City audit finds several “serious” problems with Denver affordable housing program

(Photo Credit: HopeCommunities, Creative Commons, Flickr)

Denver’s affordable housing program has “multiple, significant problems,” the city auditor determined in a report released today.

The program, with its 1,200 units throughout the city, is overseen by the Denver Office of Economic Development (OED). That office earlier this year came under fire after a 9News investigation revealed that some the program’s residents were improperly sold housing for which their incomes were too high to qualify — and then abruptly informed they’d need to sell, possibly at a loss, and move on to other housing outside the program.

The new audit claims that the OED “incorrectly calculated initial sale and resale prices of affordable homes, resulting in both overpricing and underpricing of homes.” The report found three units were purchased for more than the allowed maximum price, and that the OED didn’t calculate a maximum sale price matrix at all during 2007, leading to up to 51 homes sold at too low a price.

Additionally, the audit found, the OED is improperly calculating income eligibility to guarantee affordable rates.

According to the audit, the OED also:

  • “Did not accurately collect fees from developers meant to fund affordable housing, and it dispersed incentive payments to developers in excess of annual limits.”
  • “Did not monitor federally funded rental projects for compliance in a timely manner.”
  • Included inaccurate dates in its compliance spreadsheet and in correspondence with the city’s Clerk and Recorder’s Office.

In a news release accompanying the report, Denver Auditor Timothy M. O’Brien said, “This audit revealed serious errors in the way the Office of Economic Development was running the program” and that errors like those “could keep our already too small affordable housing supply from jeopardy.”

O’Brien said the audit indicates major fixes are needed, and that some of the issues identified could recur.

“The Office of Economic Development has not demonstrated they can be certain these problems won’t happen again,” O’Brien said. “It’s time to put stronger internal controls in place over pricing, income verification and recording to ensure the city is taking good care of its affordable housing supply and working to keep units affordable for the long term.”

In its own release on Thursday, the OED said that many of the problems O’Brien’s office detailed can be blamed on a “staffing shortage.” The agency’s executive director, Eric Hiraga, also said his staff was already aware of most of those problems.

“From day one of my tenure with OED 15 months ago, we have been working on many levels to improve operating standards across all of our affordable housing programs and investments,” Hiraga said.

“Our homeownership program provides a critical path for residents to live and stay in Denver. Preserving and protecting our entire affordable housing portfolio now and in the future is essential. Today’s recommendations are a valuable addition to our efforts already underway.”

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