Squatting on the damp earth below, a worker connected pipes for the new, handicap-accessible bathroom. It will have grab bars and enough room to maneuver a wheelchair, he said.

Crews are renovating 17 apartments in the neighborhood, replacing decades-old ductwork and bathroom and kitchen fixtures with central air and gas heat; new floors, roofs and gutters; and fire walls between adjacent units. Outside, they are hanging vinyl siding and new landscaping. Once done, the work will shift to another 13 units.

The entire job, which could take almost two years, is part of the town’s “aggressive” modernization focus, emptying multiple apartments at once to save time and money. The Chapel Hill Department of Housing has 336 apartments in 13 low-rent complexes, most more than 35 years old.

“In Chapel Hill, we pride ourselves on doing major renovation projects every few years,” Housing Director Tina Vaughn said. “We don’t want it to be so obvious that our units are public housing.”

But that way of doing business is running Chapel Hill and other housing authorities nationwide afoul of interim U.S. Department of Housing and Urban Development’s rules.

The town department was rated “management substandard” for 2011, according to a July letter from HUD’s regional office in Greensboro.

So far, the only tangible repercussion is working under an improvement plan. However, if the interim system passes review and becomes permanent, a low score could bring tougher penalties.

Low occupancy

The HUD letter cited low occupancy – 20 vacant apartments – and higher than expected tenant debt – $42,925 – for a management score of seven out of 25, or 28 percent. The overall score on four assessed factors was 69 out of 100 points.

Vaughn said Chapel Hill’s occupancy could be higher if fewer units were vacated for repairs. Tenant debt will require writing off unpaid rent and fees more quickly, she said.

The town has been working this year under a recovery plan to rent vacant apartments within 20 days, educate tenants about lease requirements and repair fewer apartments at once. It also filled a vacant housing officer position, Vaughn said.

An updated report released in June showed a slightly higher occupancy rate, at 94 percent, and tenant debt of $16,389. The total score increased to 72 points.

A new rating is expected in February.

Rules’ first year

Nine of 102 statewide housing agencies were rated substandard management in 2011, the first year for the new rules. Only one, Mt. Holly Public Housing, was rated troubled, which previously would have required a recovery plan and raised the specter of a HUD takeover. Under the interim rules, Mt. Holly only has a recovery plan.

In the Triangle, Durham’s and Raleigh’s housing authorities were rated standard and high performing, respectively, but the Housing Authority of the County of Wake received a substandard financial rating and earned zero points for its financial report.

Wake County Executive Director Burnetta Smith said the score was based on a technicality. Her authority scored well otherwise, with a 98 percent occupancy rate for 343 public housing units in six communities.

Smith said Wake County submitted its unaudited financial report on time, but HUD rejected it because of an error. The problem arose when HUD emailed the rejection, but computer problems blocked it. Wake found out about the mistake months later from an accountant working on the audited report, she said. HUD counted the report as a “presumptive failure” and refused to accept the audited report, she said.

HUD spokeswoman Donna White said she can’t speak specifically about Wake County’s experience, but some local agencies failed their financial assessment because they didn’t turn in their reports on time or there were problems. The financial assessment relies on both unaudited and audited reports.

HUD regional directors in Greensboro and Atlanta did not respond to requests for comment.

Steve Beam, executive director of the Raleigh Housing Authority, said the interim rules say more about those making the assessments than those assessed. They are also a good example of the conflict between politics and housing, he said.

White said the rules are HUD’s attempt to move to an asset-based management system. It’s not just about a good maintenance program, but one that puts more people into quality homes quickly, she said.

Uneven playing field

After hearing Chapel Hill’s situation, both Smith and Beam said they understand the frustration. HUD’s interim rules were published after many agencies had already started renovation programs, Beam said.

Raleigh’s occupancy rate was 98 percent, although 20 units were vacant and another 300 were demolished at Walnut Terrace to make way for new ones. The difference between it and Chapel Hill is that the RHA has 2,000 units, so the number being repaired didn’t have the same effect, Beam said.

The rules create an unlevel playing field and have changed many times, he said. Since 1980, when he started in public housing, there have been more than nine rating systems and several versions of the latest one, he said. There’s a good chance the interim rules will be replaced before becoming permanent, he said.

At the same time, what HUD is measuring hasn’t changed, Beam said.

“What makes a good housing authority today is the same thing that would have made a good housing authority 10 years ago,” he said.