Testimony 

Before the Subcommittee on Federal Financial 

Management, Government Information, and 

International Security, Committee on Homeland 

Security and Governmental Affairs, U.S. Senate 

United States Government Accountability Office

GAO 

For Release on Delivery 

Expected at 2:30 p.m. EDT 

Tuesday, September 27, 2005 HUD RENTAL 

ASSISTANCE 

Progress and Challenges in 

Measuring and Reducing 

Improper Rent Subsidies 

Statement of David G. Wood, Director 

Financial Markets and Community Investment 

GAO-05-1027T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

www.gao.gov/cgi-bin/getrpt?GAO-05-1027T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact David G. Wood 

at (202) 512-8678 or WoodD@gao.gov. 

Highlights of GAO-05-1027T, a testimony 

before the Subcommittee on Federal 

Financial Management, Government 

Information, and International Security, 

Committee on Homeland Security and 

Governmental Affairs, U.S. Senate 

September 27, 2005

HUD RENTAL ASSISTANCE 

Progress and Challenges in Measuring 

and Reducing Improper Rent Subsidies 

HUD has identified three sources of errors contributing to improper rent 

subsidy payments: (1) incorrect subsidy determinations by program 

administrators, (2) unreported tenant income, and (3) incorrect billing. HUD 

has attempted to estimate the amounts of improper subsidies attributable to 

each source but has developed reliable estimates for only the first—and 

likely the largest—source. HUD paid an estimated $1.4 billion in gross 

improper subsidies (consisting of $896 million in overpayments and $519 

million in underpayments) in fiscal year 2003 as a result of program 

administrator errors—a 39 percent decline from HUD’s fiscal year 2000 

baseline estimate. GAO estimates that the amount of net overpayments 

could have subsidized another 56,000 households with vouchers in 2003. 

HUD has initiated several efforts under RHIIP to address improper subsidies 

in its public housing, voucher, and project-based Section 8 programs. 

Specifically, HUD has (1) stepped up monitoring of program administrators, 

(2) improved verification of tenants’ incomes, and (3) provided guidance and 

training on program requirements to HUD staff and program administrators. 

These actions have strengthened HUD’s oversight of the programs, despite 

some implementation problems and remaining challenges. For example, for 

the voucher and public housing programs, HUD field office staff completed 

about 1,100 Rental Integrity Monitoring reviews—that is, on-site assessments 

of public housing agencies’ compliance with policies for determining rent 

subsidies—between 2002 and 2004. However, problems with a database 

containing information on these reviews prevented HUD from analyzing the 

results. 

According to HUD, the complexity of existing policies contributes to the 

difficulties program administrators have in determining rent subsidies 

correctly. For example, program administrators must assess tenants’ 

eligibility for 44 different income exclusions and deductions. However, 

simplification of these policies, which will likely require statutory changes 

by Congress, could affect many tenants’ rental payments, with some 

tenants paying more and others paying less. HUD has considered various 

approaches to simplifying policies for determining rent subsidies, but it has 

not conducted a formal study to inform policymakers on this issue. 

In fiscal year 2003, the Department 

of Housing and Urban 

Development (HUD) paid about 

$28 billion to help some 5 million 

low-income tenants afford decent 

rental housing. HUD has three 

major programs: the Housing 

Choice Voucher (voucher) and 

public housing programs, 

administered by public housing 

agencies, and project-based Section 

8, administered by private property 

owners. As they are every year, 

some payments were too high or 

too low, for several reasons. To 

assess the magnitude and reasons 

for these errors, HUD established 

the Rental Housing Integrity 

Improvement Project (RHIIP). 

This testimony, based on a report 

issued in February 2005, discusses 

the sources and magnitude of 

improper rent subsidy payments 

HUD has identified and the steps 

HUD is taking to address them. 

