HUD paid subsidies for poor tenants who did not exist

Wasteful Spending Watch: Suspension of building management review program led to rampant fraud, criminal convictions

Updated: March 22, 2020 - 10:13am

The Facts Inside Our Reporter’s Notebook

The Golden Horseshoe is a weekly designation from Just the News intended to highlight egregious examples of wasteful taxpayer spending by the government. The award is named for the horseshoe-shaped toilet seats for military airplanes that cost the Pentagon a whopping $640 each back in the 1980s. 

This week, our prestigious award is being given to the U.S. Department of Housing and Urban Development’s (HUD) Southwest Regional office, for doling out $5.6 million in subsidies (taxpayer money) to property owners for housing poor tenants who, it turns out, don’t exist.

In 2016 HUD’s Southwest regional office, headquartered in Fort Worth, Texas, suspended its project-based contract administrators’ (PBRA) management and occupancy review program. The point of the review program is to ensure that property owners receiving government contracts to house low-income tenants are providing accurate and supported information about their tenants and the conditions of their building.

In late February of this year, the Office of the Inspector General (OIG) for HUD released an audit report of five properties in HUD’s Southwest region, detailing the results of the oversight program suspension.

“HUD did not have adequate oversight of its PBRA program in the Southwest Region during the 5 years in which it suspended its project-based contract administrators’ management and occupancy reviews," the IG found. "Specifically, during that time, HUD paid subsidies to property owners for nonexistent and unsupported tenants based on falsified, inaccurate, and unverified information.”

Read the full report here:

“Some past and current tenants verified in interviews that they either never lived there or did not live there during the time that HUD paid subsidies for them, as well as confirmed that tenant information had been falsified.” Essentially, the property owners of these Section 8 buildings were profiting off of ghost tenants, who either did not exist, or did not reside in the complexes. 

There was, in fact, such blatant waste, fraud, and abuse at play that during the course of the IG’s audit, their Office of Investigation was able obtain several convictions among the building staff, all in on the scheme, at one of the apartment complexes for offenses including money laundering, conspiracy, and theft of public money.

OIG’s primary recommendation was that HUD should “enforce its written policies and procedures to ensure that the verification and payment of housing assistance payment and subsidies for properties it subsidizes are based on accurate and supported information.” Translation: Do your jobs with a basic degree of vigilance.

Given a chance to respond to the OIG report, the Director of the Office of Asset Management and Portfolio Oversight attempted to divert the blame to funding shortages and faulty OIG methods used to determine whether fraud was occurring.

“We maintain our position that HUD paid subsidies to owners for nonexistent and unsupported tenants," the auditors countered. "All five audit reports showed that HUD paid for nonexistent tenants, unsupported tenants, or both.”