National Housing Law Project Housing Law Bulletin

In a recent report, the HUD Inspector General’s Office concluded that the HUD Central Office had approved an application to demolish a public housing project on the basis of a PHA’s misrepresentation of facts about the condition of the project and its neighborhood.¹ The IG concluded that the approval occurred because, in processing the demolition application, HUD had relied solely on the certifications by the PHA director, without reviewing documents in its possession that would have raised questions or without visiting the site to check out the alleged facts. What happened in this case demonstrates the perverse results produced by HUD’s emphasis during the past four years on demolishing 100,000 units of public housing by the year 2000. The events also reveal what organized tenants can do to save their homes from demolition and themselves from displacement.

The project in question is Crescent Court in Brockton, Massachusetts. It is a 121-unit, brick, row-house development for families and the elderly that was built in 1968. There are 14 two-story buildings in the complex, and each unit has its own yard and planting area. The development also includes a community center and an on-site manager’s office and maintenance facility. The heating, hot water and electrical systems were modernized in 1987. Across the street from the project is a large city park with a swimming pool. A new elementary school is being constructed in part of that park. The other three sides of the development are bounded by a new bus station, a post office and commercial facilities.

In the summer of 1996, the PHA decided to apply for HOPE VI funds to demolish the project, use the site for future commercial purposes and build replacement housing in other parts of the neighborhood where, apparently, there was some need for urban renewal. The PHA put together the plan and, on September 3, one week before it had to be submitted to HUD, summarily discussed it at a meeting with the tenants’ association and on the next day held a public hearing on the application.

The application to HUD for the HOPE VI funds also included an application to demolish the project, as the HUD NOFA required. In the combined application, the PHA described the project as obsolete and too costly to rehabilitate and as being located in a commercial and industrial district that was incompatible with future residential use. The bases for the allegations of obsolescence were numerous. First, the heating and hot water systems installed and the electrical boxes added during the 1987 modernization were allegedly beginning to fail and replacement parts were unavailable. The fire alarm system was described as obsolete. The buildings had been built on substandard fill and, as a result, settlement and poor drainage were creating problems in the development. The development was isolated in the middle of a neighborhood that was becoming more commercial and industrial to the detriment of the residents. In addition, there were reportedly serious crime and drug activities plaguing the neighborhood.

None of these characterizations was supported with any documentation or engineering or environmental studies. Instead, they were presented as certifications made by the PHA director on the basis of the PHA staff’s experience and observations.

The Housing Authority lost out in the competition for the HOPE VI funds, with HUD rejecting the application on October 14, 1996. Despite the rejection of the HOPE VI application, however, the demolition application proceeded and was processed on a separate track. In accordance with HUD’s new procedures, the processing was done by the Kansas City Servicing Center, not the Boston field office. The Kansas City Office reviewed the application, determined that the required certifications were there and decided to approve the application. All it had the Massachusetts Office do was review an environmental checklist. There was no review of any other documents HUD had on the project nor any visit to the site to confirm that the alleged facts about the obsolescence of the project and the change in the neighborhood were accurate. Once the Kansas City Office completed its process, it sent the paperwork off to Washington for final typing and signature by the Acting Assistant Secretary for Public and Indian Housing. Final approval was granted on January 31, 1997, one week after it had be sent to Washington on January 23.

When HUD approved demolition of the project, the tenants rose up in anger and protested. On February 25, 1997, they sent a letter to the Public Housing Director in HUD’s Boston Office. They clearly and emphatically stated that they did not support the HOPE VI application, that they had not been consulted about the demolition of their homes, that their Drug Elimination Program had been working well and their development did not have the serious drug problems that the PHA had claimed it had, and that their project was in excellent condition and their neighborhood was a wonderful location in which to live. They concluded by asking HUD to intervene and investigate the facts about the HOPE VI application that they challenged in their letter.

As one might expect, they got no response from the public housing director in the local HUD office. When the IG did its investigation, the supervisor in the office claimed he had delegated the matter to two subordinates for a response. The two subordinates claimed that they had not been instructed to do anything on it, and one had not even seen the tenants’ letter until the IG investigators showed it to him.

The HUD office’s failure to respond did not deter the tenants. They secured organizing and legal assistance and took the matter higher. In April, they complained to their congressional representative and their senator. As a result of congressional intervention, the HUD Secretary’s Representative in Boston began to raise questions about what the PHA had done and why the Central Office had approved the application. She began to believe that the project was in good shape, not obsolete as the PHA had represented, that the crime problem had been solved by the Drug Elimination Program and that the PHA and the city were merely looking for a way to get federal money to improve the rest of the residential part of the neighborhood, even though that meant demolishing good public housing. She vowed not to stand by and let people be displaced from good public housing with HUD’s approval as a result of HUD’s being led down the garden path. In her view, it was the function of the local HUD office to bring these issues to the attention of the Central Office.