What GAO Recommends

In its report, GAO made 

recommendations designed to 

improve HUD’s oversight of the 

process for determining rental 

subsidies in its housing assistance 

programs. GAO also recommended 

that HUD study the potential 

impacts of alternatives for 

simplifying the rent determination 

process. HUD agreed with GAO’s 

recommendations to improve its 

program oversight but said that the 

report did not fully present the 

significance and impact of HUD’s 

efforts under RHIIP. 
Page 1 GAO-05-1027T 

Mr. Chairman and Members of the Subcommittee: 

I appreciate the opportunity to be here today to discuss our work on 

improper subsidy payments in the Department of Housing and Urban 

Development’s (HUD) rental assistance programs: Housing Choice 

Voucher (voucher), public housing, and project-based Section 8. Payments 

made under these programs, which help keep rents affordable for about 5 

million low-income tenants, account for the majority of HUD’s 

expenditures. For example, in fiscal year 2003, these payments accounted 

for about $28 billion, or almost 75 percent of the department’s total 

expenditures. HUD’s payments cover the difference between a unit’s 

monthly rental cost—or, for public housing, the operating cost—and the 

tenant’s payment, which is generally equal to 30 percent of the tenant’s 

adjusted monthly income. I will refer to these payments as rent subsidies. 

Public housing agencies (PHA) administer the voucher and public housing 

programs, and private property owners administer the project-based 

Section 8 programs. These program administrators are responsible for 

ensuring that tenants meet HUD’s eligibility criteria and for accurately 

calculating rent subsidies. 

Each year HUD makes improper payments—that is, payments that are too 

high or too low—under these programs primarily because it cannot ensure 

that rent subsidies are determined correctly. Because of their vulnerability 

to waste, fraud, and abuse, GAO has designated HUD’s rental assistance 

programs as high risk since early 2001.1

 In addition, the President’s 

Management Agenda for Fiscal Year 2002 identified HUD’s rental 

assistance programs as one of nine program areas that have severe 

management challenges and that are in need of immediate reform.2 In 

response to these assessments, HUD established the Rental Housing 

Integrity Improvement Project (RHIIP) in 2001 to increase accountability 

and reduce improper subsidy payments. 

My statement today is based on our February 2005 report to the 

Subcommittee on Housing and Community Opportunity, House 

Committee on Financial Services, which requested that we examine HUD’s 

 1

GAO, Major Management Challenges and Program Risks: Department of Housing and 

Urban Development, GAO-01-248 (Washington, D.C.: Jan. 1, 2001). 

2

Office of Management and Budget, The President’s Management Agenda, Fiscal Year 

2002 (Washington, D.C.: July 2001). 
Page 2 GAO-05-1027T 

efforts to measure and reduce improper rent subsidy payments.3

Specifically, my statement discusses (1) the sources and magnitude of 

improper payments that HUD has identified; (2) the actions HUD is taking 

under RHIIP to reduce improper payments in the voucher, public housing, 

and project-based Section 8 programs; and (3) the status and potential 

impact of HUD’s efforts to reduce the risk of improper payments by 

simplifying the process for determining rent subsidies. In preparing the 

report, we obtained and analyzed data on improper payments that HUD 

collected for fiscal years 2000 and 2003. We also interviewed officials from 

HUD’s headquarters and field offices, PHAs, and contract administrators; 

examined laws, regulations, policies, and guidance related to subsidy 

determinations; and reviewed relevant HUD reports and studies.4

In summary: 

• HUD has identified three sources of errors that contribute to improper 

rent subsidy payments: (1) incorrect subsidy determinations by program 

administrators, (2) unreported tenant income, and (3) incorrect billing. 

HUD has attempted to estimate the amounts of improper subsidies 

attributable to each source but has developed reliable estimates for only 

the first—and likely the largest—source. HUD paid an estimated $1.4 

billion in gross improper subsidies (consisting of $896 million in 

overpayments and $519 million in underpayments) in fiscal year 2003 as a 

result of program administrator errors—a 39 percent decline from HUD’s 

fiscal year 2000 baseline estimate. We estimate that the amount of net 

overpayments could have provided another 56,000 low-income households 

with vouchers in fiscal year 2003. 

• HUD has initiated several efforts under RHIIP to address improper 

subsidies in its public housing, voucher, and project-based Section 8 

programs. Specifically, HUD has (1) stepped up its monitoring of program 

administrators, (2) improved verification of tenants’ incomes, and (3) 

provided additional guidance and training on program requirements to 

HUD staff and program administrators. These actions have strengthened 

HUD’s oversight of the programs, despite some implementation problems 

 3

GAO, HUD Rental Assistance: Progress and Challenges in Measuring and Reducing 

Improper Rent Subsidies, GAO-05-224 (Washington D.C.: Feb. 18, 2005). 

