U.S. Senator Rand Paul released his latest Waste Report, an ongoing project cataloguing egregious examples of waste within the U.S. government.
A recent report by the Inspector General for the Department of Housing and Urban Development (HUD) found that, in 2016, taxpayers footed a bill of over $3 million to cover higher rent for Section 8 units in sampled co-ops than the owners charged non-subsidized units on the same properties.
You can get the full story in this week’s Waste Report HERE or below.
The guy sitting next to you on a plane paid $150 less for his ticket, or your neighbor bought a lawn mower on sale…a week after you bought the same one at regular price.
It can be frustrating when you pay for something only to find out other people got the same thing for a cheaper price. Well, if you pay taxes, get ready to be frustrated!!!
According to the Inspector General (IG) for the Department of Housing and Urban Development (HUD), the federal government paid higher rent for Section 8 housing than non-subsidized renters paid in the same buildings.
How Much More?
According to the IG’s report, the total additional cost to the taxpayer of paying higher rent for Section 8 units came out to over $3.1 million – just in 2016 – for the housing developments they sampled. However, since their sample was only 28% of the potential number of developments where this could have occurred, the taxpayer could be out as much as $10 million or more.
At the low end, the difference in rent was as little as $2 a month, but amazingly, at the high end, the taxpayer could be forking over nearly $2,900 more for a subsidized unit than they would have paid for a similar unit on the open market.
Cooperating for Lower Rent
The way Section 8 works is renters pay a percentage of their income toward the rent of their housing unit. The government picks up the difference between the tenants’ rent and the full rental cost of the unit. So if the unit rent goes up, the taxpayer picks up the full increase. This also creates a situation where Section 8 tenants might not object to a rent increase because they do not personally pay any more, since the taxpayer does instead.
Given this, at first glance, one might envision a greedy landlord bilking the government for every dollar he can get. However, the target of the IG’s investigation was cooperatives properties (co-ops). In other words, resident-owned buildings.
In a co-op, “members” pay a maintenance fee (called rent) that covers building operations, amenities, and upkeep and pays down any mortgage on the building – similar to an HOA fee. Since these fees cover communal costs, charging one group of renters a higher rent (like those with a government subsidy) allows others (non-subsidized renters) to pay less while collectively all the building costs are met.
By charging Section 8 tenants more, the non-subsidized tenants reap a benefit. As the IG put it (under the header “Taxpayer-Funded Windfall”): “[B]y paying more in assistance and allowing non-Section 8 households to pay less, HUD, and ultimately the taxpayer, is subsidizing the non-Section 8 households.”
Technically, current law and HUD regulations prohibit renting a Section 8 unit for more than a comparable unit in the same area would rent for on the open market, but not specifically in the same building.
This is unique to co-ops, because public housing authorities and corporate or privately owned buildings cannot charge disparate rents. Somehow in the course of establishing those rules, co-ops were overlooked, and it is costing you at least $3.1 million a year.