OHCS Critical Improvements Needs to help Ensure Preservation of Affordable Housing

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

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


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.


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.


Recommendations

Tohelpensureaffordablehousingforlow‐incomeOregonians,werecommendOHCSmanagementimprovehousingpreservationefforts,strategicplanning,anddatamanagement.WealsorecommendOHCSmanagementaddressorganizationalchallengesincludingorganizationalculture,communicationwithstaffandstakeholders,workflowandcapacityissues,andinadequatepoliciesandprocedures.

OurdetailedrecommendationsforagencymanagementareincludedonPage31.

Agency Response

OregonHousingandCommunityServicesmanagementgenerallyagreeswiththefindingsandrecommendationsinthisreport.Thefullagencyresponsecanbefoundattheendofthereport.


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


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.


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.


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


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.


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


theagency.Thatsamemonth,thedirectorrestructureddivisionswithintheagencyagain.

InNovember2014,thedirectorrestructuredtheagencyforthethirdtimeintoitscurrentstructure.Asnotedabove,legislationpassedinJanuary2016changedtheroleoftheHousingStabilityCouncilfromanadvisoryboardtoagoverningandpolicy‐settingboard.Duringthecourseofouraudit,theagency’sdirectorresignedandaninterimdirectorwasappointed.AnewdirectorbeganNovember1,2016,shortlybeforethereleaseofthisaudit.


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


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.


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


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.


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.


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


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.


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.


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


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


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


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.


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.


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.


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


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%


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.


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


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.


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.


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.


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.


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.

OHCS Critical Improvements Needs to help Ensure Preservation of Affordable Housing

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Transcript of OHCS Critical Improvements Needs to help Ensure Preservation of Affordable Housing