U.S. Department of Housing and Urban Development

Section 8 Contract Administrators

Issue: HUD has contracted out project-based Section 8 contract administration. The cost of contracting-out this work is taken from the Section 8 fund

If you add up the cost of all these contracts, HUD is paying a minimum of $147 million per year. With incentives, the contractors earn $220 million per year. And HUD wants to add another $41-61 million more in contracts. This money comes from the Section 8 fund. We could hire 3200 staff with this same money, doubling our current Office of Housing staff.[1] We only need 500-1400 employees to do this work nationwide.[2] These contracts currently waste $97 to $176 million Section 8 dollars per year, and new contracts will push the waste up to $237 million.

Scarce Section 8 funds are being wasted to pay these contractors. If we hired 1400 staff to do this work, we would have enough money left in the Section 8 fund for 19,158 Incremental Section 8 Vouchers. Using the joint labor/management figure of 500 staff, the extra cost of the contractors would fund 34,762 Vouchers.[3]

According to the HUD Inspector General these contracts “could adversely affect the integrity of the Section 8 program.” In a report dated September 30, 1999 (#99-PH-163-0002), the IG warned that these contracts could put the entire project-based Section 8 program at risk. This warning was issued months before HUD signed a single contract, nonetheless, HUD has chosen to contract this out.

Estimated costs continue to increase. When HUD first proposed these contracts, they estimated the cost at $184 million. When they went to Congress in 1999, they estimated $209 million. They now estimate more than $281 million per year. That’s a 53% increase in cost in just a few years.

Conclusion:

Contracting out the administration of the project-based Section 8 portfolio hurts tenants. It’s more confusing, requires tenants to navigate two bureaucracies, misuses scarce Section 8 funds, and puts the entire program at risk.

If HUD won’t do it, Congress should stop these contracts. For additional information, please contact us at 617/994-8264.

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[1] According to HUD Office of Budget, the average cost per HUD employee in 2002 is $88,000.

[2] HUD’s own analysis assumed that we would need 1400 employees to do this work, though HUD’s Inspector General found this number to be inflated. Earlier joint labor/ management work teams estimated that we would need only 500 employees.

[3] The per voucher cost is based on HUD’s proposed FY ’03 budget, or $5063 per Incremental Voucher.