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B-171308 1 (1971-04-16)

handle is hein.gao/gaobabktl0001 and id is 1 raw text is: COMPTR OLLE G ;lE ERAL OF H- 0E UNITED STATES <' T~r vWASHINGTON. D C. Z0543 B-171308 N_ 1, 96 1 11111 H ll 1111 1111111111111111111 LM089899 Dear Mr. Daniels: In accordance with your request of November 9, 1970, and subsequent discussions with your office, we have examined into the propriety of rental increases authorized by the Department of Housing and Urban Development (HUD) at the Washington Towers Apartments in Union City, New Jersey, and the Park Hudson Apartments in North Bergen, New Jersey. HUD regulations provide in general that the rental income of a project which has a mortgage loan insured pursuant to the National Housing Act, as amended (12 U.S.Co 1701), be established at a level which will maintain the economic soundness of the project and which will provide the owner with a reason- able return on his investment consistent with reasonable rents to the tenants. HUD regulations do not provide for the establishment of maximum rents for each type of apartment in a project but instead provide for establishment of a maximum gross rental income for the project. Generally, increases in the maximum gross rental income requested by a project owner may be authorized only to compensate the owner for increases in operating costs. In reviewing requests for increases, HUD determines whether the operating cost increases are bona fide. HUD also requires the project owner to submit annual financial statements which HUD reviews to ensure that the gross rental income of the project does not exceed the maximum gross rental income which it had authorized. When the reported rental income exceeds the approved rental income, HUD is required to take appropriate action to obtain necessary adjustments, including the refund of any excess rental charges to tenants. Our review was made principally at HUD headquarters; at its Newark, New Jersey, insuring office; and at the management offices of the projects. Our review included an examination of the applicable laws and regulations and the project owners' accounting records and financial statements0 We also com- pared the authorized rental incomes for the two projects with the rental incomes reported by the project owners and with those authorized for similar projects in neighboring areas. Rental increases at the two projects were not uniformly applied to all tenants nor made at the same time; therefore, we could not determine precisely the rental increases applicable to the various sizes of apartment units without a considerable amount of work, which would have delayed our reporting to you0 Further, we did not think such determinations were necessary to respond to your request. 50TH ANNIVERSARY 1921-1971

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