True to form

GCN Agency Award | HUD system verifies tennants' reported income, frees up space for low-income families

Project at a glance

WHO: Housing and Urban Development Department's Office of Public and Indian Housing

MISSION: HUD needed a system that would let public housing agencies verify the incomes of recipients of rental assistance benefits in the public housing and Housing Choice Vouchers programs, formerly known as Section 8. Also, one of the President's Management Agenda initiatives was to reduce erroneous payments by federal agencies.

WHAT WAS: To determine the amount of rental assistance benefits, HUD relied on the integrity of the tenants. The higher a tenant's income, the more rent he had to pay; about 22 percent of households receiving rental assistance had substantial income discrepancies or unreported income. In 2000, HUD made $978 million in improper payments to tenants who underreported their incomes.

WHAT IS: The Web-based Enterprise Income Verification System lets public housing agency officials enter a tenant's Social Security number and see all sources of income, including wages, Social Security benefits and unemployment. EIV accesses data from the Health and Human Services Department's National Directory of New Hires database and the Social Security Administration.

USERS: About 4,100 public housing agencies and HUD employees

IMPACT: Since implementing EIV, HUD's improper payments have declined by 61 percent. Tenant underreporting of income has declined by 73 percent. EIV has gained HUD a green score on the PMA scorecard as part of initiative to reduce erroneous payments.

COST: About $6 million,

HUD's David Sandler and Nicole Faison

Rick Steele

When she was working for the Baltimore Housing Authority, Nicole Faison liked to go to nearby Lexington Market for lunch.

One day Faison recognized the person working the counter. 'You're one of my tenants, aren't you?' she asked. The person selling her a chicken sandwich had reported that he didn't have a job. Well, clearly, he did.

When Faison moved in September 2002 to the Housing and Urban Development Department's Office of Public Housing, the problem just got bigger.

The office, part of HUD's Office of Public and Indian Housing, administers two large rental assistance programs: public housing and the Housing Choice Vouchers program, formerly known as Section 8. HUD relied until fairly recently on the integrity of tenants to report their income, Faison said.

Employers provided some written, third-party verification, but there was no way to verify all sources of income. The temptation for tenants to underreport their income is great, since the higher their income, the more rent they have to pay.

'When I was working for the city of Baltimore, I thought it'd be nice if we could punch a tenant's Social Security number into a computer and see if the income they reported was really true,' Faison said.

She even wrote her master's thesis (while she was in Baltimore) on developing such a system using game theory.

That theory is now reality. Two years ago, HUD began developing the Enterprise Income Verification System, a Web-based system that is helping 4,100 public-housing agencies throughout the nation validate tenant-reported income, including wages, unemployment and Social Security benefits.

Faison calls Jan. 23, 2004, 'the happiest day of my life.' That was the day HUD got the green light to negotiate with the Health and Human Services Department to access HHS' National Directory of New Hires database.

A 2001 study showed that HUD had made $3.2 billion in improper rental assistance subsidy payments in 2000, of which $978 million was attributed to tenants' underreporting of income. Since HUD implemented EIV, these underreporting errors have dropped to $266 million, a reduction of 73 percent.

EIV findings

Underreporting household income can keep a family that truly needs housing assistance out of the system. EIV has turned up some relatively prosperous families receiving housing assistance benefits.

For example, a family of three adults and five children in Tampa, Fla., reported a household income of $2,400 a year in child support as its sole income. The housing authority entered the Social Security number of the head of the household into EIV, and discovered that two adult members of the household were working for the school system and were each making between $40,000 and $50,000 a year.

'If HUD hadn't made payments based on tenants' reporting fraudulent income, we could have housed an additional 55,000 families in one year,' Faison said.

EIV's computer matching technology also turned up some false positives. In one case, EIV showed that an 85-year-old woman who received housing assistance benefits had five jobs. The woman insisted that she only worked two days a week at the local bingo hall. It turned out that she was a victim of identity theft.

'We have tenants who had sold their Social Security numbers to allow friends to work in the country,' Faison said. In addition to revealing unreported income, EIV has uncovered the need for education about the dangers of identity theft.

Although EIV has helped HUD reduce fraud, HUD officials are careful about using the word 'savings,' Faison said. Funds are more likely to be redistributed than actually saved.

Say, for instance, EIV uncovers a family whose members have underreported their income, and the household's rent jumps from $100 to $500 a month. 'That family most likely won't stay in the program,' Faison said, because they will more likely seek a less expensive living arrangement.

'The family that replaces them will have a lower income, and we'll have to pay more to subsidize that family. So there really is no savings,' she said. 'We have higher-income families move out because of fraud, but now we need $4 million to cover the people who move in.'

Going green

EIV is making a contribution to one of the eight President's Management Agenda initiatives by eliminating improper payments, as stated in the Improper Payments Information Act of 2002. Because of EIV, HUD received a green score on the PMA scorecard in 2005.

Section 8 housing tends to have a larger rate of unreported income errors than public housing, Faison said. 'Section 8 is so decentralized. With public housing, the managers are right there on site,' she said. 'With Section 8, you can hide out. The person who does the housing inspections is not the same person who does your income verification.'

Because of EIV, word is getting out that recipients of housing assistance benefits can no longer hide their income. Faison encourages housing authorities to publish flyers and posters that let tenants know there are consequences and repercussions to not reporting their income. It takes years to get a Section 8 voucher, Faison said. If a tenant loses it by reporting fraudulent income, it will take years to get another voucher.

'Tenants evict themselves by not reporting income,' she said. 'If you don't report your income, that's a violation of HUD requirements and a cause for eviction. It will allow us to admit another family who's really in need.'

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