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HUD Inspector General Reports Major Financial Recoveries and Oversight Improvements

Federal watchdog agency identifies nearly $500 million in recoveries while addressing critical housing challenges across America. The U.S. Department of Housing and Urban Development s Office of Inspector General (HUD OIG) has published its semiannual report to Congress, highlighting significant financial recoveries and systemic improvements across federal housing programs during the six-month period that ended on March 31, 2025. Record Financial Impact and Enforcement Actions The HUD OIG s oversight activities generated significant financial returns for taxpayers, with audit and investigative efforts yielding nearly half a billion dollars in recoveries and recommendations. Audit activities alone led to collections of $387.4 million, while identifying an additional $42.3 million in funds that could be better utilized and questioning $8.1 million in costs. Investigative efforts produced equally impressive outcomes, with over $61 million in recoveries and receivables. The enforcement actions were thorough, leading to 36 arrests, 58 indictments, and 92 administrative sanctions, including 60 debarments from federal programs. Among the most notable prosecutions, a landlord received a 17-year prison sentence for fraudulently obtaining federal rental assistance while violating the Fair Housing Act. Similarly, a businessman was sentenced to 17 years for orchestrating a reverse mortgage fraud scheme that specifically targeted elderly homeowners. Addressing Systemic Housing Quality Concerns The report highlights ongoing challenges in maintaining adequate housing conditions within HUD-assisted properties. Inspections revealed that 65% of the observed housing units had deficiencies, with 63 life-threatening issues identified. These findings underscore the continued struggle to ensure that federally subsidized housing meets basic safety and health standards. Under the Rental Assistance Demonstration (RAD) program, initial inspections of converted properties experienced significant delays, with 50% lacking timely management and occupancy reviews. The OIG has recommended improvements to the timing and completion processes of inspections to address these critical gaps. One investigation led to a civil lawsuit against a management company for lead paint safety violations impacting over 2,500 apartments, highlighting the serious health risks faced by residents in certain assisted housing properties. Fraud Risk Management Needs Enhancement The report highlights fraud risk management as a vital area needing attention, especially within large public housing authorities. An audit of the New York City Housing Authority (NYCHA) showed a lack of a comprehensive fraud risk strategy, despite some existing anti-fraud measures. The authority s approach was described as mainly reactive instead of proactive. This finding has led the OIG to recommend evaluating fraud risk management practices at other large public housing authorities across the country, indicating that NYCHA s challenges may reflect broader systemic issues. Progress in Resolving Past Recommendations Collaboration between HUD and the OIG has produced positive outcomes in addressing previously identified issues. During the reporting period, HUD resolved 135 open recommendations, bringing the total number of outstanding recommendations down to 693. This trend shows a consistent decrease in unresolved audit findings. However, although not part of the report, it should be noted that the recent and planned cuts to HUD staff may slow the pace of corrective activity. Since October 2022, the OIG has identified 283 non-monetary benefits resulting from its recommendations, including 77 guidance enhancements, 64 process improvements, 112 increases in program effectiveness, and 30 enhanced accuracies. These improvements highlight the broader impact of oversight activities beyond direct financial recoveries. Challenges in FHA Program Oversight The Federal Housing Administration continues to face challenges in managing counterparty risks with mortgage lenders and servicers. The OIG found that Carrington Mortgage and MidFirst Bank misapplied FHA foreclosure requirements in over 18% and 14% of cases, respectively. Additionally, other lenders, including CMG Mortgage and loanDepot.com, demonstrated deficiencies in their quality control programs for FHA-insured loans. These findings underscore the necessity for improved oversight of the private entities on which HUD depends to effectively deliver housing assistance programs. Disaster Recovery and Grants Management HUD s administration of disaster recovery grants continues to encounter monitoring challenges. Although grantees under the National Disaster Resilience Program faced delays in completing activities, they remain on track to achieve their overall goals. The OIG has recommended enhanced action plans and improved documentation of collaboration with partners. In broader grants management, the OIG identified compliance issues with federal transparency requirements, noting that prime award recipients did not consistently report subawards as mandated by the Federal Funding Accountability and Transparency Act. Technology and Cybersecurity Improvements HUD s information security program has achieved maturity level 3, but it has not yet reached full effectiveness. Penetration testing uncovered significant weaknesses in data protection and website security, prompting recommendations for comprehensive enhancements to safeguard sensitive information and systems. Whistleblower Protections and Transparency The OIG continues to underscore the significance of whistleblower protections in ensuring program integrity. During the reporting period, 10,214 hotline intakes were processed, with 6,631 referred to HUD program offices for action. The Public and Indian Housing office received the highest number of referrals at 5,250, highlighting ongoing concerns in this program area. Notably, the report found no attempts by HUD to interfere with OIG independence, and no instances of whistleblower retaliation were reported, indicating a healthy oversight environment. Looking Forward The semiannual report illustrates both the ongoing challenges that federal housing programs face and the effectiveness of independent oversight in addressing these issues. With nearly $500 million in financial impact and numerous process improvements, the HUD OIG s work continues to yield substantial returns on taxpayer investment while ensuring that federal housing assistance reaches those who need it most safely and effectively. The findings emphasize the crucial role of strong oversight in preserving the integrity of programs that offer housing assistance to millions of Americans while pointing out areas where ongoing attention and enhancement are vital for program success.