Even then the reaction from the HUD Central Office was not helpful, to say the least. The Deputy Assistant Secretary for Public Housing Investments speculated that the PHA might have wanted the HOPE VI money and might have planned the demolition of the project because that was what HOPE VI required, even though the project was only marginal, not obsolete. Even though the HOPE VI money might be denied, as it was in this case, he explained, HUD had required demolition approval applications to be processed on a different track and completed despite the denial of HOPE VI funds. That apparently has happened many times, and when the PHA could demonstrate some other way of solving the obsolescence problem, HUD would allow them to withdraw the demolition application or would rescind the approval if it had already been granted. But if all the PHA officials could do was say that they had lied on the application and that they were sorry, HUD could not or would not stop the demolition order. Unless they came clean pretty soon, the Deputy Assistant Secretary stated, HUD would be pushing them to proceed with the demolition.

At the same time, the tenants were also complaining to the Inspector General that the PHA had misrepresented material facts in its application and that HUD had approved the application in violation of the law. The IG responded quite aggressively, unlike all the HUD officials except the Secretary’s Representative. The IG’s Office undertook an investigation in May and June of 1997, in the course of which it interviewed the PHA’s staff and reviewed its records, interviewed the local police about the project’s alleged crime problems, interviewed HUD staff and reviewed what they had done and, most importantly, inspected the buildings.

As a result of its investigation, the IG’s office concluded that in its applications the PHA had materially misrepresented the condition of the buildings and the neighborhood and had not consulted with the tenants when preparing the demolition application and plans for the project. The IG concluded that the PHA’s representations about the condition of the project were false. The heating system was working. Replacement parts were available for it. The PHA spent only 34 hours during the entire previous year handling maintenance calls about heat and hot water at the project. The electrical and fire alarm systems were in compliance with the 1987 codes when they were installed. The only thing obsolete about them was that they did not conform to changes in the codes that were made after they were installed. There were no unusual foundation settlement or drainage problems. The project was not in the middle of an industrial park as the PHA had stated in its application. The PHA’s Drug Elimination Program, undertaken with the tenants and the local police, had been very successful, as the PHA executive director said and as HUD’s own monitoring had concluded less than one month after approval of the demolition application. The police department had agreed that the selling of drugs was practically non-existent in the project and that people felt safe walking there at any hour of the day or evening.

The IG’s investigation also confirmed that the tenants had not been consulted in the development of the demolition plans. The PHA executive director acknowledged to the IG’s investigators that the tenants and tenant council had not been involved in the preparation of the demolition approval application. The meeting with the tenants’ council on September 3rd had been attended by only five tenants, had been requested by the PHA only four days prior to the meeting, and had involved a discussion of the HOPE VI funds without any mention of the project’s demolition. The public meeting the next day was attended by 17 tenants, but the only notice of the meeting had been posted at the community center, not delivered to the tenants’ homes. Two days later, on September 6, the PHA had canvassed the development for tenant signatures in support of the HOPE VI application, but had not fully explained the demolition aspects and, even then, had secured only 21 signatures.

On June 26th, the IG’s office presented the results of its investigation to the new Deputy Assistant Secretary for Public Housing Investments, as well as HUD’s public housing director in Massachusetts. HUD Central directed Massachusetts HUD to meet with the tenants and the PHA on June 30 and also decided to contract with the Army Corps of Engineers to determine whether the project was obsolete. The Corps of Engineers confirmed what the tenants were saying and what the IG’s office had concluded, i.e., that the project was not obsolete. Its conclusion was that the 30-year-old buildings were structurally sound and that, with normal maintenance, could be expected to last another 30 years. It also recommended several long-range maintenance projects that would cost $2.3 million, which constituted 16 percent of the total development costs (TDC) of the project. The cutoff for approving rehabilitation of a project is 90 percent of TDC.

At the meeting in Washington on June 26th, and the meeting with the PHA and the tenants on June 30th, the HUD public housing officials were still sticking with their demolition decision, at least to the extent of a partial demolition. They were maintaining this position, even though the PHA had backed down and even apologized at the meeting with the tenants for submitting the demolition application. The HUD officials defense later was that, at the time, they had not had the results of the Corps of Engineers study, even though they did have the results from the IG’s investigation.

Once the Corps of Engineers report came in, HUD decided to rescind approval of the demolition application, which it did on September 27. Yet, even then, it acted only on the grounds that the buildings were not physically obsolete. It explicitly refused to conclude that the project was not obsolete as to neighborhood and invited the PHA to resubmit a demolition application if it could meet the neighborhood obsolescence standard.