4

For HUD’s project-based Section 8 programs, contract administrators—which include 

private contractors and HUD field offices—are responsible for overseeing individual 

Section 8 properties and ensuring that the properties are in compliance with HUD’s 

policies. 
Page 3 GAO-05-1027T 

and remaining challenges. For example, for the voucher and public 

housing programs, HUD field office staff completed about 1,100 Rental 

Integrity Monitoring (RIM) reviews—that is, on-site assessments of PHAs’ 

compliance with policies for determining rent subsidies—between 2002 

and 2004. However, problems with a database containing information on 

RIM reviews prevented HUD from analyzing the results of the reviews. 

• According to HUD, the complexity of existing policies contributes to the 

difficulties program administrators have in determining rent subsidies 

correctly. For example, program administrators must assess tenants’ 

eligibility for 44 different income exclusions and deductions. However, 

simplification of these policies, which will likely require statutory changes 

by Congress, could affect the rental payments of many tenants. HUD has 

considered various approaches to simplifying policies for determining rent 

subsidies but has not conducted a formal study to inform policymakers on 

this issue. 

On the basis of our findings, we recommended that HUD: 

• make regular monitoring of PHAs’ compliance with its policies for 

determining rent subsidies a permanent part of its oversight activities, 

• collect complete and consistent information from these monitoring efforts 

and use it to help focus corrective actions where needed, and 

• study the potential impact of alternative strategies for simplifying program 

policies on tenant rental payments and program costs. 

HUD has taken steps to address the first two recommendations but, as 

noted, has not done a formal study of simplification and its likely effects. 

HUD’s voucher, public housing, and project-based assistance programs 

share the common mission of making housing affordable to low-income 

households. The subsidies these programs provide are not an entitlement, 

and the number of low-income households eligible for assistance exceeds 

the number of subsidized units or vouchers that are available. These 

programs are administered differently and vary in the number of 

households they assist and the amount of funding they receive. 

The voucher program, which approximately 2,500 PHAs administer on 

HUD’s behalf, is HUD’s largest rental assistance program. The program, 

Background 
Page 4 GAO-05-1027T 

authorized under Section 8 of the United States Housing Act of 1937, as 

amended, provides housing vouchers that eligible individuals and families 

can use to rent houses or apartments in the private housing market from 

property owners participating in the program. In fiscal year 2003, the 

program assisted about 2 million households (42 percent of all HUDassisted households) and had outlays of about $13 billion. In general, only 

households with very low incomes—less than or equal to 50 percent of 

area median income—are eligible for vouchers. 

Under the public housing program authorized by the United States 

Housing Act of 1937, as amended, HUD has subsidized the development, 

operation, and modernization of government-owned properties, which are 

currently managed by some 3,300 PHAs. In fiscal year 2003, HUD’s public 

housing program assisted 1.2 million households (one-quarter of all 

households receiving housing assistance) and had outlays of about $7 

billion.5

 To be eligible for public housing, a household must be low 

income—that is, have an income that is less than or equal to 80 percent of 

area median income. 

Under a variety of project-based Section 8 programs authorized by the 

Housing and Community Development Act of 1974, as amended, HUD 

subsidizes rents at certain multifamily housing developments, which had 

often received construction subsidies from other HUD programs, with 

rental assistance payments disbursed under multiyear contracts. Property 

owners and managers for about 22,000 subsidized properties currently 

participate in these programs. In fiscal year 2003, HUD’s project-based 

programs assisted 1.6 million households (one-third of all HUD-assisted 

households) and had outlays of roughly $8 billion. In general, only 

households with low incomes are eligible for HUD project-based Section 8 

assistance. 

HUD’s oversight of the program administrators varies, depending on the 

program. For vouchers and public housing, HUD field offices provide 

oversight of PHAs that administer the programs. Field office staff conduct 

on-site reviews and analysis of PHAs’ operations. For HUD’s Section 8 

project-based programs, contract administrators—which include both 

private contractors and HUD field offices—are responsible for overseeing 

and ensuring that Section 8 properties are in compliance with HUD’s 

policies. 

 5

This figure includes both operating and capital subsidies. 
Page 5 GAO-05-1027T 

HUD created RHIIP in the spring of 2001 to assess the magnitude of and 

reasons for improper payments in its rental housing assistance programs. 

RHIIP was set up as a direct result of HUD’s analysis of data it collected 

on improper subsidy payments in fiscal year 2000. The analysis, which 

HUD issued in a June 2001 report, focused on subsidy errors made by 

program administrators but did not attempt to determine if the tenants had 

supplied accurate and complete income information.6

 In 2002, HUD 

completed a separate evaluation to determine the magnitude of rental 

assistance errors caused by unreported tenant income. The study matched 

tenants’ reported incomes with income data from the Internal Revenue 

Service and the Social Security Administration. 