HOTMA Compliance Deadline Extended to January 1, 2026 for HUD Multifamily Housing Programs

On May 30, 2025, the Office of Multifamily Housing Programs issued a new Housing Notice extending the mandatory compliance date for the Housing Opportunity Through Modernization Act of 2016 (HOTMA). The previous deadline of July 1, 2025, has now been extended to January 1, 2026, for all owners participating in HUD multifamily project-based rental assistance programs. What This Means for Owners and Agents Full HOTMA compliance is required for all tenant certifications dated on or after January 1, 2026. This includes adherence to both the mandatory provisions and any discretionary policies implemented by owners. Owners and agents may voluntarily adopt HOTMA compliance earlier by utilizing the rent override function in the Tenant Rental Assistance Certification System (TRACS). Interim Compliance Guidance Until a property fully implements HOTMA, HUD advises the following: Continue to follow your current Tenant Selection Plan (TSP) as approved by HUD or your Contract Administrator. Maintain adherence to existing Enterprise Income Verification (EIV) policies and procedures. Ensure any early implementation steps are consistent with TRACS capabilities and accurately documented in tenant files. Key Takeaways New HOTMA compliance deadline: January 1, 2026 Optional early adoption is available through TRACS Existing policies remain in effect until full HOTMA compliance is achieved LIHTC Impact Owners and operators of LIHTC projects should contact the relevant Housing Finance Agency (HFA) for information on the effective date in their respective states. If you have any questions regarding the HOTMA implementation timeline, updating your policies, or the use of TRACS features, please contact our office. We are here to help ensure a smooth transition to full HOTMA compliance.

A. J. Johnson Partners with Mid-Atlantic AHMA for December Training on Affordable Housing - June 2025

In June 2025, A. J. Johnson will partner with the MidAtlantic Affordable Housing Management Association for three live webinar training sessions for real estate professionals, particularly those in the affordable multifamily housing field. Following the LIHTC webinars, AJ will review testable areas and in-person administration of the Housing Credit Certified Professional (HCCP ) exam. The following sessions will be presented: June 10: Intermediate LIHTC Compliance - Designed for more experienced managers, supervisory personnel, investment asset managers, and compliance specialists, this program expands on the information covered in the Basics of Tax Credit Site Management. A more in-depth discussion of income verification issues is included, as well as a discussion of minimum set-aside issues (including the Average Income Minimum Set-Aside), optional fees, and use of common areas. The Available Unit Rule is covered in great detail, as are the requirements for units occupied by students. Attendees will also learn the requirements for setting rents at a tax-credit property. This course contains some practice problems but is more discussion-oriented than the Basic course. A calculator is required for this course. June 11: Advanced LIHTC Compliance - This full-day training is intended for senior management staff, developers, corporate finance officers, and others involved in decision-making concerning how LIHTC deals are structured. This training covers complex issues such as eligible and qualified basis, applicable fraction, credit calculation (including first-year calculation), placed-in-service issues, rehab projects, tax-exempt bonds, projects with HOME funds, Next Available Unit Rule, employee units, mixed-income properties, the Average Income Minimum Set-Aside, vacant unit rule, and dealing effectively with State Agencies. Individuals who take both training days will be provided with study materials and a practice exam to assist in preparation for the HCCP exam, which will be administered on June 12. June 12: Review of testable areas and administration of the Housing Credit Certified Professional (HCCP ) exam (In-person exam in Richmond, VA). After two days of intensive and comprehensive LIHTC training, AJ will review program requirements and administer the HCCP exam in person. June 24: Developing Smoke-Free Policies for Multifamily Housing - A smoke-free policy in your apartment community will help protect your property and residents from smoke damage and reduce the risk of fires. You will save money on turnover expenses because apartments will cost less to clean, repair, and repaint. Living in a smoke-free environment promotes healthier hearts and lungs. What are the other benefits of smoke-free housing? Your family, guests, pets, and building staff will all find the air more pleasant. This 2.5-hour training will assist owners in understanding the steps necessary to go "smoke-free." It will include (1) a discussion of the legal issues related to prohibiting smoking, (2) the advantages of smoke-free housing, and (3) the steps to implementing such a policy, including details on what to include in the policy. This session is a must for any property looking to go smoke-free and will provide much-needed reinforcement and guidance for those who already have. These sessions are part of the year-long collaboration between A. J. Johnson and MidAtlantic AHMA and is designed to provide affordable housing professionals with the knowledge needed to effectively manage the complex requirements of the various agencies overseeing these programs. Persons interested in any (or all) training sessions may register by visiting either www.ajjcs.net or https://www.mid-atlanticahma.org.

