ANNAPOLIS, Md. — A new legislative audit criticizes the Maryland Department of Housing and Community Development's (DHCD) lack of oversight regarding affordable housing loans.
One of the agency's main responsibilities is providing state funds to home developers to boost low-income hosuing availability.
This process is regulated by a wide range of state law and regulations.
In order to secure a state funded contract, developers are required to reserve a certain percentage of rental units for low income families over a select time frame.
Auditors say there were several cases in which this didn't happen.
"Specifically, DHCD inspections of 3 loan recipients that provided 56 housing units determined that 39 units had not been used for low-income housing as required, including certain units that had been unoccupied for 8 years as of April 2023. However, as of April 2023, DHCD had not requested repayment of these three loan recipients as permitted by the related agreements."
As for the developers, they're tasked with maintaining quality living standards as determined by the state, and submitting a Certificate of Compliance as proof.
It's the agency's job to then inspect the developments to insure the validity of each compliance certificate.
According to the audit, the department fell short of their obligations.
Often times compliance certificates (ACC) weren't even collected, and when they were, the department failed to review them.
"As of April 2023, DHCD had not obtained ACCs for 9 of the 609 loan recipients for calendar year 2021 (which were due in June 2022) and had not reviewed 68 other ACCs. As a result, DHCD lacked assurance that the approximately 4,900 residential units provided by these 77 recipients were compliant with the terms of the loan agreements."
As part of being contracted by the state, home developers are mandated to report tenants who are non-compliant things like age and income restrictions.
The audit found many examples of the department's failure to follow-up.
"DHCD did not adequately follow up on instances of noncompliance reported by the loan recipients. Our review disclosed that 57 (11 percent) of the 532 ACCs that DHCD reviewed for calendar year 2021 indicated that the recipients were not in compliance with certain terms of the loan agreements such as age and income requirements. For example, one recipient of a $4.2 million loan reported that one-third of its low-income housing units were occupied by individuals who exceeded the income limits specified in the loan agreement. DHCD could not readily document that it followed up with the 57 non-compliant loan recipients to ensure that the deficiencies were corrected."
In response, the department blamed the issue on high staff turnover.
Another red flag in the audit was the department's delayed reaction when housing health and safety concerns were raised.
State regulations require such issues to be addressed within 24 hours.
In some instances, auditors found that window varied anywhere from three to 11 months.
Finally the audit disclosed the agency's problems issuing Neighborhood Business Works venture debt loans.
"DHCD policy did not address key elements of the venture debt loan process, including public solicitation and award of loans; conflict of interest prohibitions; and guidance for establishing the loan amount, term, and collateral requirements."
According to DHCD records, there was $50.7 million in outstanding loans as of March.
The department agreed with most of the audits findings claiming that reforms are underway.
Read the full report below.
