The Department of Housing and Urban Development granted subsidies for tens of thousands of public-housing tenants who were not eligible for the assistance, according to federal auditors.

A recent review by the HUD inspector general’s office found that the department paid an estimated $37 million per month to residents who failed to comply with federal guidelines requiring them to take part in community-service or self-sufficiency programs, such as job training or education.

By failing to uphold the rules, HUD allowed non-compliant tenants to live in government-subsidized housing while other candidates remained on waiting lists, the inspector general’s office said in a report on Wednesday.


Housing and Urban Development Secretary Julian Castro, who took office in July 2014, inherited a problem: HUD has been allowing subsidies for tens of thousands of ineligible households. (Joshua Roberts/Reuters)

“If HUD does not strengthen its controls, it will pay at least $448 million over the next year in subsidies for public-housing units occupied by noncompliant tenants that otherwise could house compliant households,” the report said.

Overall, auditors found that ineligible inhabitants occupied 106,000 units out of 550,000 covered by the community-service and self-sufficiency requirement between July 2013 and the same time last year. HUD Secretary Julian Castro began his tenure with the agency in July 2014, around the time that the review ended.

The errors occurred in part because HUD did not properly monitor compliance with the subsidy guidelines, often resulting in improper status codes for recipients. For instance, one housing authority designated a household to be exempt from the requirements because one tenant was receiving food stamps, which does not automatically exempt an entire household.

The problem also stemmed from the lack of an adequate reporting system, an issue the inspector general previously flagged in 2008. HUD at that point agreed to issue monthly reports on its compliance monitoring, but the agency stopped its updates at the end of 2012, after a contract for the work expired.

Additionally, auditors found that HUD did not apply sanctions against housing authorities that failed to enforce the requirements. Agency officials said they generally issue sanctions for violations they consider to be more serious.

The community-service and self-sufficiency guidelines apply to every adult who resides in federal public housing. Exemptions apply to the elderly, the disabled, and family members receiving welfare assistance under state welfare programs.

The rules started under the Quality Housing and Work Responsibility Act of 1998, one of several measures that Republicans used to revamp social programs after taking control of Congress in 1994. President Clinton also approved welfare reforms in 1996 under pressure from GOP lawmakers.

HUD agreed with all of the inspector general’s recommendations, which included developing training and written policies for monitoring compliance, in addition to applying sanctions against housing authorities that accommodate ineligible households.

HUD spokesman Jereon Brown said the agency is “working diligently” to implement all of the plans by fall, adding that some will be complete by June. “We’re confident the new monitoring changes will significantly improve program compliance,” he said.

Approximately 1.2 million households live in public-housing units, which are limited to low-income families and individuals earning no more than 95 percent of the median income for their areas.

According to HUD guidelines, public-housing authorities must deny applicants who are drug users or registered sex offenders, as well as those who have manufactured methamphetamine on public-housing property, among other conditions.