Housing and Community Development Issue Area Plan--Fiscal Years 1996-98
(Letter Report, 06/01/96, GAO/IAP-96-18).

GAO presented its Housing and Community Development issue area plan for
fiscal years 1996 through 1998.

GAO plans to: (1) analyze proposals to dismantle or reorganize the
Department of Housing and Urban Development (HUD), the HUD fiscal year
(FY) 1997 budget request, the Federal Housing Agency's (FHA) mission and
operations, and HUD contracting practices and contract administration;
(2) evaluate proposed changes to FHA insurance coverage on single-family
mortgages, housing price variations and their impact on the
single-family insurance program, single-family foreclosure rates, and
the HUD program for sharing mortgage insurance risks on multifamily
loans; (3) assess the impact of proposals to restructure public and
assisted housing, HUD progress in reengineering its multifamily housing
portfolio, HUD actions to improve operations at large housing
authorities, the response of the public housing industry to recent
reform legislation, and the HUD Competitive Grant Program to modernize
and rehabilitate public housing; (4) analyze performance monitoring of a
combined grant for community development and housing, the conversion of
community development programs into a guaranteed loan program, and the
implementation of the empowerment zone program; and (5) evaluate the
Small Business Administration's (SBA) credit subsidy programs.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  IAP-96-18
     TITLE:  Housing and Community Development Issue Area Plan--Fiscal 
             Years 1996-98
      DATE:  06/01/96
   SUBJECT:  Housing programs
             Community development programs
             Federal agency reorganization
             Cost control
             Mortgage programs
             Low income housing
             Urban development programs
             Mortgage protection insurance
             Small business assistance
             Minority business assistance
IDENTIFIER:  Community Development Block Grant
             HUD Empowerment Zones and Enterprise Communities Program
             HUD Competitive Grant Program
             
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Cover
================================================================ COVER


Resources, Community, and Economic Development Division

June 1996

HOUSING AND COMMUNITY DEVELOPMENT
ISSUE AREA PLAN - FISCAL YEARS
1996-98

GAO/IAP-96-18



Abbreviations
=============================================================== ABBREV

  FEMA - Federal Emergency Management Administration
  FHA - Federal Housing Administration
  GAO - General Accounting Office
  GNMA - Government National Mortgage Association
  HUD - Department of Housing and Urban Development
  RHS - Rural Housing Service
  SBA - Small Business Administration
  VA - Department of Veterans Affairs

FOREWORD
============================================================ Chapter 0

As the investigative arm of the Congress and the nation's auditor,
the General Accounting Office is charged with following the federal
dollar wherever it goes.  Reflecting stringent standards of
objectivity and independence, GAO's audits, evaluations, and
investigations promote a more efficient and cost-effective
government; expose fraud, waste, abuse, and mismanagement in federal
programs; help the Congress target budget reductions; assess
financial information management; and alert the Congress to
developing trends that may have significant fiscal or budgetary
consequences.  In fulfilling its responsibilities, GAO performs
original research and uses hundreds of databases or creates its own
to compile and analyze information. 

To ensure that GAO's resources are directed toward the most important
issues facing the Congress, each of GAO's 32 issue areas develops a
strategic plan that describes its key issues and their significance;
the objectives and focus of its work; and the planned major job
starts.  Each issue area relies heavily on input from congressional
committees, agency officials, and subject-matter experts in
developing its strategic plan. 

The Housing and Community Development Issue Area is responsible for
auditing federal services whose value totals over $1 trillion and
whose benefits reach virtually every community in the nation.  These
services, which are scattered among several agencies, are targeted
toward ensuring that all Americans have decent, affordable housing
and healthy, vibrant communities upon which our nation's economic
growth and social stability depend. 

The Department of Housing and Urban Development (HUD) has
responsibility for the bulk of these services by insuring or
guaranteeing mortgage financing for about 7 million people through
its $497 billion Federal Housing Administration (FHA) loan portfolio;
guaranteeing, through the Government National Mortgage Association
(GNMA), about $485 billion in mortgage-backed securities; providing
about $25 billion annually to subsidize rentals and to operate and
modernize residences for about 4.7 million lower-income households;
providing $5 billion annually to assist over 4,000 communities
through its Community Development Block Grant program; and overseeing
the distribution of $227 billion in unexpended budget authority. 

In addition, services are provided through the Small Business
Administration's (SBA) $33 billion business loan portfolio that
supports many of the nation's 21 million small businesses; the
Federal Emergency Management Administration's (FEMA) annual disaster
assistance obligations of about $2 billion; the Department of
Veterans Affairs' (VA) $174 billion in guarantees on veterans' home
loans; and the Department of Agriculture's Rural Housing Service's
(RHS) $32 billion portfolio of direct and guaranteed home loans to
rural residents.  Finally, in the secondary markets, Freddie Mac and
Fannie Mae (government-sponsored enterprises for which HUD has
oversight responsibilities) have significant national housing
missions and oversee $1.3 trillion in securities and loans. 

