Lawmaker Says State Was Shortchanged on U.S. Housing Funds

California received substantially less federal money for public housing than it should have in recent years because of “an environment of influence peddling” in the Department of Housing and Urban Development, a California congressman charged Monday.

Rep. Tom Lantos (D-San Mateo), opening hearings into the management of HUD’s Moderate Rehabilitation Program, said “objective, measurable criteria gave way to political preference” in the federal effort to renovate run-down units and provide rent subsidies for low-income families.

A recent investigation by the department’s inspector general found that California public housing authorities were awarded less than 5% of the money allocated by the housing program between 1984 and 1988, in contrast to the 17% California should have received based on its needs.

Testifying before the committee, Inspector General Paul A. Adams said California is among a number of states that should have received more funding, while a group of 10 states captured more than twice what they should have been awarded.

“There is little assurance that housing is being provided to those areas having the greatest need and that limited program funds are being spent efficiently and effectively,” he told the committee.

Lantos, chairman of the employment and housing subcommittee of the House Committee on Government Operations, said after the panel’s hearings that he has encouraged Jack Kemp, who is now HUD secretary, to “formulate the kind of objective criteria that will enable him to set up a mechanism that works.”

Former Federal Housing Commissioner Thomas Demery, who was strongly criticized in the investigation’s report for his role in allocating the funds, said Adams’ inquiry was based on “malice, negligence or a cover-up.”

Demery said that most of the problems occurred before he came to HUD in October, 1986, and that he moved quickly to solve them.

“I am deeply distressed that this report contains numerous errors, misrepresentations, omissions, inaccuracies and self-promoting deceptive passages,” he said in a statement to the committee.

The 700-page report accuses 11 former government officials of using their influence and connections in the agency to subvert the normal competitive process by which money is distributed.

Adams told the House panel that those former officials were paid hundreds of thousands of dollars by developers to consult with officials of the department between 1984 and 1988. He said those hired as consultants included former Interior Secretary James Watt, former HUD Undersecretary Philip Abrams and former HUD Assistant Secretary Philip Winn.

“Applications pushed and lubricated by politically well-connected ‘consultants’ received the lion’s share of these increasingly scarce funds,” Lantos said. “Consultants received mind-bogglingly exorbitant fees for fleeting services of dubious legality.”

Although the investigation found no evidence that laws or regulations were broken, Adams said the Justice Department is reviewing the report.