Honolulu is losing millions of dollars in federal funds that could provide housing for homeless people and other aid to poor communities because it’s not spending the money fast enough.

The U.S. Department of Housing and Urban Development in a recent report deemed Honolulu a “high-risk grantee” because it’s failed to meet federal regulations requiring that the money be spent within certain time frames. The report evaluated the city’s performance from June 2016 to June 2017.

The federal grants have been used to fund apartments for seniors and provide interest-free loans to help families afford down payments. They’ve paid for projects as varied as a youth center in Nanakuli to a gymnasium in Waipahu.

Mark Chandler, director of community planning and development for HUD in Honolulu,  said more than 1,000 local governments receive the federal grant money and it’s rare to miss the mark two years in a row like Honolulu.

A man sleeps on the bench across from the Chinatown Gateway Plaza in Honolulu. The building received federal grant funding, but a 2017 study found the city was wasting money by leaving part of the building vacant. Anita Hofschneider/Civil Beat

The city also has the distinction of failing to meet deadlines across all four HUD grants that the city administers.

The city also hasn’t been able to spend nearly $1.5 million from a new federal housing trust fund that the state manages.

“Basically it’s just poor performance on the city’s part, failure to implement the program in a way that the funds can get out to the community in a timely manner,” Chandler said in a phone interview Friday.

The mismanagement comes as the median price of a single-family home in Honolulu reaches an all-time high for the fifth year in a row, according to the real estate research company Locations. It costs $760,000 to buy a median home in Honolulu now and $410,000 for a condo, prompting many to leave the island, crowd in with family or friends or become homeless.

Roy Amemiya, the city’s managing director, said Friday that the city has been taking many steps to improve its grant administration in response to HUD’s concerns.

The city has brought on new leadership and restructured grant management responsibilities between departments. The city will also start including the grants as part of its annual budget planning process, instead of continuing to rely on nonprofits to bid for the funds.

“We’re not sitting back and trying to just do things just like we did in the past,” Amemiya said. “This is a high priority for us.”

Failure Across Multiple Programs

Overall, the city lost nearly $5 million in federal money last year that could have been used for housing. That’s on top of $1.45 million the city had to return last summer in response to a critical federal audit.

HUD concluded that the city is on track to fail to meet deadlines for the third year in a row, with an estimated $18 million in unspent grant funding expected next summer.

Federal Housing Grants

The November report found the city didn’t spend $2.3 million to support low-income housing, despite having more than eight years to do so.

The federal government took back the money, Chandler said, which was part of the federal HOME Investment Partnerships Program. The money can be used for rental assistance for low-income people or the purchase, creation or rehabilitation of affordable units.

Chandler said the money could have been used to house the homeless. Nearly 5,000 people were homeless on Oahu last year according to a January snapshot of the population. The number has been rising steadily over the past five years.

“Our efforts in the City and County are to assist the homeless, but we’re losing money for the homeless,” Chandler said.

Pam Witty-Oakland is the new head of the city’s Department of Community Services. She’s one of the new leaders that Amemiya says will help improve grant management.

She said Friday that HUD used to allow the city to spend old funds but federal regulations changed. She said that’s why the city couldn’t spend the HOME funds, which had been allocated to old projects that never materialized.

The city also lost $1,425,000 to support affordable housing production from a relatively new federal program, the Housing Trust Fund. The money is supposed to help extremely low-income households, including people at risk of homelessness.

Chandler says HUD gave about $3 million to the state which split the funding between Honolulu and Kauai.

Witty-Oakland said that the city asked for proposals to use the money, but only one nonprofit submitted an application. The nonprofit didn’t have enough funding to complete the project, so the city decided to return the money to the state so that another county could use it.

The city’s poor performance caused HUD to slash the overall amount of money that Honolulu receives for Community Development Block Grants. That money can be used not only for affordable housing but also to revitalize low- and moderate-income neighborhoods like Waianae and Waimanalo by funding projects like community centers and firetrucks.

Due to Honolulu’s poor performance, HUD is going to give the city $6.3 million instead of $7.2 million.

“The city could have applied 100 percent of that money toward some kind of homeless activity,” Chandler said. “Instead we lose $815,000.”

More money could be lost if the city doesn’t address concerns about particular projects raised in a report last fall. The city is also at risk of losing another $100,000 in two other federal grant programs intended to help homeless people and people with HIV/AIDS.

Chandler said HUD is giving the city a few extra months to spend the money.

Reforms Underway

The 2016 audit of the city’s grant management found that the decentralized administration of the money “created dysfunction, inefficiency, and wasted grant funds.”

The city used to have a housing department, but now housing responsibilities are spread out across multiple agencies. The administration of HUD grants is shared by the Department of Budget and Fiscal Services and the Department of Community Services.

Chandler said HUD wanted the city to consolidate its housing grant management into a single office. The city resisted merging the operations and instead clarified which departments are responsible for which aspects of housing grant management, Chandler said.

Now the managing director’s office is ultimately responsible for the grant administration, Amemiya said. That includes selecting projects, reviewing monitoring reports and executing grant agreements.

In addition to appointing Oakland to the Department of Community Services, the city is also bringing on a new deputy budget director.

The biggest change is that the city is going to start considering the grants as part of its annual budget analysis process, rather than money to hand out to nonprofits, Amemiya and Witty-Oakland said.

“We’re not sitting back and trying to just do things just like we did in the past. This is a high priority for us.” — Roy Amemiya, Honolulu Managing Director

Amemiya said that Honolulu was an outlier among other grant recipients by “trying to accommodate nonprofits.” The City Council passed a resolution in August that says the city can use the federal housing grants for city-sponsored initiatives, instead of just soliciting projects from nonprofits.

“Quite frankly before this mayor no one had the political will (to change that),” Amemiya said. “The City Council has come to realize that doing the same thing over and over again is not a very good outcome.”

Witty-Oakland said that she expects the city’s reforms to the program to pay off.

“We’ve made fundamental changes,” she said. “We’re confident that we’ll be able to achieve compliance with the HUD’s deadlines and regulations.”

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