A new, scathing report from the Office of Inspector General puts the U.S. Department of Housing and Urban Development in the hot seat for its lack of action taken on the soon-to-be ghost town of Cairo, Illinois.

Back in 2016, HUD announced it would tear down two of the city’s housing developments, Elmwood and McBride, after taking control back from the local housing authority, Alexander County Housing Authority. The move would force the relocation of about 400 residents, many to a new city.

Later, in 2017, HUD Secretary Ben Carson responded to letters from the resident, saying he would do everything in his power to help them remain in Cairo.

But the new report from the OIG shows that the city of Cairo has insufficient housing stock for these displaced families, and nearly 200 families will have to move out of the city.

A HUD spokesperson said that HUD was “stunned…at what we saw, not just in terms of the deplorable living conditions that we encountered but at the poor, even absent record keeping, the staggering backlog of critical repairs, all of this going to the very health and safety of the residents living there.”

The area’s deplorable living conditions included being infested with rodents and bugs, the heating and plumbing not functioning and the high crime in the area.

However, these conditions at ACHA did not occur overnight, the report explained. HUD had been aware of negative conditions at ACHA since at least 2010. Over the span of six years, HUD performed multiple assessments and reviews of ACHA.

The chart below shows the steps HUD had taken since 2010 to address the worsening conditions.

Click to Enlarge

HUD Audit

(Source: OIG)

In fact, ACHA failed HUD’s assessments in every physical condition indicator since 2012. HUD also identified weakness in ACHA’s financial conditions as early as 2013.

What’s more, the report shows that ACHA was generally uncooperative in addressing the negative conditions identified by HUD’s assessments and reviews. Despite HUD’s attempts to bring ACHA into compliance, the negative conditions remained.

Even as far back as 2013, a HUD team reported nine findings shows the deteriorating physical condition of the two housing developments. Here is what they found:

  • The McBride and Elmwood housing developments had ongoing security issues.
  • The plumbing at the McBride housing development was deteriorated and in need of rehabilitation.
  • The former executive director improperly procured a consultant services contract for himself.
  • ACHA awarded retirement packages and offered part-time employment to specific employees with no documented or defined formula or eligibility requirements.
  • ACHA’s nepotism policy was inadequate.
  • An ACHA board member had a nephew and grandson employed by the PHA.
  • The executive director’s son-in-law and the assistant executive director’s husband were maintenance workers at ACHA.

And while these conditions did not improve in 2013, ACHA’s Real Estate Assessment Center, which is responsible for inspecting HUD properties to ensure decent, safe and sanitary conditions, score did increase.

This even led some of the field staff members to voice their shock at the “inflated scores.”

And indeed, a later re-inspection showed the conditions had actually worsened from 2012 to 2013, not improved, as the REAC scores indicated. The report conducted in 2013 for the Elmwood and McBride housing developments showed 112 health and safety issues and estimated that if all units were inspected, 1,134 health and safety deficiencies would be found.

But despite these findings, ACHA did not enter into an agreement with HUD until August 2015, when it was then required to comply with provisions related to fair housing, security of housing and equal employment opportunity.

Eventually, HUD took ACHA into temporary receivership, a last resort option for public housing authorities with the most severe problems, and gave a list of reasons why it had not taken the housing authority into receivership sooner.

  • PIH officials initially allowed ACHA several opportunities to improve instead of using HUD’s authority to declare it in substantial default and take possession of it. In our discussions with PIH officials, they did not seem to be aware of HUD’s authority to take possession of ACHA without first offering it an opportunity to cure deficiencies.
  • ACHA’s official performance scores were not initially low enough to initiate the PHARS protocol.
  • PIH officials disagreed about the extent to which ACHA’s actions and existing documentation were sufficient to place it into receivership.
  • HUD officials claimed that receiverships were costly to administer and could attract negative attention to the agency.
  • HUD guidance and expertise on receiverships were limited at the time.

Among other reasons, HUD explained it was hesitant to take the housing authority into receivership as it could take many years to execute, require four to five full-time employees and cost more than $5 million.

But the OIG said HUD could have and should have done more to oversee ACHA. It also said in its report that while it may be too late for the residences already scheduled for demolition, there are currently 50 more public housing authorities that are designated as troubled.

In light of these events, the report outlines four suggestions for HUD in future dealings with troubled housing authorities:

  1. Create agreements and strategies with other program offices that describe when cross-programmatic reviews and enforcement actions against PHAs are required.
  2. Train PIH officials on the authority and processes for declaring PHAs in substantial default and for taking PHAs into HUD possession.
  3. Update and strengthen the training program for HUD receivers of PHAs.
  4. Update procedures for receiverships to include specific guidance on when initiating a receivership may be appropriate.