GAO's program evaluation and performance work in the Housing and
Community Development Issue Area assists the Congress and federal
agencies by assessing proposals to restructure agencies and programs,
analyzing options to reduce costs, and evaluating the impact of those
options on the delivery of services.  The principal issues concerning
housing and community development are

  -- restructuring federal oversight of housing and community
     development agencies to improve service delivery, eliminate
     duplication, and produce long-term cost savings;

  -- reducing the federal government's financial risk in its programs
     to provide mortgage assistance;

  -- fostering self-sufficiency among low-income people while meeting
     budgetary constraints;

  -- promoting the economic and social development of communities;
     and

  -- improving the cost-effectiveness of programs that promote small
     and minority-owned business development. 

In the pages that follow, we describe our key planned work on these
important issues during our 3-year planning period (fiscal years 1996
through 1998).  This year's update to the plan contains some slight
changes in emphasis to reflect current congressional interest and
available resources.  Also, because unanticipated events may
significantly affect even the best of plans, our planning process
allows for updating this plan to respond quickly to emerging issues. 
If you have any questions or suggestions about this plan, please call
Larry Dyckman, Associate Director, or me at (202) 512-7631. 

Judy A.  England-Joseph
Director
Housing and Community Development Issues


CONTENTS
============================================================ Chapter 1


   FOREWORD
---------------------------------------------------------- Chapter 1:1

1


   TABLE I:  KEY ISSUES
---------------------------------------------------------- Chapter 1:2

4


   TABLE II:  PLANNED MAJOR WORK
---------------------------------------------------------- Chapter 1:3

6


TABLE I:  KEY ISSUES
============================================================ Chapter 2

Issue                                         Significance                                 Objectives                                    Focus of work
--------------------------------------------  -------------------------------------------  --------------------------------------------  -------------------------------------------
Housing and community development agency      The current focus on agency restructuring    ï¿½Analyze the effects of agencies'             ï¿½Reinvention proposals affecting housing
management: How can federal housing and       has affected HUD, SBA, and other agencies    restructuring proposals, including HUD's      and community development programs,
community development agencies be             involved in housing and community            "reinvention blueprint."                      including the impact on customers and the
restructured to improve service delivery,     development assistance. These agencies are                                                 potential savings
eliminate duplication, and produce long-      proposing to restructure their               ï¿½Assess the alternatives to restructure FHA,
term cost savings?                            organizations and are developing options to  including making it a government-owned        ï¿½Streamlining housing assistance to rural
                                              improve the delivery of federal services     corporation.                                  residents
                                              with significant cost savings. GAO has
                                              designated HUD as a high-risk area because   ï¿½Assess the feasibility of transforming       ï¿½Residual oversight role for the federal
                                              of long-standing deficiencies in             HUD's current programs, such as assisted      government if housing programs are
                                              management, accounting, and information      housing, into performance-based funds.        transferred to state and local governments
                                              systems.
                                                                                           ï¿½Identify and recommend spending reductions   ï¿½Potential savings in HUD's budget
                                                                                           to decrease the federal deficit.
                                                                                                                                         ï¿½HUD's initiatives to correct long-term
                                                                                           ï¿½Monitor HUD's actions to correct long-       management deficiencies
                                                                                           standing departmentwide management
                                                                                           deficiencies.

Mortgage financing: How can the federal       FHA, VA, and RHS underwrite mortgage credit  ï¿½Analyze proposals to change mortgage         ï¿½Financial position of FHA's mortgage
government minimize financial risks in        to purchase residential and rental           financing programs to reduce the federal      assistance programs for single-and
mortgage assistance programs while meeting    properties that are riskier than purchases   government's exposure to losses.              multifamily properties
affordable housing needs?                     made in the conventional market. These
                                              programs support nearly $500 billion in      ï¿½Analyze alternative options to provide       ï¿½Reducing losses through better management
                                              outstanding mortgage loans. In addition,     mortgage financing to urban and rural         of property disposition activities
                                              HUD's GNMA guarantees timely payment to      residents.
                                              investors on $485 billion of securities                                                    ï¿½Reducing risks through changes in housing
                                              backed by these mortgages. These four                                                      programs at FHA and RHS
                                              agencies need to continue to limit their
                                              losses, improve delivery of home mortgage
                                              and rental housing assistance, and improve
                                              oversight.

