Read the Inspector General's Report (Audit of HUD FY2000 Financial Statements)

Billions of dollars in overpayments to landlords and housing agencies by the Department of Housing and Urban Development (HUD) has reduced the agency's ability to provide low-income housing assistance, according to a recent report.

The agency provides housing assistance funds to multifamily project owners and housing agencies. These intermediaries provide housing assistance to benefit primarily low-income households. HUD spent about $19 billion in FY2000 to provide rent and operating subsidies for over four million households.

The HUD Inspector General's report, which was released in March, projected that nearly $2 billion in subsidies was overpaid. The report went on to note that these overpayments waste limited HUD funds and reduce the agency's ability to serve families who may be eligible for the program.

One of the problems is that tenants often do not report or under report income, which, if not detected, causes HUD to overpay for housing assistance, according to the report.

Under HUD's housing assistance programs, housing agencies or individual housing project owners or agents determine eligibility for programs.

The IG has long warned that this structure poses a “significant risk” to the agency. Since oversight is difficult under the arrangement, it provides little means to ensure that people receiving housing assistance from HUD are the ones who really need the support.

According to the report, 36 percent of the renters paid less per month in rent than they would have if income were accurately reported. These renters underpaid by an average of $105 per month.

To improve the agency's oversight of housing assistance programs, the IG recommended improving onsite monitoring and matching tenant income reports with other available financial data, such as tax returns.

Unfortunately, implementing such reforms may prove difficult. Past attempts to improve overall financial controls within the agency have been stymied by delays and cost overruns, according to the report.

But an attempt must be made to correct the problem. HUD should act immediately to implement the report's recommendations. The cost of these overpayments to both the treasury and those in need of housing assistance is too great to ignore.