Section 8 Tenant-Based Housing Assistance

In fiscal year 1998, Congress earmarked $25 billion for programs at the Department of Housing and Urban Development (HUD)--a 30-percent increase over the previous year's appropriation. HUD will use more than one-third of this funding to help poor people obtain decent housing under section 8 of the Housing Act of 1937. Section 8 established two primary types of assistance for families to rent private housing: tenant-based assistance provided through contracts with housing agencies and project-based assistance provided through contracts with landlords. In 1997, HUD reported that enough money had accumulated unneeded and unspent over the 24-year life of the tenant-based program to fully fund the program in fiscal year 1996. Before 1997, however, HUD's computer systems could not identify the accumulation of such excess budget authority. This report (1) evaluates the accuracy of HUD's estimate of its unspent money in the section 8 tenant-based program and the reasonableness of this amount and (2) assesses HUD's budget formulation process as it was carried out for the Department's fiscal year 1998 budget submission for the tenant-based section 8 program.

GAO noted that: (1) in 1997, HUD estimated that $20.7 billion in unexpended budget authority existed in the Section 8 tenant-based program and that $9.9 billion of that amount was in excess to known program needs; (2) this is funding that housing agencies received under contracts with HUD but did not expend because the funding was not needed as planned to make housing assistance payments to landlords on behalf of low-income families; (3) because HUD based its estimate largely on the data in its tenant-based program's information system--which HUD's Office of Inspector General and an independent audit firm have tested and determined to be reliable--GAO believes that the estimate is reasonably accurate; (4) after Congress rescinded a total of $4.2 billion in June and October 1997 and HUD set aside $2.2 billion for unanticipated costs and to account for future transactions, the balance of $9.9 billion in excess unexpended budget authority was reduced to about $3.5 billion in October 1997 and placed in a congressionally established Reserve Preservation Account; (5) the budget information process that HUD used to prepare its fiscal year (FY) 1998 budget request for renewing Section 8 tenant-based contracts did not produce an accurate estimate of needs; (6) key HUD offices did not adequately oversee critical steps in the process, and the process did not require reasonable justification for substantial portions of the estimate--including several hundred million dollars proposed for contingency costs; (7) in addition, although at the time of its FY 1998 budget submission HUD had an estimate of the impact of welfare reform on the cost of the Section 8 program, more recent information caused HUD to conclude that including this estimate in the budget request was necessary; (8) as a result, HUD eventually lowered by $1 billion its FY 1998 budget estimate for renewing Section 8 contracts; and (9) to improve its process, HUD has further enhanced its tenant-based program's information system, consolidated its budget development with strategic planning and financial management, and changed its budget process; HUD also plans additional changes in these areas but does not have a timetable for accomplishing them.

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.

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