Why Are The Rich Living in Social Housing?

Public housing in the Brownsville section of Brooklyn, New York, is seen from a rooftop of the Seth Low Houses on July 29, 2010. Shannon Stapleton/Reuters

This article first appeared on the American Enterprise Institute site.

Last week, The Washington Post and The Hill reported on an internal audit of the Department of Housing and Urban Development's (HUD) public housing program. This audit found that more than 25,000 families earned more than the income eligibility amounts allowed for public housing.

Although it accounts for only 2.6 percent of all public housing tenants, many were far over the income eligibility requirements and had been for a while.

In one of the more egregious cases, a New York City family earned almost $500,000 in annual income (mostly from rental income on properties they owned) and paid $1,500 per month in rent to the public housing authority. New York City had 10,000 of the over-income cases and a waiting list of more than 300,000 families, according to the audit. And this was only one of a handful of equally appalling cases.

But most surprising was that the local housing authorities knew about the over-income families and chose to leave them alone, and HUD allows it. According to the report:

The 15 housing authorities that we contacted choose to allow over-income families to reside in public housing. HUD did not encourage them to require over-income families to find housing in the unassisted market. As a result, HUD did not assist as many low-income families in need of housing as it could have.

We estimate that HUD will pay $104.4 million over the next year for public housing units occupied by over-income families that otherwise could have been used to house low-income families.

Although it would be reasonable to expect that a minimum number of over-income families would reside in public housing at any time, HUD can significantly reduce the number of over-income families that reside in public housing.

It would be reasonable to expect that high-income families not be allowed to reside in low-rent apartments at the expense of taxpayers. In no other means-tested program (e.g., TANF, SNAP, Medicaid, EITC) are families who exceed income limits allowed to receive a benefit indefinitely.

According to a follow-up report by The Washington Post, HUD reversed its original response to the audit and is now "taking additional steps to encourage housing authorities to establish policies that will reduce the number of over income families in public housing."

This seems inadequate. Local housing authorities have the final say and they have little incentive to evict higher-income tenants. According to the Post report, New York City's Housing Authority collects $90 million in revenue from higher-income tenants. It is unlikely that they would forgo this revenue without consequences.

While it is true that housing authorities must be careful not to discourage tenants from earning more money, allowing high-income tenants to benefit from tax-supported public housing indefinitely is not the answer.

Angela Rachidi is a research fellow in poverty studies at the American Enterprise Institute (AEI) and a former deputy commissioner for policy research and evaluation for the Department of Social Services in New York.