Ineligible Households in Assisted Housing Projects

GAO undertook a review of the practice of some section 8 project owners who are leasing units, for which section 8 assistance is available, to market rate tenants rather than section 8 eligible households. Although leasing to such ineligible market rate households is permissible under the section 8 regulations, GAO believes the current policy and procedures relating to their inclusion in assisted housing could be improved.

In its review, GAO found that there are two major objections to the policy of leasing to ineligible households. First, occupancy of section 8 contracted units by ineligible tenants frustrates the intent of the program by causing the program to fall short of its assistance goals, even though the money to achieve more has been made available by Congress. Second, the cost-effectiveness of the program is degraded since indirect subsidy costs, which are incurred regardless of who occupies the housing units, must be counted against a lower number of assisted households. To correct these problems, GAO believes that the Department of Housing and Urban Development (HUD) should consider: (1) further lowering the percentage limitation on ineligible households to 5 percent, with no exception for partially assisted projects; (2) issuing explicit enforcement guidelines for use by HUD area offices in dealing with project owners who exceed the limitation on ineligible households; and (3) making the new percentage limitation on ineligibles applicable to completed projects for which the earlier 20 percent limitation is still in effect.