Fewer Over-Income Families Could End Up Staying in Public Housing Under Proposed Rule

The Housing and Urban Development Department wants feedback on reducing the number of families in public housing who earn significantly more than the income limits on their units.

A proposed rule published in Wednesday’s Federal Register seeks to better define the parameters of a law that allows families living in public housing to remain there as long as they like, regardless of increased earnings, provided they comply with rental agreements and remain good tenants. A controversial HUD inspector general report released in July estimated 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, drawing attention from Congress and prompting the department to revisit the issue. Last week, House Oversight and Government Reform Committee Chairman Jason Chaffetz, R-Utah, asked HUD for information on how many over-income families live in public housing—and how many needy families are still on waiting lists for assistance.

HUD wants to “continue to give PHAs [public housing authorities] discretion on when to evict or terminate the tenancies of over-income families, but narrow that discretion by providing circumstances that would require a PHA to terminate tenancy or evict an over-income family,” said the proposed rule. “Specifically, HUD is considering whether a family whose income significantly exceeds the income limit and has exceeded such limit for a sustained period of time must be notified by the PHA that the family will be evicted or tenancy terminated. HUD is also considering what a reasonable period of time to find alternative housing would be.”

Families have to meet certain strict income limits to qualify for public housing to begin with, but under the law, once accepted into government housing, they cannot be kicked out simply because they start earning more money. 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. Ultimately, Congress will have to change the law if it decides it doesn’t want any over-income families remaining in public housing.

The presence of such over-income households helps de-concentrate poverty in public housing and create sustainable mixed-income communities, according to HUD, PHAs and affordable housing advocates.

“An increase in income is a good and welcomed event for families, and when a family's income steadily rises, it may be an indication that the family is on its way to self-sufficiency,” said the proposed rule. “However, an increase in income may be minimal or temporary, and a minimal or temporary rise in income should not be the basis for termination of public housing assistance.”

Still, HUD knows it has to balance those goals with making sure needy families waiting for public housing – for years, in some cases – aren’t left behind. “Given the urgent need for affordable rental housing in many communities, HUD is considering ways to possibly limit public housing residency to those households that actually require housing assistance,” said a department press release outlining the proposed rule.

PHAs have another reason to keep some over-income families in the mix: Many of the authorities count on the rent from those residents 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 July 2015 IG report.

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.

The July IG report 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 the approximately 1.1 million public housing households, and in most cases the families in question were over-income by less than $10,000.

Some questions HUD is asking as it weighs changes to the regulation include: How much income is considered “significantly” exceeding the income cap for occupied public housing units? How should wait list data and local housing market decisions factor into possible evictions of over-income families? Should the department create an appeals process for those over-income residents who are kicked out?

The Feb. 3 proposed rule clarified that HUD is not looking to alter current exceptions under the law regarding the eviction of over-income residents. “Specifically, a family over the income limits who has a valid contract for participation in a Family Self-Sufficiency program administered under HUD regulations would not be subject to eviction or termination of tenancy. Additionally, a PHA may not evict a family over the income limits if the family is currently receiving the earned income disallowance authorized by the 1937 [United States Housing] Act,” the Federal Register notice said.

Comments on the proposed rule are due March 4.