wealsoreviewedliteratureonaffordablehousingpreservation,datamanagement,strategicplanning,andinternalcontrol.Tofurtheridentifypromisingpracticesrelatedtoaffordablehousingpreservation,wedevelopedandadministeredastateHousingFinanceAgencyquestionnairetosixstates,andconductedfollow‐upinterviews.
WerevieweddocumentspreparedbytheLegislativeFiscalOfficetounderstandhistoricalcontextforOHCSprogramsanditsbudgets.
Weconductedinterviewswithnearly40currentorformerOHCSstaff.Wealsospokewithover30stakeholdergroups.Stakeholdersincludedhousingauthoritiesornonprofitsinvolvedindevelopinghousinganddeliveringservicestotenantsofaffordablehousing;for‐profitandnonprofitaffordablehousingdevelopers;localgovernmentsinvolvedindevelopingaffordablehousing;andothergovernmentofficials.Wealsoattendedameetingofahousingauthority’sresidentadvisorycommittee.Toassessstaffthoughtsandfeelingsabouttheirworkexperience,weconductedaworkplaceenvironmentsurvey,whichwassentto116staff.Ninety‐sixstaffcompletedthesurvey,an83%responserate.Thesurveyhad68questionswedevelopedand10additionalquestionsOHCSrequestedbeincluded.
Wetouredapropertynearingtheendofitsfirst15yearsofaffordabilityaswellasapropertyoverahundredyearsoldthathadrecentlybeenrehabilitatedwithitsfederalsubsidiespreserved.
Weconductedthisperformanceauditinaccordancewithgenerallyacceptedgovernmentauditingstandards.Thosestandardsrequireweplanandperformtheaudittoobtainsufficient,appropriateevidencetoprovideareasonablebasisforourfindingsandconclusionsbasedonourauditobjective.Webelievetheevidenceobtainedandreportedprovidesareasonablebasistoachieveourauditobjective.
Report Number 2016‐31 December 2016 OHCS Preservation of Affordable Housing Page 34
Auditorsfromouroffice,whowerenotinvolvedwiththeaudit,reviewedourreportforaccuracy,checkingfactsandconclusionsagainstoursupportingevidence.
PhotosusedinthisreportobtainedfromDreamstime.com:©Flynt;©SelvamRaghupathy;©Vs1489;©Sangoiri;©Rangizzz;©DmitriKhomiakov;©Bloopiers;©Convisum;and©Agawa288.
About the Secretary of State Audits Division
TheOregonConstitutionprovidesthattheSecretaryofStateshallbe,byvirtueofheroffice,AuditorofPublicAccounts.TheAuditsDivisionexiststocarryoutthisduty.ThedivisionreportstotheelectedSecretaryofStateandisindependentofotheragencieswithintheExecutive,Legislative,andJudicialbranchesofOregongovernment.Thedivisionisauthorizedtoauditallstateofficers,agencies,boards,andcommissionsandoverseesauditsandfinancialreportingforlocalgovernments.
AuditTeam
WilliamK.Garber,CFGM,MPA,DeputyDirector
SandraK.Hilton,CPA,AuditManager
JamieRalls,ACDA,CFE,PrincipalAuditor
RebeccaBrinkley,MPA,StaffAuditor
DanielleMoreau,MPA,StaffAuditor
Thisreport,apublicrecord,isintendedtopromotethebestpossiblemanagementofpublicresources.Copiesmaybeobtainedfrom:
website: sos.oregon.gov/audits
phone: 503‐986‐2255
mail: OregonAuditsDivision255CapitolStreetNE,Suite500Salem,Oregon97310
ThecourtesiesandcooperationextendedbyofficialsandstaffofOregonHousingandCommunityServicesduringthecourseofthisauditwerecommendableandsincerelyappreciated.