Lenient Rules Abet the Occupancy of Low Income Housing by Ineligible Tenants

CED-81-74: Published: Apr 27, 1981. Publicly Released: Apr 27, 1981.

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The Department of Housing and Urban Development (HUD) recently took a number of positive steps when it: (1) lowered to 10 percent the percentage of section 8 assisted units in any new project that can be rented to ineligible households without explicit HUD approval, and (2) developed new sanctions for dealing with project owners who fail to comply with the limitation.

GAO agreed with these changes but believed additional measures were needed, since all previously completed projects continue to be covered by the older regulations and because HUD enforcement options are still limited. This problem warrants prompt attention because under present regulations, the potential exists for greater occupancy by ineligible households in the future, and the incentives to house ineligible households and market forces that encourage such occupancy will increase as the cost of housing escalates and the scarcity of rental housing becomes more prevalent. Occupancy of section 8 contracted units by ineligible tenants frustrates the intent of the program by causing it to fall short of its planned assistance, even though the money to achieve more assistance has been made available by Congress. The cost effectiveness of the program is degraded since indirect subsidy costs which are incurred, regardless of who occupies the housing units, must logically be counted against a lower number of assisted households. Ineligible occupancy works against or fails to enhance economic integration in many instances. Economic integration among assisted units should be achieved by selecting tenants across the broad range of income-eligible households. Units already earmarked for assisting lower income households should not be rented to middle income households without regard to the availability of assisted households.

Matters for Congressional Consideration

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should consider whether a more stringent limitation on ineligible households should be applied to previously completed section 8 projects. This limitation could be achieved by either (1) enacting legislation to apply a 5 percent limitation to completed projects already under contract; or (2) directing HUD to change its regulations to have the same effect.

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Matter: Congress should enact legislation clarifying the section 8 program's original intent that housing units, for which section 8 subsidy contracts exist, be used to the maximum extent possible for section 8-eligible households.

Recommendations for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should lower the percentage limitation on ineligible households from 10 percent to 5 percent for new, fully assisted projects without HUD approval and allow no ineligible households to occupy contracted units in partially assisted projects without HUD approval.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should issue explicit enforcement guidelines for use by HUD regional and area offices to deal with project owners who exceed the limitation on ineligible households or otherwise fail to comply with HUD's policies on ineligible occupancy.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of HUD should (1) modify program regulations for new, fully assisted projects to lower the percentage limitation from 10 percent to 5 percent on the number of units that can be occupied by ineligible households without HUD approval and allow no ineligible households in contracted units in partially assisted projects without HUD approval; (2) issue explicit enforcement guidelines for use by HUD regional and area offices in dealing with project owners who exceed the limitation in ineligible households or otherwise fail to comply with HUD policies on occupancy by ineligible households; and (3) amend section 8 regulations to explicitly state a project owner's responsibility to make every effort to rent all section 8 contracted units to eligible households before utilizing the exception for ineligible households.

    Agency Affected: Department of Housing and Urban Development

 

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