HUD Has Deemed the Durham Housing Authority “Troubled.” How Big of a Problem Is That? | Durham County | Indy Week

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HUD Has Deemed the Durham Housing Authority “Troubled.” How Big of a Problem Is That?

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The CEO of the Durham Housing Authority says the agency is appealing for a second time a low assessment score that deemed the authority's public housing operations "troubled" for 2016.

DHA was notified in April that it had been designated "troubled" by the U.S. Department of Housing and Urban Development's Real Estate Assessment Center, which reviews public housing agencies' finances, management, and housing conditions. The assessment covered 2016 and gave DHA's public housing program fifty-seven out of one hundred possible points. Agencies that receive scores of sixty or less are deemed "troubled," the lowest designation. (The 2016 scores are the most recent available.)

The designation continues a decline in DHA's scores as it prepares to undertake a redevelopment of most of its public housing stock. The agency had been considered a high performer in 2013, then dipped to a standard performer in 2014 and 2015, with high scores in every area but physical condition. In 2016, DHA received a perfect score for its finances, but scored nineteen out of forty points for the physical condition of its buildings. It recieved a management score of eight out of twenty-five, and a capital-fund score of five out of ten points.

It was the management and capital-fund scores that landed DHA in "troubled" territory. Vacancy rates inform both scores.

CEO Anthony Scott says the agency would not have had as many vacancies as it did if not for plans to redevelop its public housing units through HUD's Rental Assistance Demonstration program, or RAD. It's on these grounds that DHA is appealing the 2016 score, after already having one appeal rejected.

RAD was created to help public housing agencies make up for what HUD estimates is a $50 billion backlog in needed improvements. Locally, DHA estimates its public housing units need $19 million in basic repairs—although major fixes like new roofs, plumbing, and HVAC systems are also needed. The program lets housing agencies convert units to the more stably funded Section 8 voucher program, borrow money (which they traditionally have not been able to do), and partner with private investors.

Former DHA CEO Dallas Parks, who left the agency two years ago, planned a full-scale renovation of all the public housing sites through RAD. So when residents moved out, the agency kept their units vacant so other residents could move in temporarily while their own units were being redone.

However, under Scott, who became CEO in June 2016, RAD plans have changed. Two sites—Moreene Road and Damar Court—are being gutted, while the rest will be rebuilt in phases as mixed-income and, in some cases, mixed-use neighborhoods. Because plans changed, DHA lost or withdrew RAD contracts, known as CHAPs, which lay out broad plans for a site but more importantly start the clock ticking on tight timelines to arrange financing and get to work.

Properties with CHAPs aren't factored into the public housing assessment score because it's understood that the agency is working to improve them. So when DHA lost those contracts on some of its sites, those vacancies were suddenly counted against it, although DHA still intends to convert the properties.

"The 'troubled' designation is basically a consequence of not putting these units back online quick enough when they went from wanting to go from full RAD to partial RAD," HUD spokesman Joe Phillips told the INDY last week.

Scott says the agency was not aware that creating vacancies to prepare for RAD would have this effect on its assessment score. He expects the agency will again be deemed "troubled" for 2017 because those vacancies still existed in properties not under RAD contracts. Prior to receiving the latest score in April, the agency hired additional contractors to more quickly get vacant units ready to rent, and it expects to improve occupancy rates within the next few months.

"We have clear evidence that we were already working toward this," Scott says.

As of May 31, there were 137 vacant units, with the highest number—thirty-four—at Oldham Towers, a senior housing site. Meanwhile, there are nearly two thousand households on the waiting list for housing, according to a presentation made to DHA commissioners. (Phillips says DHA's designation would remain until the next annual assessment.)

Scott says having to fill those vacant units—rather than keep them open in anticipation of upcoming RAD renovations—is not a significant setback for redevelopment plans. Work is underway at Morreene Road and Damar Court, and while DHA recently selected some development partners to work with on its downtown sites, it has not decided which property they'll focus on first. The agency is trying to determine which would be the best contender for crucial low-income housing tax credits, with the aim of beginning construction on the next site in early 2020.

"Because we won't be developing all of the properties downtown at the same time, I don't think we have the same concern the authority had under the old model," Scott says.

The "troubled" designation only becomes a significant issue when a housing authority is considered chronically troubled. The designation doesn't preclude DHA from participating in RAD or other programs. Generally, HUD considers an agency's scores for both its public housing and Section 8 operations when approving grants or programs; DHA's Section 8 program is considered a high performer.

DHA has until July 15 to submit a proposed plan to HUD that will form the basis of a binding recovery agreement.

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