Audit Of San Diego Housing Commission Reveals Loan Accounting Issues, But No Collection Defaults
A performance audit of San Diego Housing Commission (SDHC) loans released last week by City auditor Eduardo Luna revealed 24% of total outstanding interest, or $3.9M, owed the city by affordable-housing developers was collected over the last fiscal year. The loans represent public money borrowed to build low-income apartments projects. The interest collected, which is earmarked for developing more affordable housing, represented the total amount due during the last fiscal year.
SDHC did not fail to collect interest owed the city, SDHC spokesperson Maria Velasquez tells Bisnow. She says under terms of developer loan agreements, no interest or payments were due on seven of the 10 highest outstanding loans, because these projects have no positive cash flow.
Developers pay an agreed-upon percentage of the loan amount in interest and payments when annual revenue collected exceeds the cost of developing the project. If residual receipts are zero or negative, no payment is required, she explained, noting that interest continues to accrue and a balloon payment is due when the loan matures.
The Audit Committee met last Wednesday to clarify the results of the audit. A few issues related to the SDHC accounting system were determined in need of improvement. Specifically, the report authors noted that documentation submitted by developers was being accepted without independently reconciling the information with SDHC records. The report made several recommendations for changes.
In response, SDHC president/CEO Richard Gentry said his staff had already made changes in the agency’s loan-processing practices and promised to implement other recommendations included in the report.
Over the past six years, the commission helped develop 3,325 affordable housing units, which represents 63% of low-income apartments developed overall during this period. San Diego's homeless population is the fourth-largest in the nation, with 8,700 people without a fixed address and 50% of them living on the streets. Most recently, SDHC and affiliate affiliate Housing Development Partners reopened the historic Hotel Churchill in Downtown SD, which was renovated to provide 72, 321-SF affordable studio apartments for 59 homeless veterans, eight transitional youth from the foster system and eight former prisoners.