Abuses Riddle Federal Program to House the Homeless, Records Show

A government program to give the poor a roof over their heads is so riddled with problems that well-off people lived in houses meant for homeless families and low-income home buyers were bilked by government-approved middlemen, documents show.

Under the “Homes for Homeless” program, the Department of Housing and Urban Development leases houses whose owners have defaulted on federally guaranteed loans. The houses are made available for $1 a year to nonprofit organizations that work with the homeless.

The aim is to provide cheap, temporary housing for people trying to get back on their feet.

But some HUD offices have done such a poor job of monitoring the groups that many have abused the program, letting friends, relatives or others live in the houses, according to internal HUD investigative documents and audits obtained by Associated Press.

“It’s just too easy to cheat,” said D. Michael Beard, inspector general for HUD’s Southwestern district. “We believe the program should be eliminated.”

The agency is not ready to scrap the program yet. But under pressure from Congress, it said in November that no new leases would be issued as of Jan. 1. HUD will decide next year whether to end the program, said Jacquie Lawing, deputy assistant secretary.

More than 300 organizations--mainly privately funded homeless coalitions and community service groups--hold leases on 1,289 of the homes nationwide.

HUD acquired the properties through foreclosures of government-guaranteed home loans. The program receives no direct funding, although the department absorbs the cost of leasing the homes, which would otherwise be sold.

In Baton Rouge, La., HUD auditors found only one homeless person among the 43 tenants it reviewed among 108 leases held by the nonprofit group Safety Net Inc.

Expensive cars were parked in front of houses that contained nice furniture and big-screen televisions, documents show. Tenants were later found to be friends and business associates of the group’s director. One tenant earned $58,000 a year and paid no rent, according to Beard and local newspaper reports.

HUD knew as far back as 1990 that some of the Safety Net tenants were not homeless. It told the group to stop the practice, but continued leasing it more properties and failed to monitor the group to see if the problems had been corrected.

It finally terminated Safety Net’s leases and kicked the group out of the program after local press reports earlier this year.

In Denver, a nonprofit group sold a fixer-upper house meant for a low-income buyer to a builder making $30,000 a year, who paid cash for the property.

Ecumenical Refugee Services Inc. received $46,000 for the house, $10,000 more than the discounted price it paid. The group’s director said the sale was the work of a single employee, who has been fired.

HUD kicked the group out of the program in September and made it pay back its profit on the house.

In St. Louis, HUD gave Allied Housing Group Inc. contracts to purchase a dozen houses and resell them to low-income buyers, even though it had had problems with the group in the past.

Allied collected thousands of dollars in deposits from several buyers and tried to buy additional houses with the money, according to HUD documents. The deals fell through.

“We scraped to get the money together,” said Pamela Wyatt of Bridgeton, Mo., who lost $7,900.

HUD terminated its dealings with Allied early this year. The state also sued the group to retrieve the funds, but the group’s officials can’t be located, according to state and HUD officials.

A man who answered the phone at the number listed for Allied said the group had moved.

HUD doesn’t have enough staff to ensure that groups rent only to homeless people, officials say.

“We don’t manage the nonprofits; we manage the properties,” said Tony Hernandez, HUD’s top official in Denver.

To get into the program, created in 1990, nonprofits need to show that they have adequate funding to keep up the properties and provide support services to help families get on their feet.

The groups sign agreements to house only people who have been living in shelters, have very low incomes or face eviction.

HUD inspects the houses once a year for maintenance and damage and periodically checks the groups’ tenant and financial records.

Pamela Martin, executive director of a Phoenix nonprofit that HUD accused of leasing to ineligible tenants, says renters who eventually find work often may earn more than the program allows.

“You don’t kick them out right away,” Martin said. “We look at their financial situation and give them 30 to 60 days.”

Lawing said tighter rules are making it harder for cheaters. Groups now get two-year leases, down from five, and are examined before they get any new properties. The agency also capped how many houses each HUD office could lease. The changes have led to fewer problems, she said.

The $1 leasing program is a small part of HUD’s $1-billion effort to assist homeless families.

“We will review what role, if any, the program will have in the context of our national homeless policy, given that Secretary [Henry] Cisneros and Congress have doubled funding for our other homeless programs,” Lawing said.

Rep. Spencer Bachus (R-Ala.), who chaired hearings on the program in August, said the program should be scrapped.

“It attracts charlatans,” said Bachus. “It’s laughable. It ought to be discontinued.”