Millions Lost in Errors on Rent, HUD Audit Says

Errors in calculating rents for subsidized housing are costing the federal government millions of dollars a year, according to a Department of Housing and Urban Development internal audit obtained today.

A second audit, sent to Congress this week, raises fresh charges of favoritism in the awarding of rent subsidies and says such conduct was allowed because of poor program accountability. Mismanagement and political favoritism are the key subjects of congressional investigations of HUD during the Reagan Administration.

For the rent study, completed last week and released under the Freedom of Information Act, HUD’s inspector general reviewed 142 of the 2,755 areas for which the department sets fair-market rents for subsidized housing. He found that in 116 of those areas, the government was paying as much as $39.1 million a year in excessive subsidies.

Since the review covered only 5% of the rent areas and that sample was not drawn at random, the auditors said they could not provide a nationwide estimate of likely overpayments but noted that HUD’s long-range commitments to the Section 8 program are in the area of $188 billion.

Still, they recommended that HUD take a number of steps to bring its Section 8 rent formulas in line with local real estate market conditions, particularly in rural areas not covered by government or industry housing surveys. In a smattering of areas, the auditors said HUD might also be paying too little in subsidies.

The report was sharply criticized by HUD officials in charge of the program, who responded to a draft copy in July by saying “the evidence simply does not support a conclusion of any serious problem.”