- The Washington Times - Tuesday, July 28, 2015

The federal government gave tax-subsidized low-income housing to thousands of families who didn’t qualify, including some millionaires, while hundreds of thousands of needy families were left on waiting lists.

A new audit report from the Department of Housing and Urban Development’s Office of Inspector General found over 25,000 families earned too much to qualify for public housing, costing taxpayers an estimated $104.4 million in subsidies this year.

Almost half of the families identified earned at least $10,000 more than HUD’s 2014 income limit, according to the audit.

“Most of these families had earned more than the qualifying amount for more than 1 year, were not participating in programs that would allow them to reside in public housing, and occupied units while many families were waiting for public housing assistance,” auditors wrote in the report.

Auditors sampled housing authorities in 13 states, Puerto Rico and the Virgin Islands and found 12,425 over-income families living in public housing while 579,890 families were on waiting lists.

At least 1,242 families earning income that exceeded HUD’s eligibility limits lived in public housing for over 9 years, according to the report.

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In one case in Oxford, Nebraska, a tenant was approved to live in subsidized housing for 10 years with a monthly rent of just $300, despite having an annual income of $65,007, assets valued at $1.6 million, and savings, checking and retirement accounts each holding hundreds of thousands of dollars.

“This condition occurred because HUD regulations require families to meet eligibility income limits only when they are admitted to the public housing program,” the report said. “The regulations do not limit the length of time that families may reside in public housing.”

Mark Calabria, director of financial regulation studies at the Cato Institute and former deputy assistant secretary for regulatory affairs at HUD, said that the findings in the report were entirely predictable.

“There’s always been some degree of overpayment, HUD has never been very good at tracking changes once you’re in,” said Mr. Calabria. “I’m absolutely convinced there’s some level of fraud that people lie about their income when they come in.”

Even when a family does report income exceeding limits, HUD officials told auditors that they do not want to discourage over-income families from leaving public housing because they do not want to discourage families from seeking stable employment.

“You don’t want to punish people for earning more income. There are a number of studies, and it’s well accepted that if you’re going to lose your subsidized rent somewhere if you get a job, you’re less likely to go out and get a job,” Mr. Calabira said.

“Fair enough,” said Leslie Paige, vice president for policy and communications at the non-partisan Citizens Against Government Waste, “but there has to be a system that moves them in the direction of self sufficiency. The whole idea is to stabilize people financially so they can have their own home and pay their own rent out of their own income. “

HUD officials claimed that evicting over-income families would increase the amount of money needed to subsidize the dwellings for needy families.

“Such changes could result in increased subsidy needs for the program because rents paid by overincome families reduce operating subsidies requested by public housing authorities,” investigators wrote. “HUD claimed that if all overincome families were removed from the public housing program, it would need to request nearly $116.5 million more in public housing operating subsidies.”

Mr. Calabria explained that HUD has a financial incentive to keep higher income earning tenants in public housing.

“Let’s say the person has made more income, and we know that. That means that they will pay more and more of their rent, and the housing authority will be able to use more of the subsidized dollars elsewhere,” Mr. Calabria explained. Mr. Calabria added that HUD would have to use more resources in order to verify income on a regular basis, and to root out fraud entirely would cost more than the department would save in tax dollars.

“The optimal amount of fraud is not zero, you’ve got to spend resources finding it. You don’t want to spend more resources then you’re going to save,” Mr. Calabria said.

HUD has very little incentive to verify income levels for public housing tenants, a fact that Ms. Paige says has led the department to regard federal rules as mere suggestions.

“Based on our experience, if there’s an opportunity to turn a blind eye to oversight, they’re going to do it,” Ms. Paige said. “There’s no penalty on the housing authority for not following the rules. There are thousands of families on waiting lists and there’s no penalty for doing this.”In its response to the report HUD questioned the inspector general’s method for calculating taxpayer costs and argued that investigators over-emphasized the problem because over-income households only represent 2.6 percent of all public housing.

But investigators argued that HUD had done nothing to address even the most egregious examples of millionaires living in public housing.

“The problem is not over-emphasized to as many as 25,226 families in need of housing that continue to wait for assistance because overincome families chose to remain in public housing rather than find housing in the unassisted market,” auditors wrote.

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