RHIIP’s goal is to reduce the incidence and dollar amount of improper rent 

subsidies by 50 percent in fiscal year 2005 compared with fiscal year 2000, 

with interim goals of a 15 percent reduction by fiscal year 2003 and a 30 

percent reduction by fiscal year 2004. To meet this goal, HUD has initiated 

several program-specific and overarching efforts. 

HUD has identified three basic sources of errors that have resulted in 

improper rent subsidy payments and has conducted separate studies for 

each of these sources to assess the magnitude of the problem and the 

progress that has been made in meeting RHIIP’s goal of reducing improper 

subsidies. However, these studies have not provided reliable estimates of 

the amount of improper subsidies from each source. 

As part of RHIIP, HUD identified three basic sources of errors that 

resulted in improper rent subsidy payments: (1) program administrator 

errors, (2) unreported tenant income, and (3) billing errors. Program 

administrator errors are the broadest category of errors because, as figure 

1 shows, they can affect nearly all of the critical dimensions of the process 

for determining rent subsidies. In performing their work, program 

administrators may incorrectly determine rent subsidies by, for example, 

making calculation and transcription errors or by misapplying income 

exclusions and deductions required by HUD policies. 

 6

Department of Housing and Urban Development, Quality Control for Rental Assistance 

Subsidies Determinations (Washington, D.C.: June 2001). 

HUD Has Identified 

the Sources of 

Payment Errors but 

Lacks Complete and 

Reliable Estimates for 

Each One 

Errors during the Subsidy 

Determination Process 

Can Result in Improper 

Subsidy Payments 
Page 6 GAO-05-1027T 

Errors that result from unreported tenant income occur when tenants do 

not report an income source, either their own or another household 

member’s, to program administrators. These errors generally occur early 

in the process when the tenant first submits income information to 

program administrators (see fig. 1). Although some tenants may not 

disclose all income sources in order to qualify for assistance and to 

increase the rent subsidies they receive, tenants may also fail to report 

income sources unintentionally if program administrators provide unclear 

instructions about the sources of income they must disclose. 

Finally, billing errors occur at the very end of the process (see fig. 1). The 

procedures program administrators use to bill HUD for subsidy payments 

vary for each of the three rental assistance programs, and, as a result, the 

specific types of mistakes that lead to billing errors can also vary. 

However, in general, billing errors arise when discrepancies exist between 

the amount of rent subsidy the program administrator determines and the 

amount billed to and paid by HUD. Billing errors can also include 

accounting discrepancies between amounts paid by HUD and a property’s 

bank statements and accounting records. 
Page 7 GAO-05-1027T 

Figure 1: Rent Subsidy Determination Process 
Page 8 GAO-05-1027T 

To determine the amounts of improper rent subsidies resulting from 

program administrator errors, HUD collected data on more than 2,400 

randomly selected households participating in the voucher, public 

housing, and project-based Section 8 programs for fiscal years 2000 and 

2003. Our analysis of the documentation and data collected indicated that 

these studies provided a reasonably accurate estimate of subsidy 

determination errors made by program administrators. Data from the 

fiscal year 2003 study show that the department paid an estimated $1.4 

billion in gross improper rent subsidies (representing $896 million in 

overpayments and $519 million in underpayments) as a result of program 

administrator errors in fiscal year 2003—a 39 percent decrease from fiscal 

year 2000.7

 The voucher program accounted for about one-half of the total 

reduction, while public housing and project-based Section 8 each 

accounted for roughly one-quarter. Because the overpayments exceeded 

the underpayments, HUD was not able to use an estimated $377 million of 

its funding to assist needy low-income households. On the basis of the 

average national subsidy cost of a voucher in 2003—about $6,720, 

including administrative costs—we estimated that HUD could have 

provided an additional 56,000 households nationwide with vouchers in 

fiscal year 2003, nearly the same number of households that currently 

receive vouchers in the Los Angeles, California, area. 

