U.S. Department of Housing and Urban Development

Section 8 Contract Administrators

Impact on Tenants

 

 

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.  It presents three challenges for HUD tenants:

 

1.     knowing which issues to take to HUD and which to take to the contract administrator;

2.     learning to deal with another bureaucracy;  and

3.     combating the misuse of scarce Section 8 funds for contracting out.

 

1.  Knowing which issues to take to HUD and which to take to the contract administrator: 

 

Things to know:           

-  Capital Advance Section 202 and 811, and some other scattered developments, will continue to be overseen by HUD.

-  All developments in the following states continue to be overseen by HUD:  Arkansas, Northern California, Connecticut, District of Columbia, Illinois, Nebraska and Utah.  This is subject to change daily, as HUD continues to seek contractors for them.  As of June 1, 2003, the agency was soliciting contractors from out of state for these remaining areas.

-  If you’re in a Section 8 unit, chances are your question goes to the contractor.  If you’re not in a Section 8 unit, chances are you go to HUD.  If your building has both Section 8 and non-Section 8, and the issue involves common space?  Review the guidelines.

-  Contractors are almost always state housing finance agencies, but may also be public housing authorities.  Ask your HUD office who the contractor is for your state.

 

            HUD is preparing a new guidebook for Contract Administrators.  But it is more than 108 pages long.  You can find it on the HUD website;  go to “About HUD” then “Housing” then “Multifamily” then “Section 8 contract administration” and finally “Documents.”  You will find it on this page.  A copy of the Section 8 Contract Administration web page is attached.

 

2.         Learning to deal with another bureaucracy:  These contracts will put more stress on organized tenants—you now have to go through two bureaucracies when you used to go through only one.  For unorganized tenants, these contracts could create insurmountable obstacles.  If you are a tenant in a state that has no tenant organization or where it is weak, in the past you could always turn to your sisters and brothers living in the Multifamily Hub to press your case for you.  Now, you’re on your own to face the contractor.  Classic divide and conquer.

 

 

 

3.         Combating the misuse of scarce Section 8 funds for contracting out.  If you add up the cost of all these contracts, HUD is paying a minimum of $156.8 million per year.  With incentives, the contractors earn $237.6 million per year.  And HUD wants to add another $30-46 million more in contracts.  This money comes from the Section 8 fund!  We could hire 2376 staff with this same money, almost doubling our current Office of Housing staff.[1]  We only need 500-1400 employees to do this work nationwide.[2]  These contracts currently waste $96.5 to $187.6 million Section 8 dollars per year, and new contracts will push the waste up to $234 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 28,264 Incremental Section 8 Vouchers.  Using the joint labor/management figure of 500 staff, the extra cost of the contractors would fund 46,257 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 $284 million per year.  That’s more than a 50% 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 more information, please contact Carolyn Federoff, President, AFGE Council 222, at 617/994-8264.

 

           

 


[1] According to HUD Office of Budget, the average cost per HUD employee in 2003 is $100,000, including salary, benefits, retirement contributions, etc.

 

[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.  Total cost of contracts plus incentives equals $284.2 million.  Total cost of 1400 staff equals $141.1 million, and 500 staff equals $50 million.