Although many of the “over income” tenants exceeded the limit by a small amount, the audit revealed that nearly half were over the threshold by $10,000 to $70,000. And some of the cases were eye-popping, such as a family of four in New York City with a $497,911 salary that is paying $1,574 in rent for a three-bedroom apartment in public housing.
The review, released late last month, said that some public housing tenants who exceed HUD’s low-income threshold are committing “egregious” abuses and are squeezing out truly needy families.
“This audit, like others, provides HUD an opportunity to re-evaluate policies and initiatives and make improvements where necessary,” agency spokesman Jereon M. Brown said Wednesday in a statement. “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.”
Housing authorities must grapple with competing priorities when setting policy. Officials say they do not want to discourage tenants from trying to improve their economic circumstances by threatening to evict them if they find better paying jobs, and housing experts have recognized that it is healthier to have people of various incomes living together instead of perpetuating isolated pockets of poverty.
But waiting lists of people who truly need affordable housing are long, and taxpayers oppose subsidizing tenants who can pay market rents.
When HUD was first presented with the conclusions of the draft audit by Inspector General David Montoya’s office, the agency strongly objected to all of them.
Milan Ozdinec, HUD’s deputy assistant secretary for public housing and voucher programs, wrote that “there are positive social benefits from having families with varying income levels residing in the same property” and warned that “amending policies to force over-income families to leave could negatively affect their interest and full participation in achieving self-sufficiency.” He accused the inspector general of “over-emphasizing” a problem when higher-earning tenants represent just 2.6 percent of the 1.1 million families in public housing.
With the audit’s findings gaining public attention in recent days, however, the agency has shifted its emphasis, seeking to underline that the primary goal of public housing is to help those with few other options.
HUD spokesman Cameron French described the agency’s first response to the audit as “merely an initial explanation of facts, not a policy recommendation.” He said, “HUD senior management is now actively pursuing policy changes in response to the findings,” and added that the agency “does not condone any of the egregious examples of over income cited in the audit.”
Agency officials have begun calling and e-mailing housing authorities that the audit found to have higher numbers of over-income tenants. Federal officials say they are telling their local counterparts that these tenants must leave to make room for the needy.
“We are directly engaged in conversations with the housing authorities identified within the audit as having residents who were over the income limit,” Brown said. “We anticipate issuing additional guidance on the topic this fall and working with local housing authorities to provide greater opportunity for more families.”
In New York City, which has the country’s largest concentration of public housing, auditors found almost 11,000 over-income tenants, with 302,000 families waiting to get into subsidized apartments.
A spokeswoman said the housing authority “supports income diversity and is, overall, invested in the goal of attacking concentrations of poverty throughout this city.” The authority did not seem inclined to urge its high-earning tenants to leave the system.
“Removing the relatively small number of higher-income residents from public housing would remove more than $90 million in revenue” from higher rents those tenants pay, the spokeswoman said.
HUD has limited ability to evict higher-earning tenants. Although the federal government provides the subsidies, more than 3,000 state and local housing authorities run the programs. And HUD’s leverage also is constrained because, under the law, families can stay in subsidized homes as long as they want, no matter how much money they make, as long as they are good tenants.
Agency officials have added language to a pending regulation that would make explicit the goal of encouraging tenants to surrender their subsidized housing if their income rises above the maximum allowed. On Wednesday, HUD officials said they plan to hold discussions with members of Congress about the possibility of introducing legislation that would give authorities the power to force high-earning tenants out of public housing.
In Newark, auditors identified 134 over-income tenants in public housing, while 15,470 people were on the waiting list for subsidized apartments.
Spokeswoman Gloria Wright said the Newark Housing Authority has long worried that evicting these tenants, when the law allows them to stay, would put local officials at risk of violating fair-housing laws by treating some tenants differently from others. That would jeopardize the agency’s federal funding.
“It puts us in a pickle,” she said. “So we have to work with them, to encourage them to buy a house, or move out to a market-rate apartment.”
In the farm belt town of Oxford, Neb., which has 20 tiny one-bedroom subsidized apartments, Cindy Haussler, director of the local housing authority, said the board of directors will review HUD’s new policy.
She said that current federal funding is not enough to cover costs, so the housing authority depends on allowing over-income tenants to stay and charging them higher rents. That includes someone who earned $65,007 last year — double the income limit — and has assets valued at nearly $1.6 million. As of April, this tenant was paying $300 a month, auditors found, more than other tenants, but still not market rate.
“You don’t want to bite the hand that feeds you,” Haussler said of HUD. “But I have to pay our bills. We’re running a business.”
Even before the inspector general’s review, HUD officials said they were pushing for legislation in Congress that would prod higher-earning tenants to leave public housing on their own. Starting this year, whenever a tenant’s income exceeds the maximum for qualifying for a subsidized home, housing authorities are required to set the rent at 80 percent of the fair market rent for the apartment. The new rules are being phased in over three years.
The HUD inspector general concluded that these rules have only “marginal” potential to coax tenants from public housing, because rent increases are limited to no more than 35 percent a year, “and [this] may not prevent the egregious cases illustrated” in the audit.