In addition, in their response to a draft version of the IG Office’s report, the public housing officials at HUD defended their initial approval of the application as much as they could — possibly more than they could with any credibility. They noted that the PHA’s application had not included any estimates of the costs of rehabilitation, that demolition and rebuilding on site would cost over $11 million, 91 percent of the TDC, that rehabilitation and/or rebuilding would not solve the locational problem, and that all those reasons put together were sufficient to justify processing the application. They did not explain how those combined reasons would justify approving the application. The fact that even from the application the project appeared to be in better shape than the others for which HUD was processing demolition applications was not seen by HUD as a reason to reject the application, or to require closer scrutiny. In HUD’s bureaucratic view, all applications had to be judged on a case-by-case basis, which makes comparison with other applications irrelevant.

HUD argued that the application contained material that supported the PHA’s supposition that the project was obsolete, but, as the IG pointed out, a mere supposition that a project is obsolete is not grounds to demolish it. It has to be obsolete.

HUD also suggested that the documents showing that five tenants had attended the September 3rd meeting, and that 17 had attended the September 4th meeting, would be sufficient demonstration of compliance with the tenant consultation requirement. In addition, HUD pointed out that the application contained an offer made by the PHA on September 5th to sell the project to the tenants. That offer, of course, is also required by the statute, but how it could have been considered as satisfying the statute when the demolition application was submitted four days later is a little difficult to comprehend. HUD regulations provide that the tenants are to have at least 30 days to express their interest in buying the project. 24 C.F.R. § 970.13(d) (1996). HUD had also noted that the mayor’s letter in support of the project had observed that the PHA had consulted with the tenants.

Many lessons can be learned from this experience that will be valuable for the future. First, if we want to prevent the demolition of good public housing, we cannot use a system that relies solely on the PHA, or the PHA and the local government, to make the demolition decision without any federal oversight. Here the PHA was willing to demolish this project in collaboration with the city to get some federal money to redevelop another part of the neighborhood two to three blocks away. Unfortunately, H.R.2,² the housing bill passed by the House, has a scheme that virtually takes HUD out of the demolition approval process. There is no requirement of separate approval by HUD of demolition decisions. Instead, the PHA merely has to put its demolition decisions in its PHA-wide plan, and HUD may decide whether or not to review it. H.R.2, §§ 261 and 107.

Second, if some system of federal oversight is retained, that oversight cannot be limited to a mere determination whether the PHA has provided certifications that the factual conditions required for demolition exist. In this case, the problems arose because the HUD officials relied on the PHA’s certifications, with no independent review of its own files on the matter and without a visit to the site to verify the truth of the statements certified as true by the PHA. Unfortunately, S.462, the other housing bill pending in Congress, constructs exactly such a self-certification system. See S.462, § 115. Unlike H.R.2, HUD involvement would still be required, but it would be more of the rubber-stamp variety. S.462 would require HUD to approve a PHA’s application to demolish a project if the PHA certifies that the grounds for demolition are present, unless the certifications are clearly inconsistent with information HUD has. S.462 does not require HUD to independently determine whether the project meets the standards for demolition, as does current law. 42 U.S.C.A. § 1437p(a) (West 1994).

Third, it is also clear that HUD’s system for reviewing demolition applications is not effective. It relies upon people in HUD’s Kansas City office to make the decision, even though they are too far from most sites to visit them. The HUD staff in Kansas City have no ongoing contact with the PHA and have nothing to do with other PHA oversight that might raise questions about the truth of the PHA’s representations. Naturally, all they do, and all that they can do, is review the papers in the applications to see that they are complete and recite the correct factual allegations. The pending legislation will encourage retention of this decision-making process, because the Senate bill will require HUD to act on the application in 60 days, while the House bill will not require HUD to act at all. S.642, § 115; H.R.2, § 261. It took HUD 143 days to process this application that was filled with misrepresentations, none of which HUD caught.

Fourth, something has to be done to change HUD officials’ response when they make a mistake and the mistake is uncovered. Here, quite clearly, the project was not in a condition that justified demolition. To her credit, the new Deputy Assistant Secretary responded to the conclusions of the IG’s office by deciding to have the Army Corps of Engineers investigate the conditions of the buildings and by having the approval decision rescinded when the Corps confirmed that the buildings were not obsolete. To her credit, the Secretary’s Representative in Boston vowed not to stand by and allow people to be displaced from good public housing once the mistake had been brought to her attention.

