HUD’s Budget Threatened Because of 'Over-Income' Public Housing Residents

A controversial watchdog report on public housing residents who earn too much money could adversely affect the Housing and Urban Development Department’s annual budget.

Republican Rep. David Jolly of Florida, a member of the House Appropriations Committee, told The Washington Post on Sunday that he would move to slash HUD’s budget by $104 million if the department does not “fix the problem” of over-income families living in public housing. HUD’s IG estimated in a July audit that the department would pay $104.4 million over the next year for public housing units occupied by over-income families that could otherwise be used for low-income people. HUD has disputed that figure, saying the IG’s methodology to estimate the subsidy cost of housing over-income families contained a “serious flaw.”

The watchdog’s report sparked a brouhaha because it included some extreme examples of over-income families living in public housing. In one case in New York City, a family of four that has been living in public housing since 1988 had an annual household income of $497,911 in 2013. But the number of over-income residents identified in the audit represented just 2.6 percent of all public housing households, and in most cases the families in question were over-income by less than $10,000. The term “over-income” applies to those public housing households that earn more than the income threshold established for their locality.

Under HUD regulations, once accepted into public housing, individual households and families can stay as long as they like regardless of increased earnings, provided they comply with rental agreements and remain good tenants. When a family in public housing becomes over-income, they no longer receive a subsidy from the government for their rent; they pay the unit’s full rent themselves.

Jolly has called for an investigation into the policy, and asked HUD to change it. Ultimately, Congress will have to change the law if it decides it doesn’t want over-income families remaining in public housing.

HUD has said public housing authorities already have the ability to evict over-income tenants. A 2004 HUD rule allows PHAs to move families in public housing to the private market if they earn more than the income limit, “allowing authorities to address over-income families within the context of their own unique demographic and economic situations,” the IG report said.

In September, HUD sent PHAs a letter reminding them of their authority and flexibility in evicting over-income households. “HUD strongly encourages PHAs to utilize the discretion available to them to remove extremely-over-income families from public housing,” wrote Lourdes Castro Ramirez, HUD’s principal deputy assistant secretary for Public and Indian Housing, in the Sept. 3 letter. Ramirez recommended PHAs use some available tools to deal with the issue, including using the local area median income for program income limits instead of the national AMI, which HUD uses in certain markets with significantly higher incomes. HUD also suggested PHAs create a “preference for return” to public housing for those over-income households that are evicted if their income drops after moving out.

In addition “as the changes to flat rents required by the 2014 and 2015 Appropriations Act are fully implemented, the higher rent levels will ensure that families with higher incomes pay an appropriate market-based rent,” said Erika Moritsugu, assistant secretary for congressional and intergovernmental relations, in a letter to Jolly dated Sept. 22. Preston Rudie, communications director for Jolly, said the office received the letter last week.

Jolly told the Post that “three of the five housing authorities I’ve spoken with said they would like to evict these tenants, but they are prohibited from doing so.”

HUD spokesman Jereon Brown on Tuesday said “PHAs have the ability to evict over-income tenants,” adding that the department is working on “additional, even more definitive guidance” for the housing authorities on this issue. Brown would not specify when “because it may involve an as-yet undetermined comment period.”

There are more than 3,000 public housing authorities across the country. Many PHAs count on the rent money from over-income families to help boost their budgets. While HUD oversees PHAs, they are administered by states and localities, and are similar in structure to a school district. HUD told auditors that if all over-income families were removed from public housing, it would need to request “nearly $116.5 million more in public housing operating subsidies annually,” according to the IG report. The presence of such households also helps de-concentrate poverty in public housing and create sustainable mixed-income communities, according to HUD, PHAs and affordable housing advocates.