A family of four in New York City makes $497,911 a year but pays $1,574 a month to live in public housing in a three-bedroom apartment subsidized by taxpayers.
In Los Angeles, a family of five that has lived in public housing since 1974 made $204,784 last year but paid $1,091 for a four-bedroom apartment. And a tenant with assets worth $1.6 million — including stocks, real estate and retirement accounts — last year paid $300 for a one-bedroom apartment in public housing in Oxford, Neb.
In a new report, the watchdog for the Department of Housing and Urban Development describes these and more than 25,000 other "over-income" families earning more than the maximum income for government-subsidized housing as an "egregious" abuse of the system. While the family in New York with an annual income of almost $500,000 raked in $790,500 in rental income on its real estate holdings in recent years, more than 300,000 families that really qualify for public housing lingered on waiting lists, auditors found.
But HUD has no plans to kick these families out, because its policy doesn't require over-income tenants to leave, the agency's inspector general found. In fact, it encourages them to stay in public housing.
"Since regulations and policies did not require housing authorities to evict over-income families or require them to find housing in the unassisted market, they continued to reside in public housing units," investigators for Inspector General David Montoya wrote.
The review, conducted in 2014 and 2015 at the request of Rep. Phil Roe, R-Tenn., found that 45 percent of the 25,226 public housing tenants with incomes higher than the threshold to get into the system were making $10,000 to $70,000 a year more. About 1,200 of them had exceeded the income limits for nine years or more, and almost 18,000 for more than a year.
HUD sets the low-income limits at 80 percent and very low-income limits at 50 percent of the median income for the local area. The agency sets "fair market rents" every year based on incomes, housing demand and supply. In Los Angeles, for example, the threshold was $70,450 for a family of five. In Oxford, Neb., it was $33,500 for an individual.
New York, Puerto Rico and Texas had the most over-income families in public housing, while Utah, Idaho and Wyoming had the fewest, investigators found.
About 1.1 million families in the country live in public housing. The over-income tenants represent 2.6 percent of the system. Based on these numbers, HUD officials said the inspector general was "overemphasizing" the problem. But the watchdog didn't buy it.
"Although 25,226 over-income families is a small percentage of the approximate 1.1 million families receiving public housing assistance, we did not find that HUD and public housing authorities had taken or planned to take sufficient steps to reduce at least the egregious examples of over-income families in public housing," the audit said. "Therefore, it is reasonable to expect the number of over-income families participating in the program to increase over time."
The watchdog estimated that taxpayers will pay more than $104 million over the next year to keep these families in public housing, money that should be used for low-income people.
But under HUD regulations, public housing tenants can stay as long as they want, no matter how much money they make, as long as they are good tenants. The agency is only required to consider a tenant's income when an individual or family applies for housing, not once they're in the system. This is different from the housing choice voucher program that used to be called Section 8, which gives families subsidies for rentals in private apartment buildings. That program has an annual income limit; tenants who go above it get less money.
Tenants can wait years to get into both programs.
HUD tweaked its policy on high-earning tenants in 2004, encouraging the thousands of housing authorities in the system to move families out of public housing if they earn more than the income limit for their area. While HUD gives money to the housing authorities, they're run by states and local governments.
But the 15 authorities investigators looked at told them they had no plans to evict these families, because if they did, poverty would continue to be concentrated in government-subsidized housing. The goal, they said, was to create diverse, mixed-income communities and allow tenants who are making good money to serve as role models for others.
HUD officials repeatedly objected to the audit, saying that evicting over-income families could "negatively affect their employment and destabilize properties."
"There are positive social benefits from having families with varying income levels residing in the same property," Milan Ozdinec, HUD's deputy assistant secretary for public housing and voucher programs, wrote in a lengthy rebuttal to the inspector general.
"Forcing families to leave public housing could impact their ability to maintain employment if they are not able to find suitable housing in the neighborhood," Ozdinec wrote. "Further, for families with children, it may be more difficult to find affordable child care, and it may impact school-age children's learning if they are forced to change schools during a school year."
The watchdog said it didn't believe that HUD should kick out every family that earns more than the income threshold. But at the very least, the agency should create "limits to avoid egregious cases."