Each of the rental assistance programs experienced substantial reductions 

in gross program administrator error between fiscal years 2000 and 2003—

50 percent for public housing, 35 percent for vouchers, and 32 percent for 

project-based Section 8 (see fig. 2). These reductions exceeded HUD’s 

interim RHIIP goal of reducing improper rent subsidies by 15 percent by 

fiscal year 2003 for this source of error.8

 Many of the initiatives under 

RHIIP were too recent to have had any direct impact on the reductions. 

However, HUD officials stated that its communications with program 

administrators about the importance of addressing improper rent 

subsidies and program administrators’ anticipation of increased 

monitoring by HUD had probably led to voluntary improvements in 

internal control activities and likely contributed to these reductions. 

 7

The margin of error at the 95 percent level of confidence for the estimated $1.4 billion in 

gross improper subsidies is ±$185 million. The margins of error for the estimated $896 

million in overpayments and $519 million in underpayments are ±$132 million and ±$96 

million, respectively. 

8

RHIIP’s quantitative goal for reducing improper rent subsidies also applies to the other 

sources of errors. 

HUD Has Reliable 

Estimates of Improper 

Payments Due Only to 

Program Administrator 

Errors 
Page 9 GAO-05-1027T 

Future estimates of improper subsidies may show whether further 

reductions can be made and sustained as the RHIIP initiative matures. 

Figure 2: Estimated Gross Improper Rent Subsidies Due to Program Administrator 

Error, Fiscal Years 2000 and 2003 

For the other two sources of errors—unreported tenant income and billing 

errors—HUD did not produce complete or reliable estimates for all three 

programs for fiscal years 2000 and 2003. HUD estimated that the 

department paid $191 million in fiscal year 2003 in gross improper rent 

subsidies due to unreported tenant income. However, the small number of 

files that formed the basis for the estimate and the large variances in the 

amounts of income tenants did not report resulted in a margin of error so 

large that the estimate is not meaningful. As a result, the actual amount of 

improper rent subsidies for this source of error could be as low as zero or 

many times higher than HUD’s estimate. Despite problems with the 

estimate, HUD reported that gross improper rent subsidies due to 

unreported income decreased by 80 percent from fiscal years 2000 to 2003. 

However, we believe that any comparison between the two estimates is 

not valid because of the limitations of the fiscal year 2003 estimate and 

significant differences in the methodology used for each year. 
Page 10 GAO-05-1027T 

HUD also did not produce a complete and reliable estimate of the amount 

of billing error in fiscal year 2000 for any of the three programs. For fiscal 

year 2003, HUD has begun to implement a methodology for estimating 

billing error for vouchers and public housing. For project-based Section 8, 

HUD estimated approximately $100 million in billing errors for fiscal year 

2003, although the small sample size and the concentration of errors in a 

small number of properties resulted in a large margin of error. 

HUD has undertaken three separate efforts under RHIIP to address 

improper rent subsidies for its public housing, voucher, and project-based 

Section 8 programs. Specifically, HUD is (1) stepped up its monitoring of 

program administrators, (2) improving verification of tenants’ incomes, 

and (3) providing HUD staff and program administrators with guidance 

and training to help them understand program requirements. Despite some 

implementation problems and remaining challenges, these actions have 

strengthened HUD’s oversight of the programs. 

To increase monitoring of program administrators, HUD has taken the 

following actions: 

• For the voucher and public housing programs, HUD field office staff 

completed about 1,100 RIM reviews—that is, on-site assessments of PHAs’ 

compliance with policies for determining rent subsidies—between 2002 

and 2004. According to HUD officials, these reviews were the first 

comprehensive reviews of PHAs’ tenant information files in more than 20 

years. While important, the reviews were hampered by implementation 

problems. For example, officials from most of the HUD field offices we 

met with said that they did not have enough staff to conduct all of their 

reviews within the required time frames and still fulfill their other 

oversight responsibilities. As a result of resource constraints, some field 

offices had to use staff with little or no experience in monitoring PHAs for 

RIM reviews; issued their RIM review reports late; or postponed other 

monitoring activities such as inspections of troubled properties. 

Additionally, problems with a database containing information on RIM 

reviews prevented HUD from analyzing the results of the reviews to assess 

improvements in PHAs’ calculations of tenant subsidies and provide 

technical assistance to PHAs. 

