720-913-5000 auditor@denvergov.org

Audit Report

Preserving Affordable Housing for Denver Residents: Denver Economic Development & Opportunity and the Assessor’s Office

To determine whether Economic Development’s compliance efforts and other processes follow covenant requirements and regulations to preserve affordability and prevent involuntary displacement, to examine how well locally funded programs and contracts are monitored, and to determine the effectiveness of Economic Development’s processes to measure meeting strategic goals.

Watch the Audit Committee presentation here soon.

Our audit revealed that Denver Economic Development & Opportunity is not ensuring affordable housing is preserved and involuntary displacement is prevented. In this finding, the audit team determined that Economic Development is not evaluating its affordable housing programs’ effectiveness, is not adequately enforcing affordable housing violations, is not effectively communicating with other agencies about compliance efforts, and has not created processes for preserving foreclosed affordable housing units. These deficiencies impede Economic Development’s ability to preserve its affordable housing inventory, to evaluate whether program goals are being met, and to successfully resolve and prevent compliance violations.

Through stronger program design and evaluation, contract monitoring, and communication, Denver Economic Development & Opportunity will be better equipped to meet its goals to preserve affordable housing and prevent involuntary displacement of Denver residents. Our report lists several related recommendations.

I am disappointed Denver Economic Development & Opportunity has chosen to disagree with recommendations that would clearly advance the city’s affordable housing objectives. Further explanation is in the Auditor’s Addenda included in the Recommendations section of the report and included in full on pages 57-59.

This performance audit is authorized pursuant to the City and County of Denver Charter, Article V, Part 2, Section 1, “General Powers and Duties of Auditor,” and was conducted in accordance with generally accepted government auditing standards. Those standards require we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

We extend our appreciation to the Denver Economic Development & Opportunity personnel who assisted and cooperated with us during the audit. For any questions, please feel free to contact me at 720-913-5000.

Denver Auditor’s Office

Timothy M. O’Brien, CPA Auditor

Median incomes have grown in Denver at nearly three times the national average. However, housing costs have outpaced growth in income, in some areas increasing by more than 50 percent between 2011 and 2014. Denver Economic Development & Opportunity’s Housing Division is responsible for creating and preserving housing options that are accessible and affordable to all Denver residents.

Its strategic goals are to preserve affordability, prevent involuntary displacement, create affordable housing in vulnerable areas, and promote equitable and accessible housing.

NEED THIS COPY

In our second audit of the City’s affordable housing program, we found that Economic Development has not ensured that it is meeting its strategic goals of preserving affordable housing and preventing involuntary displacement.

Denver Economic Development & Opportunity Has Not Ensured Affordable Housing Is Preserved and Involuntary Displacement Is Prevented

  • Denver Economic Development & Opportunity does not evaluate whether its programs are effective.

    The agency measures outputs but not outcomes. It also is not adequately monitoring or evaluating temporary housing assistance programs.

  • Economic Development does not enforce housing violations effectively.

    Economic Development should improve its process to remediate violations and does not have formalized methods for prioritizing and documenting cases. We identified other cities that monitor occupancy annually.

  • Economic Development is not effectively communicating with other City agencies to enforce compliance and share information.

    Poor communication has cost owners of affordable homes thousands of dollars and hampers City functions.

  • Affordable homes have been lost to foreclosure.

    Economic Development lacks a management strategy with accompanying policies and procedures for foreclosures.

1.1  Evaluate Programs – Denver Economic Development & Opportunity’s Chief Housing Officer should evaluate the City’s affordable housing program to determine whether strategic goals are being achieved and program objectives are being met. Specifically, Economic Development should:

    • Evaluate how well activities are carried out and reach intended individuals to be served by the programs in their early stages;
    • Assess the extent to which the programs achieve their objectives, including intermediate and final outcomes; and
    • Use the evaluation results to assess the effectiveness of the programs, identify how to improve performance, and guide resource allocation.

Agency Response: Agree, Implementation Date – December 31, 2019

1.2 Collaborate with Vendors – Denver Economic Development & Opportunity’s Chief Housing Officer should collaborate with Economic Development’s vendors for the Temporary Rental and Utility Assistance and Temporary Mortgage Assistance programs to design and implement outcome evaluations and assess the extent to which each program achieves its objectives. Specifically, Economic Development should:

    • Incorporate more explicit guidance surrounding how the vendors manage their case files for the programs;
    • Hold periodic meetings with all housing assistance program vendors to ensure consistency in processes; and
    • Ensure all housing assistance program vendors verify all addresses for individuals receiving services with accurate maps of Denver, such as those managed by the Assessor’s Office.

