Procedures for Adjusting Rents in the Section 8 Program Need Reexamination

GAO reviewed the procedures followed by the Department of Housing and Urban Development (HUD) in making annual rent adjustments under its subsidized rental housing program.

The program's authorizing legislation states that its rental assistance contracts shall provide for rent adjustments at least annually for units covered. HUD uses a formula approach to adjust the rents and develops annual rent adjustment factors for selected standard metropolitan statistical areas and four census regions. Congress made a number of changes to the program because of its high costs, including the basis for granting rent increases. GAO found that the process which HUD uses to develop the annual adjustment factors needs reexamination, because the Bureau of Labor Statistics (BLS) data used to compute these factors are gathered from samples that are not designed to yield precise local estimates. Review of the BLS sample design indicated that the data used by HUD to develop factors for local areas could contain sampling errors so high for some of the areas that the estimates are meaningless from a statistical standpoint. HUD officials said that time constraints and costs contributed to the agency's initial decision to use existing data rather than generate new data for the program. The direct impact that the annual adjustment factors have on the substantial Federal rental subsidies paid under the program strongly suggests that HUD should make every effort to insure the appropriateness and adequacy of the data used to develop the adjustment factors.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Steven J. Wozny Team: General Accounting Office: Community and Economic Development Division Phone: (202) 426-1780