Politics & Policy

The Architecture of Graft

HUD headquarters in Washington, D.C.
HUD-backed housing agencies rob communities blind.

The Houston-area Harris County Housing Authority (HCHA) has wasted or misspent nearly $30 million of U.S. taxpayers’ money from 2010 to 2012, and the federal government wants its money back. The catch: The U.S. Department of Housing and Urban Development is for obvious reasons demanding that those wasted federal funds not be paid back out of other federal funds, and the HCHA’s total non-federal revenues this year are expected to amount to a mere $52,000. At that rate, HCHA should have paid back HUD sometime in the middle of the 26th century, assuming it dedicates 100 percent of its non-federal funds to doing so.

#ad#A newly released audit from HUD’s inspector general found $27.5 million in mismanaged spending by the Harris County Agency during the three-year period in question. The audit came in response to an excellent investigative series by the Houston Chronicle, which found, among other things, that hundreds of thousands of dollars had been paid to friends and family of agency employees — not only without board approval, but without so much as a contract. Among those on the HCHA gravy train were convicted felons with no qualification for the work they were hired to do but boasting a more important asset: links to management. A longtime associate of the CEO of the organization was paid more than $135,000, while the CEO’s father-in-law was put on the payroll of a subcontractor awarded millions in contracts.

The agency managed to spend millions of dollars on a veteran-themed housing development called Patriots by the Lake — which, despite some $8 million being poured into the project, was never built.

And, in a classic political move, former CEO Guy Rankin was bought out of his contract for $137,000 last year, but he had left the agency in such poor shape that it did not have the funds to pay him off. He has sued, and the mess is currently in court. He is under investigation by the FBI.

So: Boo, Houston! Except that Houston is hardly alone in this. Cities in Massachusetts have seen similar scandals at the state’s HUD-backed agencies, with executives paid fat salaries and subject to little or no oversight. The Philadelphia Housing Authority saw the mass resignation of its board last year after it was revealed that the agency’s executive director had dedicated $1 million in agency funds to questionable purposes, including hiring professional belly dancers and settling with plaintiffs in sexual-harassment complaints against him. In New Orleans, there was nearly $1 million in embezzlement. Phoenix, Los Angeles, and other cities have had similar troubles. The director of the HUD field office in San Juan was the subject of a 40-count indictment on fraud and theft charges.

The federal housing-subsidy program is a $25 billion–a–year racket, a national crime wave headquartered in Washington but with franchises in every city.

Senator Charles Grassley, a leading HUD critic, argues that oversight is effectively nonexistent:

The agency has taken a few positive steps, but progress has been too slow. The agency seems to get involved in oversight of local housing authorities only after the fact, when the abuse has occurred and local media have documented the problems. For the public benefit, we need to reverse the timeframe. HUD and local housing authorities need to prevent malfeasance on the front end, not chase it after the fact when it’s too late. I hope the senators responsible for HUD funding and programs will step in and help me reverse the lax oversight that harms the people who need safe, affordable housing and the taxpayers alike. 

Senator Grassley is being too kind. Federal housing subsidies are not a basically good program in need of better management practices; they are a political gravy train performing exactly as intended. HUD has long been a dumping ground for political cronies with neither the business skills nor the integrity to perform the work entrusted to them. The HUD director charged in San Juan was accused of falsifying his time reports while on “unauthorized personal leave” — meaning that he just stopped showing up at work but continued collecting a paycheck. In the annals of government corruption, that is one of the less destructive strategies; other than the money out of taxpayers’ pocket, no-shows do less harm than, for example, their colleagues in Harris County.

There is, incidentally, no reason for HUD to exist. After the debacle of the housing-project boom in the 20th century, the idea of the federal government’s ingenious central planners managing the nation’s housing development in the interests of the poor was as thoroughly discredited as pre-Copernican cosmology. If the federal government wishes to support the housing needs of the poor, then its voucher program (Section 8), problematic as it is, is the only program that really needs to be preserved, and administering it does not require HUD’s vast infrastructure, much less the use of HUD franchises to act as local property developers. Section 8 vouchers, you may be interested to learn, can be quite generous: HUD lists the fair-market rent for a three-bedroom in Stamford, Conn., at $2,851 a month. In Stamford, that will get you a three-bedroom with granite countertops, a balcony, and a “built-in home-theater system with embedded stereo speakers.”

It is poetic that the phrase “Section 8” denotes two different things in fed-speak: the housing-voucher program and military discharges for the mentally unstable — one designation, two kinds of insanity.

But what the Harris County case really shows is that the problem with the welfare state is not that poor people will abuse it, but that well-off, politically connected people making nice six-figure incomes will abuse it. We can and should help the poor, but that does not mean allowing well-connected political sycophants to rob us blind. HUD should not be reformed, but dissolved.

— Kevin D. Williamson is a roving correspondent for National Review and the author of the newly published The End Is Near and It’s Going to Be Awesome.

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