Agency Response: Agree, Implementation Date – December 31, 2019

1.3 Improve Policies and Create Procedures for Monitoring and Enforcement – Denver Economic Development & Opportunity’s Chief Housing Officer should improve policies and create and implement procedures for monitoring and enforcement, such as those recommended in standards from the Grounded Solutions Network, including:

  • Identification of method and frequency of monitoring
  • List of required homeowner compliance documentation
  • Procedure for following up with those who do not respond after the first communication
  • Identification and definition of potential program violations (e.g., nonowner occupancy, unauthorized renting, unauthorized title transfer)
  • Identification of conditions that would trigger a site visit
  • Process for responding to violations
  • List of possible repercussions for violations
  • Procedures for following up on violations

Agency Response: Disagree, Implementation Date – Completed (See pg 37 for Agency Narrative, see pg 38 for Auditor’s Addendum)

1.4 Perform Annual Occupancy Monitoring – Denver Economic Development & Opportunity’s Chief Housing Officer should perform annual occupancy monitoring by having homeowners sign a document, such as an affidavit, affirming the affordable unit is their primary residence and by having them provide evidence they live there (e.g., provide a copy of their driver’s license or utility bill to Economic Development).

Agency Response: Disagree (See pg 38 for Agency Narrative, see pg 39 for Auditor’s Addendum)

1.5 Formalize Communication with Related City Agencies – Denver Economic Development

& Opportunity’s Chief Housing Officer should determine information that needs to be communicated to and received from other City agencies, decide the most efficient and effective methods of communication, and formalize and document a plan of communication with the Assessor’s Office, the Denver 311 contact center, the Department of Excise and Licenses, and the Public Trustee.

Agency Response: Agree, Implementation Date – September 15, 2019

1.6 Process Abatements – The Assessor’s Office should create protests for all overvalued affordable homes and work with Department of Finance personnel to issue returns of property taxes.

Agency Response: Agree, Implementation Date – September 30, 2019

1.7 Design Policies and Procedures – Denver Economic Development & Opportunity’s Chief Housing Officer should design policies and procedures for identifying affordable homes in foreclosure and recovering foreclosed affordable housing units.

Agency Response: Disagree, Implementation Date – Completed (See pg 40 for Agency Narrative, see pg 40 for Auditor’s Addendum)

1.8 Record Release of Covenant – Denver Economic Development & Opportunity’s Chief Housing Officer should record a release of covenant after Economic Development has determined the affordable home should be released from its covenant.

Agency Response: Agree, Implementation Date – December 31, 2019

1.9 Assess the Cause of Foreclosures – Denver Economic Development & Opportunity’s Chief Housing Officer should periodically assess and review the cause of affordable home foreclosures. This information should be used to identify possible changes to policies and procedures to prevent future affordable homes being lost to foreclosure.

Agency Response: Disagree (See pg 41 for Agency Narrative, see pg 41 for Auditor’s Addendum)

1.10 Ensure Timely Notification – Denver Economic Development & Opportunity’s Chief Housing Officer should ensure that Economic Development receives monthly reports from the Public Trustee listing affordable homes beginning the foreclosure process.

Agency Response: Agree, Implementation Date – Completed

1.11 Establish First Right of Refusal – Denver Economic Development & Opportunity’s Chief Housing Officer should establish the City’s first right of refusal or first right to purchase for-sale affordable housing units that are foreclosed on.

Agency Response: Disagree (See pg 42 for Agency Narrative, see pg 42 for Auditor’s Addendum)

1.12 Remedy Defaults – Denver Economic Development & Opportunity’s Chief Housing Officer should pursue the authority to remedy defaults by purchasing the unit or paying defaulted mortgage payments before foreclosure.

Agency Response: Disagree (See pg 42 for Agency Narrative, see pg 42 for Auditor’s Addendum)

Follow-up report

A follow-up report is forthcoming. 

In the news

Denver agencies are at odds over how to manage affordable housing” – The Denver Channel – August 16, 2019

Audit Team: Katja E.V. Freeman, Jared Miller, Shaun Wyson, Megan O’Brien, Taylor Younger
Methodological Support: Samuel Gallaher, Robert Persichitte