On May 16, the County auditor submitted a preliminary report on the County’s affordable housing program to the Board of Supervisors. Having previewed just 81 of the estimated 395 affordable housing units in the program, the auditor, Bob Geis, found an astonishing level of violations of occupancy, rental and sale restrictions. Preliminary indications are 25% of owners are in violation.

The audit found that Housing and Community Development, the department responsible for the program, had no accurate record of the total number of units subject to its jurisdiction. The auditor also found problems in the application and qualification process, which included instances of housing employees waiving some requirements to benefit some unqualified applicants. When the auditor attempted to investigate, records of suspect transactions were missing.

Faced with the enormity of fraud in the program, supervisors’ reactions were decidedly mixed. Supervisors Brooks Firestone and Susan Rose focused not just on reform but also on accountability for violations. Supervisors Joe Centeno and Salud Carbajal clearly only wanted to look forward. The Board’s Chair Joni Gray expressed concern, but was non-committal.

The supervisors set a date of July 25 to receive a complete report with recommendations to improve the program. A “project improvement team” of Ron Cortez, County assistant CEO, Bob Geis and Ed Moses, director of Housing and Community Development, has been formed to devise solutions and report to the board.

Clearly, the board intends to address reform of the program. What is less clear is what supervisors are going to do about departmental failures, applicants who committed fraud to obtain affordable units and owners who disregard restrictions on rental, occupancy and sale, reaping substantial profits in the process.

If the County addresses only future reform, it will allow County employees who didn’t do their jobs and dishonest citizens who exploited the program to benefit without consequences.

When considering effective reforms, one thing becomes very clear: the County’s existing affordable housing program encourages fraud. The affordable housing units are for-sale units with limited periods of restriction on sale, occupancy and rental. An applicant pays a pittance for a two- to three-bedroom home with resale restrictions expiring in 10, 20, 30 years. At the end of that period, the unit can be sold for full market value, now more than $1 million. In the meantime, the owner is required to occupy the home as a primary residence and cannot rent it out in whole or part without County permission, and then only at affordable rates. There has been virtually no monitoring or enforcement of these restrictive covenants for more than 20 years.

As long as there is this pot of gold at the end of the rainbow, dishonesty and non-compliance will be tempting. The City of Santa Barbara and County Housing Authority, which administer affordable housing programs with more than 7,000 units, have few of these problems mainly because they are rental, not for-sale programs.

As a fundamental reform, the Board of Supervisors has to either end the for-sale program, offering only rental units or it must make the for-sale units restricted in perpetuity. Once the opportunity for a windfall is eliminated, fraud and dishonesty will diminish.

The Board must also decide what to do about a program where numerous affordable housing owners have thumbed their noses at their government and taxpayer benefactors. The application process to obtain units is based on unverified self-declaration of assets. Applicants have in the past even been encouraged by County employees to sell or transfer assets, including other real estate holdings, to qualify. The few attempts at monitoring compliance with occupancy, rental and sale restrictions were also based on self-declaration, preceded by notices to the suspected violators that the County was checking.

Another major problem with this program is that the housing committee is more interested in notches on its belt in terms of numbers of affordable units created and federal and state matching funds attracted. It wants nothing to do with supervision or integrity of process. It eschews bad publicity about the program and so has acted to cover up violations, not expose them or hold owners accountable. The result is neighbors have been abandoned by the County to deal with scofflaw owners on their own and to suffer through transient, clandestine tenants and the neglect that often accompanies non-owner occupancy.

The solutions to this mess are to:

1. Limit county affordable units to rentals or sales subject to affordability restrictions in perpetuity.

2. Insist that County Counsel enforce existing contracts in court through fraud and contract claims, including rescission to reacquire units from scofflaw owners and restitution to the County of all ill-gotten gains.

3. Refer cases of perjury and deceit to the District Attorney for prosecution – lying and stealing from the government are still crimes.

4. Revise all contracts to punish violations by forfeiture and reversion of the units to the County’s affordable pool for re-sale and levy stiff fines.

5. Put the County Consumer Fraud Division in charge of monitoring and enforcement, not Housing and Community Development.

Most importantly, in deciding upon reform, the Board of Supervisors needs to be clear on the concept and structure of its program. Does the County want a program that assists the needy among us – the elderly, the disabled and low income workers? Or, does the County want to pursue a program to give sale opportunities to select members of the middle class? If it’s the latter, how does it fairly structure such an inherently discriminatory program and ensure honesty by participants? Whatever goal is decided upon, the existing program is a disaster and should be reformed from the bottom up, including holding violators and exploiters of the taxpayers’ largesse to account.