It’s one of the biggest pots of money in D.C.—$100 million a year to help build and preserve affordable housing in an increasingly expensive city. But a new report is asking if some of that money is going to projects that might not deserve it.
In a report published Thursday, D.C. Auditor Kathy Patterson says that a June 2018 disbursement of more than $78 million from the Housing Production Trust Fund to nine housing projects included five that had been ranked in the bottom half of all applications for money.
That meant the city got 353 fewer units of affordable housing than it could have gotten had it chosen only the highest-ranking applications. Of those, 95 would have gone to the city’s lowest-income residents and families.
Patterson says not only did the awarding of city funds to low-ranked applications throw into question how D.C. ranks and chooses affordable housing projects, but also raises concerns over whether the city is getting the best bang for its buck.
“We have a priority reflected by our elected officials of building and preserving affordable housing, and if you have a process where agency leadership decides to put money into projects that do not build as much housing as is possible, that’s not a good thing for taxpayers,” she said.
Since Mayor Muriel Bowser first took office in 2015, she has made the preservation and construction of affordable housing a priority. She doubled the annual investment in the Housing Production Trust Fund (HPTF) to $100 million a year. By the end of her first term, that move resulted in 7,200 units of affordable housing being built or preserved.
For her 2020 budget, Bowser proposed increasing the commitment to the HPTF to $130 million a year, but the D.C. Council reduced it to $116 million. Bowser also proposed increasing the investment in the separate Housing Preservation Fund—which largely helps tenants buy their buildings—to $15 million a year. The Council gave her $11.5 million.
The money from HPTF largely serves to help developers bridge the gap between what they can raise through the private market and tax breaks and what a project will ultimately cost. The money is doled out by the D.C. Department of Housing and Community Development (DHCD) to applications that are scored on a number of factors, including economic feasibility, the development team’s experience, site selection and design and what income levels and family types will be served by the housing.
But Patterson says her audit — spurred by information she received this year from a confidential source—shows that while DHCD staff proposed awarding funds to the nine highest-ranking projects, city officials ultimately replaced those ranked second through sixth with those ranked 11th, 12th, 15th, 19th and 20th.
“We had with the nine proposals that were recommended by a very strong objective internal evaluation process and produced a lot more housing units and a lot more housing units for the poorest households,” she said. “And that was essentially subverted in terms of selecting five other projects that were not as well-rated.”
In a late-April letter responding to some of Patterson’s initial concerns, DHCD director Polly Donaldson said the staff rankings of projects are not final drivers of the decision to award funds, but rather serve as recommendations that she can use to balance against other city priorities—such as the locations of proposed projects and availability of funding from other city agencies.
In the case of the projects that got funding in June 2018, Donaldson says the last-minute availability of funding for rent subsidies from the D.C. Housing Authority and D.C. Council prompted her to prioritize projects for funding that had a higher proportion of rent subsidy requests, even if some of them had been ranked lower than other proposals by her staff.
“The panel’s scores may not take the bird’s eye view of the whole portfolio and consider what would be most effective and efficient, in combination and in line with the administration’s priorities and needs across the city,” she wrote.
She also said that some projects are submitted multiple times before being selected; funding awards announced earlier this year included projects that had not made the cut last year.
And Donaldson—who joined the Bowser administration in 2015 after a decade working on affordable housing for non-profits, and has been credited with improving the agency’s ability to fund projects—rejected any claims that she would pick projects for funding based on alleged favoritism for a particular developer.
“At all times I exercise my discretion in an impartial manner, without favoritism based on any impermissible grounds,” she wrote.
In a separate statement to WAMU, Donaldson stressed some of the points she wrote in the letter to Patterson.
“My agency followed all laws in making decisions in the best interest of the District. Further, the Council Auditor herself lauds the Development Finance Division controls that I put in place. D.C. must be inclusive and we must take into account developments across the city in making decisions with each round,” she said.
Patterson says she does not find Donaldson’s explanations “to be at all persuasive,” and tried herself to obtain the scores and decision memo produced by DHCD staff and given to Donaldson—but was told the material cannot be released. (She ultimately got them through a confidential source.)
Earlier this year and in a separate effort, WAMU filed an open-records request for the scores for all the projects that applied for HPTF funding, but was similarly told they cannot be disclosed because of the “deliberative process” exemption that protects communications by public officials made in the course of debating what course of action to take. An appeal was rejected. A similar effort to obtain the decision memo prepared for Donaldson was rejected.
Donaldson refused to provide the information even after Patterson issued her with a subpoena, saying it would “require the disclosure of privileged information.”
“There’s absolutely a transparency issue,” said Patterson.
In February, At-large Councilmember Elissa Silverman introduced a bill that would require DHCD to make public more information about the development proposals seeking HPTF funding—including the scores given those proposals by DHCD staff. The first hearing on the measure will take place next month; Donaldson will be testifying.
Patterson’s audit is not the first she’s done on HPTF. Last year, she published a report looking at spending from the fund from 2009 to 2014, and found that money was used for things other than affordable housing. And in 2017, another audit found that DHCD did not do enough monitoring of projects to ensure that promises of affordable housing were kept.