In contrast, the reaction by the other HUD officials was to stick with the original decision as much as possible. The Massachusetts HUD Office’s public housing officials simply ignored the tenants’ protest that the project should not be demolished. The former Deputy Assistant Secretary myopically could see nothing wrong with demolishing a good project merely because the PHA had lied on the demolition application. When the PHA’s misrepresentations had unraveled, the public housing officials in both the HUD Central and the Massachusetts offices held out hope for at least partial demolition of the project. Even when the approval was rescinded, the Acting Assistant Secretary invited the PHA to reapply for approval of the demolition on the locational obsolescence grounds, although it was clear from the tenants and the IG’s investigation that the neighborhood was not a bad place in which to live. Finally, the new Deputy Assistant Secretary’s response to the IG’s report was not only to defend HUD’s original, paper-based decision to approve the application, but also to suggest, absurdly, that the PHA’s supposition that the project was obsolete somehow was enough to justify HUD’s approval of the application.

When HUD officials not only act upon PHA claims without verifying them, but then persist in sticking to those claims when they are not only called into question but demonstrated to be false, it is difficult to hope that the correct decisions will ever be made, either originally or eventually. It is doubly discouraging when the decisions the HUD officials persist in defending are ones that run directly counter to the purposes of the public housing program, i.e., developing, maintaining and preserving decent housing. One begins to believe that there is more than the classic circling of wagons here. The past four years of rhetoric about demolishing public housing have dimmed HUD officials’ ability to distinguish between ones that should be demolished and those that should not.

Fifth, and very importantly, the tenants must be given credit for saving their homes. The tenants were the first to call attention to what the PHA and HUD had done. They were the ones who went to their members of Congress and the IG when the HUD Office in Massachusetts did nothing in response to their first protest letter. They were the ones who convinced the PHA to back down, even when HUD officials were still holding out for partial demolition.

Systems have to be established to ensure that red flags raised by protesting tenants will be seen by HUD officials and responded to appropriately. The normal operating system at HUD did not work for them. When they wrote their letter to the local HUD office, it went down a black hole. That leads one to suspect that the officials who received it had no respect for tenants and tenant organizations, did not believe that they could be telling the truth, or at least decided that, among all the things they were working upon, looking into questions raised by a letter from a tenants’ organization was too far down on their list to get to. It was only when the tenants stepped outside the normal HUD channels, complaining to their elected representatives and the IG’s office, that things began to change. HUD officials need to be trained to listen and respond to tenant protests, especially when further investigation raises serious questions.

HUD will also have to change its processing system for determining whether demolition applications have been prepared in consultation with the affected tenants, as the statute requires. In this application, the PHA had recited that the application was considered at a tenant association meeting less than one week before the application was submitted and had attached a sign-in sheet with five tenants’ signatures. The PHA also recited that the application was considered at a public meeting one day later, and attached a sign-in sheet for that meeting containing 19 signatures, 17 of which were of tenants. In addition, the mayor’s letter of support made the point of observing that the PHA had consulted with the tenants. Obviously, those recitations and attached documents were deemed sufficient by the Kansas City Office to conclude that the application had been developed in consultation with the affected tenants, despite the unrealistic timing and the small number of tenants who attended the meetings. In addition, the Central Office, in its response to the IG’s draft report, cites the PHA’s recitations and attachments as if they justify HUD’s conclusion that the tenant consultation requirement had been met.

To the contrary, recitations and documents like these ought to raise serious concerns by HUD officials that the application had not been developed in consultation with the tenants. If all the PHA could point to was one tenant association meeting, held six days before the application was submitted to HUD, any reasonable person would begin to suspect that the application had been developed long before the tenants had heard anything about it. When one looks at the sign-in sheet and learns that only five tenants were in attendance, even more suspicions have to be raised as to whether the affected tenants were involved in the application’s development. The system must be changed to ensure that HUD officials raise questions when they see such fact patterns, and that they investigate further, instead of mechanically checking the box that says that the application had been developed in conjunction with the tenants.

Finally, this experience reveals the value of complaining to the IG’s office. One has to admit that investigations done by the IG have not always won the admiration or respect of HUD officials, PHAs or tenant organizations. Nonetheless, they are set up to uncover violations of the law by HUD officials and recipients of HUD funds. In cases like this one, where public housing slated for demolition is in decent shape and the PHA has made obvious misrepresentations in its applications, it is not hard for an independently minded IG to uncover those misrepresentations and, by shining the light of day upon them, force HUD officials to change their minds. The chances of success might not be so high in cases where the project’s obsolescence is more debatable and the misrepresentations not so clear, but turning to the IG in even those cases should not be rejected out of hand. And, in cases like this one, which may not be as rare as one might hope, complaining to the IG presents a very attractive alternative to going to court.

1. Office of Inspector General, HUD, Audit Report: HUD’s Approval of Demolition Application (No. 98-BO-101-001, Office of Audit, Boston) (Nov. 6, 1997).
2. 143 CONG. REC. H10050 (May 14, 1997).