Inspections and Evaluations Reports

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Issue Date: September 2008
File: IED-07-003

Title: HAP Overpayments to Multifamily Property Owners After Hurricane Katrina

We completed an inspection of Section 8 housing assistance payments (HAP) to owners of multifamily properties in Louisianathat were severely damaged or destroyed by Hurricane Katrina in August 2005. The tenants vacated these properties shortly after Katrina struck. In the storm's aftermath, HUD and the Louisiana Housing Finance Agency (LHFA) continued to subsidize property owners, although many properties under HAP contract were vacant and not habitable. In November 2005, HUD notified its New Orleansfield office that the owners of the vacant properties were entitled to HAP only for a 1-month grace period (September 2005).

The primary objective of the inspection was to determine the amount of Section 8 HAP overpayments that were made to these property owners and whether HUD had recaptured any of the overpayments. To satisfy this objective, we obtained and analyzed information from relevant HUD management and financial data systems and discussed our data with the Office of Multifamily Housing.

We determined that HUD and the LHFA made HAP overpayments of $1,607,283 to 27 multifamily property owners in Louisiana. Most of the overpayments were incurred for the month of October 2005. As of July 24, 2008, HUD and the LHFA had recovered a total of $527,407 related to 7 of the 27 properties. More than $1 million remains to be recovered, including $145,362 from two properties for which HAPs were resumed in March 2007 and January 2008, respectively.

HUD plans to send out collection letters to the property owners that have not made repayments. The draft letters inform owners to either remit the total amount of the HAP overpayment within 2 weeks or to have future HAPs reduced by the amounts owed to HUD in cases in which the owners plan to reopen their buildings to Section 8 tenants. Noncompliance with these instructions may result in administrative sanctions against the ownership/management parties.