A searing audit of D.C.’s most important affordable housing funding source has reignited concerns about opaque decision-making and a lack of accountability at the city’s Department of Housing and Community Development, and a member of the D.C. Council’s housing committee now plans to introduce legislation to tighten oversight of the agency.

The recent report from D.C.’s Office of the Inspector General says the housing agency, under the recently retired director Polly Donaldson, failed to meet a legally mandated goal to direct at least 50% of the city’s annual Housing Production Trust Fund dollars toward creating and preserving homes for the city’s poorest residents. During the 2021 fiscal year, DHCD allocated just 27% of the trust fund to extremely low-income housing, according to a breakdown the agency submitted to the D.C. Council. The share was 18% in 2020, and 13% in 2019.

Extremely low-income housing refers to homes affordable to a four-person household earning no more than $38,700 per year, or 30% of the region’s median family income. The audit concludes that over four years, DHCD allocated nearly $82 million intended for extremely low-income households to higher-income housing instead.

The D.C. Council previously required the trust fund to reserve at least 40% of its dollars for extremely low-income housing; lawmakers increased the target to 50% in 2019. Today, 40% percent of the funds must support homes for very low-income households earning up to 50% percent of MFI ($64,500 for a family of four) and 10% are set aside for low-income households earning up to 80% of MFI ($103,200).

A spokesperson for DHCD says the report "ignores [the] tremendous success" of the Housing Production Trust Fund.

"Since 2015, the Bowser Administration has invested over $1 billion in the production and preservation of affordable housing. We have delivered over 14,250 units of affordable housing and there are another 12,300 in the pipeline or under construction," spokesperson Richard Livingstone writes in a statement. "The overwhelming majority of those units are for families making 50% of the Median Family Income or below, surpassing statutory requirements for very low-income households."

An earlier review of the fund's performance, undertaken in 2017 by the Office of the District of Columbia Auditor, also found underspending on extremely low-income housing during the final year of former Mayor Vince Gray's administration in 2014. The agency exceeded its then-40% benchmark in the 2016 fiscal year, according to data DHCD submitted to the Council.

One reason DHCD has often failed to reach its targets for extremely low-income housing, the latest audit says, is that Donaldson has exercised broad discretion in selecting projects for funding, rather than following recommendations from the agency's Development Finance Division, which scores projects' viability based on publicly available criteria.

The housing department defended Donaldson's discretion in written responses to OIG.

"The agency's organizational law allows for this discretion, and there is absolutely nothing wrong, as a policy matter, with considering more holistic goals — such as advancing neighborhood diversification and making high-amenity neighborhoods accessible to low-income people," the agency wrote.

DHCD described the 50% target for extremely low-income housing as "aspirational."

"Make no mistake: the Administration desires both to comply with the letter and spirit of the law and to help residents most in need, but housing those at the 0-30% poverty levels is a lot tougher and more complicated to implement than just setting a big goal," it wrote.

Donaldson announced her retirement from the Department of Housing and Community Development one day after the Office of Inspector General submitted a draft of the audit to the agency on Sept. 9. It's not clear whether the two events are related. Donaldson left the post at the end of September; Drew Hubbard, the department's former deputy director, became interim director Oct. 1.

Since the audit's release, the chair of the D.C. Council's housing committee — which oversees DHCD — has not announced any new efforts to improve performance at the agency. In an interview with DCist/WAMU, D.C. Council member Anita Bonds (D-At Large) says the audit raised important issues, but the 50% goal — which she herself proposed in 2019 legislation — is more of a guideline than a firm requirement.

"It would be great if we could hit that goal... [but] the law didn't include any penalties," Bonds says.

One of Bonds' colleagues on the housing committee, Council member Elissa Silverman (I-At Large), is taking a more assertive approach.

"The goals aren't aspirational, they're essential," says Silverman. "If there's an issue with [meeting them], then DHCD needs to inform all of us that there's a problem, and we all need to get together to try to come up with a solution."

Silverman plans to introduce two bills in the coming weeks that staff say would improve accountability and transparency at DHCD. One would require the agency to update the council each year about the affordability level of projects for which it has obligated funding, with information about which developers are getting awards, and which were rejected and why. (Silverman introduced a similar bill in 2019.) The second bill would require the agency to seek a waiver from the council when it can't meet its benchmarks for funding extremely low-income housing or other affordability bands. Currently, seeking a waiver is optional.

After allocating at least $100 million to HPTF every year since 2015, Bowser boosted its funding to $250 million in the 2022 budget, a historic high. Bowser set a goal in 2019 to create 36,000 new housing units citywide by 2025, with a third of them priced for lower-income residents.

But especially as land values and costs rise, the housing agency has said it requires more local housing vouchers to make many deeply affordable housing projects viable. In its written responses to OIG, DHCD said funds from the city's Local Rent Supplement Program — which makes up the difference between market rents and what a tenant can pay — have been unpredictable in the past, making it tougher to guarantee the financial sustainability of extremely low-income projects. But the department acknowledged that D.C.'s recent investments in the program — celebrated by affordable housing advocates — are likely to get more deeply affordable projects across the finish line.

"It has been an incremental process over the years to target the 50% and below MFI bucket, and we are now at the next stage where we can align our HPTF production resources with essential project operating resources to better target the 30% and below MFI bucket for the first time," the agency wrote.

The D.C. Fiscal Policy Institute, a progressive think tank that has advocated for stricter oversight of the trust fund, says D.C.'s recent investments into affordable housing could help the housing department finally overcome historical challenges it has faced in meeting the needs of the city's lowest-income residents. But the influx of funding doesn't let DHCD off the hook for running roughshod over what's supposed to be a public and transparent project selection process, says DCFPI policy analyst Eliana Golding.

"We look to our our government tools to be effective, efficient, and accountable. And we also know that they're using our tax dollars," Golding says. "So I think there's a higher standard of reporting that needs to be accomplished by DHCD in order to really satisfy the demands of constituents and of lawmakers."