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The Affordable Housing Scam
by Randall O’Toole, The Antiplanner, October 6, 2020
The federal government has several programs aimed at making affordable housing available to low-income families, and people have found numerous ways to scam those programs.
Staff at local housing agencies can accept bribes to bump people to the top of waiting lists to move into low-income housing;
People can move into low-income housing when their incomes are low (such as right after they graduated from college) and then stay in the housing after their incomes rise to well above the average.
All of these scams are illegal, yet it is likely that many of them are quite common. One study found that well-connected people often found their way to the tops of housing waiting lists while the names of people who really needed affordable housing disappeared from those lists. Another study found hundreds of people earning more than $250,000 a year, including one who earned $1.4 million a year, living in low-income housing.
This policy brief, however, is going to ignore these illegal scams and focus instead on a scam that is completely legal but which is highly unethical. This is a scam in which non-profit organizations use federal, state, and local funds to build extremely expensive housing projects that are then rented out to people whose incomes are less than the median but often well above what would be considered truly low-income for their areas.
Part of the problem is that any household whose income is less than the median is eligible for low-income housing. By definition, that means half of all households are eligible, yet low-income housing programs produce only a small percentage of new housing units each year. For example, the Low Income Housing Tax Credit program, which is the biggest affordable housing program, produces about 100,000 new homes a year, which is well under 10 percent of all new homes built each year. This means the vast majority of people who are supposedly eligible for affordable housing will never live in such a home.
Given a choice, owners of affordable housing would rather have reliable tenants who have a steady job. That means they will tend to pick tenants at the top of the eligible income scale. As the Los Angeles Tenants Union complains, “U.S. housing policy has become a market-driven, mixed-income program of ‘Affordable Housing’ for carefully selected, mostly middle-income tenants, largely excluding the very poor.”
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Related: Amemiya Joins Pack of Insiders Grabbing ‘Affordable’ Housing Units for Themselves