HUD Allowing Higher-Income People to Live In Public Housing

Agency Even Encourages the Practice, Inspector General Reports

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Longley, Robert. "HUD Allowing Higher-Income People to Live In Public Housing." ThoughtCo, Aug. 23, 2016, Longley, Robert. (2016, August 23). HUD Allowing Higher-Income People to Live In Public Housing. Retrieved from Longley, Robert. "HUD Allowing Higher-Income People to Live In Public Housing." ThoughtCo. (accessed October 23, 2017).
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Infamous Chicago Public Housing Project Cabrini-Green. Tim Boyle/Getty Images

The Cabinet-level Department of Housing and Urban Development (HUD) is improperly allowing more than 25,000 “over income” families and individuals to live in taxpayer-subsidized public housing and has no intention of evicting them, according to a federal inspector general.

In what HUD Inspector General (IG) David E. Kasperowicz called an “egregious” abuse of the system, some of the families’ incomes far exceeded the maximum income allowed for public housing in their area.

For example:

  • A family of five that has lived in a Los Angeles public housing project since 1974 paid $1,091 a month for a four-bedroom apartment last year despite reporting $204,784 in income.
  • A family of four making $497,911 a year pays $1,574 a month to live in three-bedroom apartment in a New York City public housing project.
  • An individual, paying $300 a month for a one-bedroom apartment in a public housing project in Oxford, Nebraska, despite having over $1.6 million in assets including real estate, stocks and retirement accounts.

While that New York family of four was making nearly $800,000 from its own rental properties over the last few years, over 300,000 families that truly qualified to live in public housing remained on HUD’s waiting list, according to the IG’s report.

The IG’s investigation found that of the 25,226 over-income tenants of public housing, 45% were making from $10,000 to $70,000 a year more than the maximum allowable income.

In addition, about 18,000 of them had lived in public housing for over a year, while about 1,200 of them had done so for nine years or longer.

For public housing purposes, HUD defines the “low-income” limit as 80% of the median income for the local area, and “very low-income” as 50% of the median local income.

Maximum allowable incomes for public housing vary widely from location-to-location based on average incomes and “fair market” rental rates. For example, the maximum allowable income for a family of five in Los Angeles was $70,450 in 2014, compared to $33,500 for individuals in Oxford, Nebraska.

According to the IG’s report, the most over-income families in public housing lived in New York, Puerto Rico and Texas, while the fewest lived in Utah, Idaho and Wyoming.

HUD Policy Allows and Encourages Income Limit Abuse

Under HUD’s existing rules and policies, none of these over-income tenets will be evicted as long as they continue to pay their rent, according to the IG.

Since HUD’ sregulations and policies did not require housing authorities to evict over-income families or require them to find housing in the unassisted market, over-income families continued to reside in public housing units,” wrote the IG.

Under current HUD federal regulations, tenants in public housing are free to remain there as long as they pay their rent and meet other lease requirements no matter how much money they make or how much wealth they have. The tenants’ incomes are considered only when they apply for the program, but never again once they are accepted.

By comparison, HUD’s housing choice voucher program – formerly called Section 8 – subsidizes the rents of people who live in privately-owned, rather than publicly-owned apartments. People making more than the program’s income limits get proportionally less money.

Why Not Evict Them?

While the money comes from HUD, public housing projects themselves are administered by state and local housing authorities.

None of the 15 housing authorities interviewed by IG investigators said they planned to evict over-income families. Doing so, they said would work against HUD’s efforts to prevent the concentration of poverty in public housing developments.

In general, the housing authorities believed that other residents of public housing communities viewed over-income families as role models, “because they had demonstrated that self-sufficiency could be achieved.”

In HUD’s decidedly negative response to the IG’s report, the agency’s deputy assistant secretary for public housing wrote, “There are positive social benefits from having families with varying income levels residing in the same property.”

Or as officials of the New York housing authority put it, “The Authority believes that allowing over-income families to reside in public housing is beneficial because it shows that participation in the public housing program can help families achieve a more stable life and the average rent paid by over-income families is greater than that paid by other low income families.”

And HUD Does a Flip-Flop

After first objecting strongly to the report, HUD did what federal agencies rarely do, changed its mind.

Noting in its initial response that the over-income tenants represented only 2.6% of all 1.1 million residents of public housing, HUD accused the IG of “overemphasizing” the issue and stated it had no plans to do anything about it.

But inspector general Kasperowicz fired back.

“Although 25,226 over income families is a small percentage of the approximate 1.1 million families receiving public housing assistance, we did not find that HUD and public housing authorities had taken or planned to take sufficient steps to reduce at least the egregious examples of over income families in public housing,” he wrote. “Therefore, it is reasonable to expect the number of over income families participating in the program to increase over time.”

Days later, HUD decided to “re-evaluate” its stance, and agreed to urge all state and local housing authorities to evict over-income tenants.

“This audit, like others, provides HUD an opportunity to re-evaluate policies and initiatives and make improvements where necessary,” HUD spokesman Jereon M. Brown was quoted as saying in the Washington Post. “As a result, HUD is taking additional steps to encourage housing authorities to establish policies that will reduce the number of over income families in public housing.”