Los Angeles sues HUD over loss of contract

Already battered by budget deficits and service cuts, the city of Los Angeles stands to lose nearly $8 million a year in federal funds that pay for healthcare centers at housing projects, summer job programs for at-risk youths and housing and services for poor people, officials said.

In an attempt to keep the money, the city filed a lawsuit Monday against the federal Department of Housing and Urban Development, accusing the Republican-appointed HUD secretary of acting “capriciously” and illegally in taking away a contract the city has administered for years.

“The hasty decision to implement this dramatic policy change in the last days of a presidential administration raises serious questions about the motivation behind the change,” said Thomas Saenz, counsel to Mayor Antonio Villaraigosa. He added that given the city’s current financial circumstances, it would be “extremely hard if not impossible” to make up the lost funds.

HUD officials did not return phone calls seeking comment.

The at-risk money flows to Los Angeles through an obscure bureaucratic channel in which a subsidiary of the city’s Housing Authority administers federal contracts for 45,000 units of low-income housing in 10 California counties. Most of the money passes through the authority on its way to thousands of individual landlords. But the city takes a cut for administrative fees, amounting to about $8 million a year, according to Rudolf Montiel, the head of the city’s housing authority.

The city uses that money to pay for healthcare centers at five city housing projects: Jordan Downs, Mar Vista Gardens, Imperial Courts, San Fernando Gardens and Estrada Courts. The city also spends some of it on summer jobs programs for at-risk youth and after-school sports, as well as providing maintenance at city housing projects.

The city is asking a judge to issue a temporary restraining order.

Also on Monday, in an unrelated move, HUD’s inspector general released a report that said nearly two-thirds of the apartment units inspected by auditors in its Section 8 program did not meet minimum standards.

Those units are separate from the low-income housing at issue in the lawsuit.

The housing authority subsidizes the rent on more than 36,000 apartment units in Los Angeles through the federal Section 8 program. That program pays subsidies directly to private landlords for poor people to rent apartments. The authority is supposed to ensure that the units it helps pay for meet minimum standards. Auditors from HUD’s Office of Inspector General looked at 68; 43 did not pass.

Montiel said his office does not agree with the audit. “We believe these units are safe as determined by the department building and safety and code enforcement,” he said. He added that the city does not stand to lose any money as a result of that audit.

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jessica.garrison@latimes.com