HUD Rental Assistance:

Progress and Challenges in Measuring and Reducing Improper Rent Subsidies

GAO-05-224: Published: Feb 18, 2005. Publicly Released: Mar 21, 2005.

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In fiscal year 2003, the Department of Housing and Urban Development (HUD) paid about $28 billion to help some 5 million low-income tenants afford decent rental housing. HUD has three major programs: the Housing Choice Voucher (voucher) and public housing programs, administered by public housing agencies; and project-based Section 8, administered by private property owners. As they are in every year, some payments were too high or too low, for several reasons. To assess the magnitude and reasons for these errors, HUD established the Rental Housing Integrity Improvement Project (RHIIP). In response to a congressional request, GAO examined the sources and magnitude of improper rent subsidy payments HUD has identified and the steps HUD is taking to address them, including efforts to simplify the process of determining rent subsidies.

HUD has identified three sources of errors contributing to improper rent subsidy payments: (1) incorrect subsidy determinations by program administrators, (2) unreported tenant income, and (3) incorrect billing. HUD has attempted to estimate the amounts of improper subsidies attributable to each source but has developed reliable estimates for only the first--and likely largest--source. HUD paid an estimated $1.4 billion in gross improper subsidies (consisting of $896 million in overpayments and $519 million in underpayments) in fiscal year 2003 as a result of program administrator errors--a 39 percent decline from HUD's fiscal year 2000 (baseline) estimate. GAO estimates that the amount of net overpayments could have subsidized another 56,000 households with vouchers in 2003. HUD has made several efforts under RHIIP to address improper rent subsidies for its public housing and voucher programs. Rental Integrity Monitoring (RIM) reviews by HUD's field offices--on-site assessments of public housing agencies' compliance with policies for determining rent subsidies--are a key part of the initiative. However, GAO found that resource constraints and a lack of clear guidance from HUD headquarters hampered the reviews and that the field offices did not collect complete and consistent data, limiting HUD's ability to analyze and make use of the results. HUD has not incorporated RIM reviews into its routine oversight activities. HUD expects that a second effort, a Web-based tenant income verification system, will avoid an estimated $6 billion in improper subsidies over 10 years, but the system is not yet fully implemented. HUD has undertaken RHIIP efforts for its project-based Section 8 programs but faces several challenges. HUD has improved its policies and guidance for property owners. The agency also plans to give owners access to the Web-based income verification system by the end of 2006. HUD plans to rely more extensively on contractors to monitor property owners' compliance with its policies for determining subsidies. According to HUD, the complexity of the existing policies contributes to the difficulties program administrators have in determining rent subsidies correctly. For example, program administrators must assess tenants' eligibility for 44 different income exclusions and deductions. However, simplification will likely require statutory changes by Congress and affect the rental payments of many tenants. HUD is considering various approaches to simplifying policies for determining rent subsidies but has not conducted a formal study to inform policymakers on this issue.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In January 2006, HUD issued guidance directing its field offices to conduct annual reviews of 275 PHAs (100 PHAs that receive 80 percent of the rental assistance funds and 175 PHAs selected on the basis of field office risk assessments) for compliance with HUD's rent determination policies and other requirements. These "consolidated reviews" institutionalize HUD's efforts to address PHAs' improper rental assistance payments.

    Recommendation: To enhance HUD's ability to reduce improper subsidies in its public housing and voucher programs, Secretary of HUD should make regular monitoring of PHAs' compliance with HUD's policies for determining rent subsidies a permanent part of HUD's oversight activities.

    Agency Affected: Department of Housing and Urban Development

  2. Status: Closed - Implemented

    Comments: In response to our recommendations, HUD reported that it has begun the process of automating its RIM monitoring process for the public housing and Housing Choice Voucher programs within the department's Comprehensive Compliance and Monitoring (CCM) system. Launched in 2006, the CCM system contains a module that allows HUD to record and track findings from consolidated and other reviews, including RIM reviews, of PHAs. The system generates management reports that provide summaries and detailed data on the status of all open findings and corrective actions, allowing staff throughout HUD to monitor PHAs' progress in addressing and closing findings from reviews and to target corrective actions. HUD has rolled out this new module in CCM public housing and Housing Choice Voucher program.

    Recommendation: To enhance HUD's ability to reduce improper subsidies in its public housing and voucher programs, Secretary of HUD should collect complete and consistent information from these monitoring efforts and use it to help focus corrective actions where needed.

    Agency Affected: Department of Housing and Urban Development

  3. Status: Closed - Implemented

    Comments: In September 2007, HUD awarded a contract to study the current rent structures in the Public Housing and Housing Choice Vouchers programs. The study assesses the impact of potential changes to the current rent structures, such as the introduction of flat rents, on various tenant groups including the elderly and disabled. The study's findings will be used to help develop regulatory and/or legislative proposals to simply the current rent structures. The study methodology includes visits to 25 public housing authorities, phone surveys of an additional 200 public housing authorities, and interviews with 1,000 residents and individuals on the waiting list for housing assistance. The final analysis is due in September 2009 and the final report is due in November 2009. The final report will address our recommendation that HUD study and assess the impact of rent simplification approaches on subsidy errors and tenant groups.

    Recommendation: To ensure that HUD's rental assistance programs are administered effectively and that policymakers have sufficient information with which to consider potential simplification approaches, the Secretary of HUD should study the possible impact of alternative strategies for simplifying program policies on subsidy errors, tenant rental payments, program administrators' workload, and program costs. As part of the study, HUD should determine how it intends to implement proposed changes and indicate how the department would help tenants transition from the old to the new rent structures.

    Agency Affected: Department of Housing and Urban Development


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