• For the project-based Section 8 programs, HUD plans to rely on 

performance-based contract administrators (PBCA) to monitor property 

HUD Has Taken Steps 

to Reduce Improper 

Subsidies in All Three 

Programs, but 

Challenges Remain 
Page 11 GAO-05-1027T 

owners’ compliance with HUD’s policies for determining rent subsidies.9

For the past several years, HUD has been transferring responsibility for 

overseeing property owners to PBCAs from other types of contract 

administrators, including HUD field offices. As of October 2004, HUD’s 

project-based Section 8 programs consisted of about 21,900 properties, 

and HUD had transferred contracts for about 11,800 of these properties to 

PBCAs. HUD requires PBCAs to perform extensive annual reviews of 

properties’ operations, including reviewing owners’ rent subsidy 

calculations. To ensure that PBCAs meet HUD’s performance standards, 

HUD has developed a comprehensive oversight program. However, 

because HUD has often not provided adequate oversight of contractors—a 

factor that in 2003 led us to designate acquisitions management as one of 

HUD’s major management challenges—implementing these oversight 

measures could pose challenges to HUD.10

In our February 2005 report, we recommended that HUD make regular 

monitoring of PHAs’ compliance with HUD’s policies for determining rent 

subsidies a permanent part of its oversight activities. We also 

recommended that HUD collect complete and consistent information from 

these monitoring efforts. In August 2005, HUD officials told us that they 

planned to conduct 275 RIM reviews each year starting in 2006, and that 

they were developing software to better track the results of RIM reviews. 

To improve verification of tenants’ incomes, HUD has done the following: 

• For the voucher and public housing programs, HUD has implemented an 

Internet-based income verification system that allows PHAs to compare 

income information they receive from tenants with income information 

employers report to government agencies. According to HUD officials, the 

system is intended not only to help PHAs detect unreported income, but 

also to provide them with a more convenient and accurate way to verify 

tenant-reported information. HUD obtained the data currently in the 

system through agreements with state wage and income collection 

agencies. HUD is replacing these data with data from a single source—the 

National Directory of New Hires—and intends to make it available to all 

PHAs by the end of this month. Congress passed legislation in 2004 that 

grants HUD the authority to request and obtain data from this directory—a 

 9

PBCAs receive an incentive fee if they perform above a minimum quality level as 

determined by HUD, and their fees are reduced if they perform below this level. 

10GAO, Major Management Challenges and Program Risks: Department of Housing and 

Urban Development, GAO-03-103 (Washington, D.C.: January 2003). 
Page 12 GAO-05-1027T 

database containing quarterly federal and state wage data, quarterly 

unemployment data, and monthly new hire data reported by employers to 

state agencies and compiled by the Department of Health and Human 

Services.11

• For project-based Section 8 programs, HUD plans to implement a similar 

Internet-based system for property owners after it addresses data security 

concerns. When Congress granted HUD access to the National Directory 

of New Hires database, it required that HUD demonstrate to the 

Department of Health and Human Services that all necessary steps had 

been taken to prevent the inappropriate disclosure of information from the 

database before property owners were given access. To alleviate concerns 

about releasing sensitive information to private property owners, HUD is 

initially making the data available only to PHAs to confirm that the system 

is secure. If the Department of Health and Human Services is satisfied with 

HUD’s security precautions, HUD plans to make the information available 

to property owners by the end of fiscal year 2006. Once the system is 

implemented, property owners will be able to access earned income data 

from a secure Web site. 

To improve HUD staff and program administrators’ understanding of the 

complex requirements for determining rent subsidies, HUD has taken the 

following steps: 

• For vouchers and public housing, HUD has provided training and guidance 

to PHAs on various topics, such as how to calculate subsidies, improve 

quality control procedures, and comply with income verification 

requirements. The training addresses program basics, including how to 

interview prospective tenants and verify tenant income information. HUD 

also has provided guidance to PHAs on developing policies and 

procedures that would prevent future subsidy calculation errors and 

provided technical assistance to PHAs that were deemed high risk on the 

basis of their performance in RIM reviews. Finally, HUD has updated or 

developed guidance for PHAs on how to correctly calculate rent subsidies. 

• For project-based Section 8 programs, HUD has improved its guidance and 

training for property owners, contract administrators, and HUD field staff. 

For example, in 2003, HUD revised its handbook for project-based Section 

8 programs, which sets forth the requirements and procedures that 

property owners must follow in administering these programs, including 

 11Consolidated Appropriations Act, 2004, Pub. L. No. 108-199, Jan. 23, 2004. 
Page 13 GAO-05-1027T 

determining rent subsides. Also in 2003, HUD issued a new monitoring 

guide to help contract administrators improve their oversight of property 

owners’ subsidy determinations. HUD accompanied these efforts with 

training for property owners, contract administrators, and HUD field 

offices on the updated handbook and new monitoring guide. 