Low-income housing: How can federal low-      Although real outlays for federal low-       ï¿½Identify ways to better manage and maintain  ï¿½Improvements in the federal oversight,
income housing programs meet budgetary        income housing assistance have tripled       urban and rural federally assisted public     regulatory framework, and budgeting
constraints while effectively serving low-    since 1977, only one-third of eligible       housing and multifamily properties.           practices of assisted public housing
income people and promoting self-             households receive such assistance. Due to
sufficiency?                                  budget constraints, funds for low-income     ï¿½Evaluate ways to improve the cost-           ï¿½Cost implications of project-and tenant-
                                              housing assistance are likely to shrink      effectiveness of housing assistance.          based housing assistance
                                              substantially. Therefore, policy makers
                                              must find more cost-effective methods to     ï¿½Evaluate options to reinvent housing         ï¿½Proposed reforms to improve delivery of
                                              house low-income people, including better    assistance delivery systems and encourage     housing assistance and promote self-
                                              ways for federal housing programs to         self-sufficiency.                             sufficiency
                                              encourage self-sufficiency among residents
                                              and to apply best management practices
                                              among housing providers.

Community development: What roles do HUD and  Over a dozen federal agencies provide        ï¿½Identify overlap among community             ï¿½Economic development in distressed urban
other federal agencies play in promoting the  community development assistance. The        development programs and recommend ways to    areas and overlap among community
economic and social viability of communities  Congress is currently debating whether to    streamline them.                              development programs across federal
and their residents and what types of         consolidate some of these programs into                                                    agencies
performance measures do these agencies use?   performance-based funds or block grants to   ï¿½Identify options to integrate social,
                                              improve their effectiveness and efficiency.  economic, and housing programs to maximize    ï¿½Integration of social, economic, and
                                              Consolidation should include performance     delivery of services.                         housing programs
                                              measures to assess program effectiveness
                                              and safeguards against duplicate federal     ï¿½Assess performance indicators used to rate   ï¿½Performance indicators that will be used
                                              programs as well as factor in the ability    existing programs and recommend other         to assess implementation of the empowerment
                                              of states and localities to meet community   indicators to improve oversight of these      zone program
                                              needs that the federal government formerly   programs.
                                              provided.                                                                                  ï¿½Impact of allocation formulas used for
                                                                                           ï¿½Assess the capability of states and          calculating block grants to states
                                                                                           localities to meet community needs for
                                                                                           development assistance and services.

Small and minority-owned business             Although several SBA programs are directed   ï¿½Identify the most cost-effective ways to     ï¿½Cost-effectiveness of current ways to
development: Do existing programs meet        at establishing or                           assist small and minority-owned businesses    deliver program services
clearly defined goals; what benefits have     preserving small and minority-owned          and recommend cost-savings measures.
been accrued; and what are the most cost-     businesses, only about seven percent of all
effective ways to deliver                     small business lending is backed by SBA.
services to these businesses?                 Federal purchasing requirements annually
                                              direct billions of dollars to support small
                                              business development. The Congress has
                                              raised concerns about the benefits of these
                                              programs, and court cases have challenged
                                              minority set-asides and mandates.
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

TABLE II:  PLANNED MAJOR WORK
============================================================ Chapter 3

Issue               Planned major job starts
------------------  --------------------------------------------------------------------
Housing and         Analyze proposals to dismantle HUD, including options to transfer
community           programs to other federal, state, or local agencies.
development agency  Analyze HUD's fiscal year 1997 budget request.
management          Evaluate issues affecting the consolidation of HUD and RHS housing
                    programs.
                    Assess FHA's mission and how well its operations provide affordable
                    housing.
                    Evaluate HUD's contracting policies and practices and contract
                    administration.
                    Assess HUD's progress in addressing high-risk issues.

Mortgage financing  Evaluate the impact of proposed changes to reduce FHA's insurance
                    coverage on single-family mortgages.
                    Assess housing price variations and their impact on the current 2-
                    percent reserve that the single-family insurance program requires.
                    Analyze single-family foreclosure rates to determine patterns and
                    their causes.
                    Review HUD's program for sharing mortgage insurance risks on
                    multifamily loans with state and local housing finance agencies and
                    other qualified entities.

Low-income housing  Assess the impact of proposals to restructure public and assisted
                    housing on the ability of lower-income families to find housing and
                    achieve self-sufficiency.
                    Assess HUD's progress in re-engineering its multifamily housing
                    portfolio.
                    Assess HUD's actions to improve operations at the worst-performing
                    large housing authorities and whether HUD's strategy has been
                    successful in Chicago, New Orleans, and San Francisco.
                    Analyze the response of the public housing industry to recent major
                    reform legislation and its consequences for increasing the number of
                    working families in public housing.
                    Evaluate HUD's Competitive Grant Program to modernize and
                    rehabilitate public housing.

Community           Assess the options for monitoring performance of a combined block
development         grant for community development and housing.
                    Assess the implications of converting grant and loan programs that
                    promote community development into a guaranteed loan program.
                    Determine who benefits from block grants for community
                    development.
                    Assess the implementation of the empowerment zone program.

Small and           ï¿½Analyze credit subsidies provided by SBA's programs.
minority-owned
business
development
----------------------------------------------------------------------------------------

*** End of document. ***