DENVER – Denver made some progress in improving the communication and accountability of its affordable housing programs, but remaining disagreements and impacts from the COVID-19 pandemic continue to hold the city back from preserving affordability in the city, according to a follow-up report from Denver Auditor Timothy M. O’Brien, CPA.
“Housing prices in Denver continue to increase rapidly, and in the current recession, income isn’t increasing at the same pace,” Auditor O’Brien said. “We need more affordable housing inventory and our audit recommendations should be implemented to ensure the resources we have are helping as many people as possible.”
The August 2019 audit found weaknesses in how Denver makes sure affordable homes stay in the city’s affordable housing program inventory and in how the city makes sure the program is not abused through illegal rentals and other violations.
The Department of Housing Stability, formerly part of Denver Economic Development & Opportunity, disagreed with six of our recommendations in the initial audit. We did not update the status of recommendations that the department disagreed with, as managers presumably would not have taken action toward implementing them. However, the underlying risks that these recommendations sought to address remain.
The department disagreed with our recommendations related to improving monitoring and enforcement of affordable housing violations. By not performing and documenting annual occupancy monitoring, the department is not ensuring homeowners follow the requirement to keep their affordable home as their primary residence.
The department also disagreed with our recommendations to help the city avoid losing affordable housing inventory to foreclosures.
“Although we cannot follow up on these recommendations, my disappointment remains. I hope city leaders will recognize the importance of not losing affordable homes from our already severely limited inventory,” Auditor O’Brien said.
We found in our follow-up efforts that the department partially implemented two of our recommendations but still has work to do. In one instance, managers started work to create a program evaluation framework and assess program objectives. However, the pandemic led to a freeze on crucial staffing positions and the department temporarily stopped work on creating a needed online reporting process.
The department also started using a database system, Salesforce, to track data. This includes households served, demographics, whether households received counseling, and narratives of cases from contractors. The audit team hopes to see this data used in assessments to make program changes and improvements in the future.
“By tracking outcomes and using data to assess program performance, department managers can optimize work and use limited resources to help as many households as possible,” Auditor O’Brien said. “The effects of the COVID-19 pandemic have tightened budgets and created workflow limitations, which makes these data-driven tools more important than ever.”
The department also partially implemented a recommendation to communicate more with other city agencies. We found evidence that communication has improved with four other offices, but in the future, we hope to see these communications documented and formalized.
The Department of Housing Stability fully implemented three of our recommendations and the Assessor’s Office implemented one of our other recommendations.
We determined Housing Stability has effectively collaborated with their housing assistance program vendors to ensure they are verifying addresses. The department also started recording the release of covenants and the chief housing officer now receives monthly updates about affordable homes entering foreclosure.
Meanwhile, the Assessor’s Office created protests for all 51 affordable homes identified as overvalued during the original, and the Denver Board of Equalization approved the reduction of the homes’ assigned property values during its August 2019 meeting. This resulted in the Department of Finance issuing nearly $49,250 in property tax refunds to the owners of affordable homes.
This was the second audit and follow-up of affordable housing programs. After the first audit in 2018, the city completed a list of its affordable housing inventory but we found it could still be allowing the sale and resale of affordable properties at incorrect prices.
“The Department of Housing Stability has undergone a lot of change and improvement over the past three years,” Auditor O’Brien said. “Now that leadership and structure are in place, I will expect to see more significant improvements in the future.”