As one of its efforts under RHIIP and as mandated by The President’s 

Management Agenda for Fiscal Year 2002, HUD has considered various 

approaches—statutory, regulatory, and administrative—to streamlining 

and simplifying its policies for determining rent subsidies. According to 

HUD, the complexity of the existing policies contributes to errors in 

determining subsidies. For example, program administrators currently 

must determine tenants’ eligibility for 44 different income exclusions and 

deductions in order to calculate rent payments and subsidies. The purpose 

of some of these income exclusions and deductions is to provide 

additional relief to certain tenants, such as elderly and disabled 

households with large medical expenses, by reducing the amount they 

contribute toward rent. Other income exclusions are designed to 

counteract potential work disincentives—for example, tenants’ rental 

payments are raised as their income increases. 

The process for determining rent subsidies is further complicated by the 

difficulty some program administrators may have in understanding and 

implementing HUD’s program requirements. According to multiple field 

office staff, program administrators, and industry groups we met with, 

staff responsible for calculating rent subsidies are often poorly paid and 

have large caseloads and limited education. These factors can contribute 

to the misapplication of program policies and to subsequent errors in 

subsidy calculations. In addition, these same groups commented that these 

types of positions have a high turnover rate, and, as a result, it is difficult 

for program administrators to retain knowledgeable and experienced staff. 

HUD has considered several approaches to simplifying rent subsidy 

policies, including: 

• an income-based approach that would establish tenants’ rents as a 

percentage of their income, possibly with a limited number of exclusions 

and deductions or none at all; 

• a tiered flat-rent system that would establish tenants’ rents for several 

income bands and eliminate the need to readjust rents because of income 

changes, provided the changes were within the band; and 

HUD Has Considered 

Simplifying Policies 

for Determining Rent 

Subsidies but Has Not 

Done a Formal 

Review of the 

Potential Effects 
Page 14 GAO-05-1027T 

• a mixed approach that would give program administrators various rent 

structures to choose from, including income-based and tiered flat rents. 

Adopting any simplification approach represents a change from current 

policies. Because most of HUD’s policies have a basis in statute, major 

changes are likely to require congressional action. Under any 

simplification approach, many tenants’ rental payments could be affected, 

with some tenants paying higher rents and others paying lower rents. For 

example, elderly and disabled households, as well as large families, that 

currently benefit the most from HUD’s exclusions and deductions would 

be hit hardest by the elimination of current income adjustments. In 

addition, the transition to simplified policies could create confusion 

among program administrators and tenants in the short term. Depending 

on the magnitude of program changes, program administrators—the 

approximately 22,000 property owners and 3,000 PHAs across the 

country—would have to retrain staff, update written procedures and 

administrative plans, and make potentially costly modifications to their 

software applications. Program administrators would also have to 

undertake outreach efforts to explain the changes to tenants. 

HUD staff have conducted a preliminary analysis of the impact of some 

simplification approaches on tenants’ rental payments and program costs. 

However, the department has not conducted a formal study on the impact 

of policy changes to inform policymakers on this issue. To ensure that 

policymakers have sufficient information with which to consider potential 

simplification approaches, our February 2005 report recommended that 

HUD study the possible impact of alternative strategies for simplifying 

program policies on subsidy errors, tenant rental payments, program 

administrators’ workload, and program costs. 

In its fiscal year 2006 budget submission, HUD proposed, among other 

things, to simplify program requirements for the voucher program and 

provide PHAs with greater administrative flexibility. The proposal 

recommends a mixed approached and allows PHAs to choose from several 

alternative rent structures, including income-based and tiered flat rents. 

Mr. Chairman, this concludes my prepared statement. I would be happy to 

answer any questions at this time. 
Page 15 GAO-05-1027T 

For further information on this testimony, please contact David G. Wood 

at (202) 512-8678. Contact points for our Offices of Congressional 

Relations and Public Affairs may be found on the last page of this 

statement. Individuals making key contributions to this testimony included 

Daniel Garcia-Diaz, Rose Schuville, Cory Roman, Steve Westley, Emily 

Chalmers, Carl Barden, Jerry Sandau, Marc Molino, and John McGrail. 

Contacts and 

Acknowledgments 

(250260) 
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