Navigating Solicitation Bans in Apartment Communities: Religious and Political Canvassing Rights

Understanding the Legal Landscape Property managers and apartment community owners often implement solicitation bans to protect residents from unwanted disturbances. However, these policies can create complex legal scenarios when religious groups and political campaigns seek to canvas on the property. The distinction between commercial solicitation and noncommercial canvassing creates important legal boundaries that property managers should understand. The Constitutional Framework The U.S. Supreme Court has consistently ruled that noncommercial canvassing including religious outreach and political campaigning receives substantial protection under the First Amendment. This protection differs significantly from commercial solicitation, which can be more readily restricted. "The mere fact that the ordinance covers so much speech raises constitutional concerns," wrote Justice Stevens in the landmark Watchtower Bible & Tract Society v. Village of Stratton (2002) case, highlighting how requirements to obtain permits before engaging in door-to-door advocacy fundamentally conflicts with our conception of a free society. This case built upon decades of precedent established in cases like Lovell v. City of Griffin (1938), Schneider v. State(1939), and Cantwell v. Connecticut (1940), where the Court consistently struck down ordinances requiring permits for door-to-door solicitations, particularly those involving religious expression. Private Property Considerations The application of these constitutional principles becomes more nuanced in the context of private property, such as apartment communities. While public spaces must generally respect constitutional freedoms of expression, private property owners maintain certain rights to control access and activities on their premises. Key factors affecting an apartment community s ability to restrict canvassing include: 1. Property Access Structure: Communities with truly private roads and gated access may have greater latitude in restricting entry than those with public access points. 2. Local and State Regulations: Regulations vary significantly by jurisdiction. Some municipalities specifically exempt religious and political canvassers from solicitation restrictions, while others include them in "no solicitation" ordinances. 3. Reasonable Time, Place, and Manner Restrictions: Even when canvassing must be permitted, property owners may implement reasonable restrictions regarding when and how such activities occur, provided these restrictions don t effectively eliminate the ability to canvas. Best Practices for Property Managers Property managers seeking to balance resident privacy with legal compliance should consider these approaches: 1. Review Local Laws: Understand specific municipal and state regulations governing solicitation and canvassing in your jurisdiction, as these vary widely. 2. Differentiate Commercial and Noncommercial Activities: Policies should clearly distinguish between commercial solicitation (which can generally be prohibited) and protected noncommercial canvassing. 3. Implement Reasonable Restrictions: Rather than blanket bans, consider time limitations (e.g., no canvassing after 8 PM) and registration requirements that don t impose undue burdens. 4. Educate Residents: Inform residents about their individual rights to refuse engagement with canvassers while respecting the broader legal framework permitting such activities. 5. Consult Legal Counsel: Given the complex interplay between constitutional rights and property management, seek legal advice when developing solicitation policies. The Resident Perspective Individual residents maintain the right to refuse interaction with canvassers. While the constitutional framework may permit canvassing within the community, no resident is obligated to engage with canvassers who approach their door. Property managers should ensure residents understand they can: Post individual "No Soliciting" signs on their specific units Verbally decline conversations with canvassers Report harassment or persistent unwanted contact to management Conclusion The tension between solicitation bans and constitutional protections for religious and political expression creates an ongoing challenge for apartment community management. While complete prohibition of noncommercial canvassing likely exceeds legal boundaries, thoughtful policies can balance resident privacy concerns with constitutional requirements. Property managers should approach this issue with careful consideration of local regulations, the physical structure of their communities, and the important distinction between commercial solicitation and constitutionally protected expression. By developing nuanced policies rather than blanket prohibitions, communities can navigate this complex legal terrain while maintaining a positive living environment for residents. Disclaimer: This article provides general information for educational purposes only and should not be construed as legal advice. Consult with a qualified attorney for guidance on specific situations.