HUD is failing to manage key public housing program, government watchdog finds

New GAO report finds 39 housing authorities failed to distribute over $800 million in federal housing vouchers to their tenants.

Public housing in lower Manhattan. CREDIT: Spencer Platt/Getty Images
Public housing in lower Manhattan. CREDIT: Spencer Platt/Getty Images

Over the past 20 years, dozens of housing authorities across the country have been allowed to skirt federal regulations and were given extra discretion in how they spend millions in federal funds through an experimental low-income housing program. 

Under the watchful eye of the Department of Housing and Urban Development (HUD), 39 housing authorities created policies that limited the time low-income tenants could live in a public housing complex, established work requirements, or set higher rents through a program called Moving to Work Demonstration (MTW). However, HUD hasn’t been properly monitoring the policies and regulations, and those 39 agencies have failed to distribute over $800 million in federal housing vouchers to their tenants and served fewer families than required, according to a new report by the Government Accountability Office (GAO).

Over the next seven years, another 100 housing authorities will be added to the MTW program, but HUD does not have a plan or the staff to monitor its expansion, according to the report.

“This really confirms our concerns and experiences with HUD’s implementation, oversight, and expansion of the MTW program,” said Jessica Cassella, a staff attorney with the National Housing Law Project. The program is “supposed to test out alternative policies but when you are testing out alternative policies you need to oversee and evaluate them, but what this report shows is HUD failed to do that.”

The program, which was created under the Clinton administration in 1996, has given 39 different housing authorities in more than 20 different states and the District of Columbia flexibility on how they can distribute federal funds or what policies they want to enforce, rather than abide by standard federal regulations.

That means housing authorities have discretion on how to spend federal funds that normally would have been marked for capital funds, operating funds, and housing choice vouchers, for instance. Or authorities can implement different work requirements for their tenants, change rent levels, or limit the amount of time a tenant can receive housing assistance.

But HUD staff have not been properly monitoring those programs and failed to enforce the few requirements those authorities are required to follow, according to the new GAO report, which was requested by Rep. Maxine Waters (D-Calif.) in 2015.

The report offered a number of different recommendations for HUD to resolve the issues, including: creating a plan to properly staff the implementation of 100 new housing authorities being added to the program, collecting better data on how those agencies spend their federal funds, creating clear guidance on how those agencies report and analyze their policies, and monitoring how those policies affect tenants.

HUD, in its response that was published in the study, accepted most of the GAO recommendations. But the agency said implementing some of the recommendations would hinder the intent of the program, which is designed to give the state authorities flexibility regarding specific rules and funding.

“HUD must consider both the extensive MTW flexibilities and the locally-designed nature of each MTW agency’s program in administering the demonstration,” the agency said in its response. “For this reason, HUD does not agree with the recommendations that restrict an MTW agency’s ability to exercise its MTW flexibility and respond to variations within local markets.”

Cassella said housing advocates are “troubled” by HUD’s response.

“We are very troubled by HUD’s disagreement with three of GAO’s recommendations given that those three recommendations only seek to further increase accountability and oversight of MTW agencies,” Cassella said.

While the agency emphasized its commitment to ensuring the program “is beneficial to and does not harm the low-income families that it ultimately serves,” the GAO report found those housing authorities were not serving the same number of low-income families they would have normally served without the program, one of the few restrictions on the program.

Additionally, those housing authorities often hoarded large amounts of federal housing vouchers they were supposed to distribute to low-income families. As of last June, the 39 agencies had put a combined $808 million in housing vouchers into their voucher reserve accounts, according to the report. By comparison, that’s more than the combined $737 million worth of housing vouchers the other 2,166 nationwide housing authorities not part of the program had stored up in reserves. 

While HUD has taken steps to address some of the staffing needs for overseeing the program, it does not have a plan to accommodate the massive seven-year expansion of the program, according to the report.

Also, HUD has failed to collect the proper data needed to analyze the performance of those housing authorities in relation to the number of tenants served, program expenses, occupancy rates, and voucher utilization rates, the GAO found.

The report also found that while those housing authorities have lower occupancy rates than other agencies, they had higher yearly median program expenses. HUD also does not give those agencies clear and proper guidance on how to report an analysis of their policies, nor does the department even analyze them.