Paterson’s Section 8 program let landlords cash in

This appeared in the Herald News on Monday, May 21, 2007

By SAMANTHA HENRY, HERALD NEWS

PATERSON — Michele Johnson and Darlene Robinson both rent three-bedroom apartments on Paterson Avenue under the Section 8 rental subsidy program.

Robinson, whose Section 8 voucher is from the Paterson Housing Authority, has a monthly rent of $1,292. But Johnson, who lives just a few houses away, has a Section 8 voucher from the City’s Department of Community Development that’s worth $1,425.

The price discrepancy is not because the apartments are different. It’s because the Section 8 programs are.

In a rare arrangement, Paterson had two Section 8 programs operating in the city for more than a decade – the only municipality in the state besides Lakewood to have more than one. Section 8 is funded by the U.S. Department of Housing and Urban Development and allows low-income tenants to contribute up to 30 percent of their income toward rent with the government paying the difference.

For years, Paterson’s two Section 8 programs administered the same HUD money to the same pool of applicants in the same coverage area. But they had distinct track records of HUD compliance, varying levels of oversight, divergent rules for tenants and different allowable rents — often for comparable apartments in the same area.

During the years both programs were in operation, the Paterson Housing Authority — although not problem-free — routinely received passing grades from HUD. The city, however, earned the worst HUD rating in the state, and was plagued with mismanagement and corruption allegations until it was dismantled and folded into the PHA in October 2006.

“The HUD guidelines really govern how the programs are run, and somewhere in there, whoever was the administrator of the (city’s) program, failed to realize the importance of following the HUD guidelines,” said Irma Gorham, director of the Housing Authority.

The arrest of 14 workers in March — whom federal authorities had taped soliciting or accepting bribes in connection with Section 8 cases — further highlighted the differences in management of the funds. Nine of the 14 arrested were employees of the City of Paterson at the time of their alleged misdeeds — the majority of them with its Section 8 program. Two others were caseworkers with the Paterson Housing Authority, and the remaining three were from other agencies.

Tale of two Section 8s

The split to two programs dates back to 1976, shortly after the creation of Section 8. At the time, the Paterson Housing Authority declined to administer the vouchers, according to a former director, and instead asked the city to handle them. The Housing Authority did not start administering Section 8 funds until 1996, according to HUD, when it was given a block of vouchers to help relocate families displaced by the demolition of several housing developments.

Since then, Paterson’s two programs have received tens of millions of dollars from HUD. Last year, the city had a Section 8 budget of $13.5 million and administered 1,071 vouchers. The Housing Authority got $8.2 million and had 808 families on its roster.

The biggest discrepancy that arose between the programs was in how much they paid landlords. To determine the rents that a landlord can charge a Section 8 tenant, a program caseworker fills out what’s called a Rent Reasonableness Form, basing their calculations on a formula provided by HUD that takes into account local market rents. HUD allows each agency the discretion to pay landlords from 90 percent to 110 percent of prevailing fair market rent.

Irma Gorham, director of the Paterson Housing Authority, said the city, however, routinely paid landlords more than 100 percent of fair market rent for the same housing stock, a fact confirmed by HUD.

Gorham said the housing authority’s decision to offer the lower end of HUD allowable rents was based, in part, on the fact that much of Paterson’s aging housing stock did not merit above-market rates, and that the less Section 8 funding that went to landlords meant more for additional vouchers to shorten the program’s long waiting lists.

Gorham said she tried to persuade city Section 8 officials to bring their program in line with the 90 percent rate in a meeting with HUD officials and local housing authorities from other towns. She said surrounding towns agreed to the 90 percent rate, but Paterson’s program refused — insisting on paying landlords the near maximum allowable rents.

Calls to current and former officials involved with the city’s program were all referred back to Gorham.

When asked why the city paid more to Section 8 landlords, former Section 8 Director John Carluccio said he could not comment due to a new City Hall policy instructing all workers currently or formerly associated with the city’s program not to speak to the public about Section 8.

“There have been many questions asked about Section 8, and there’s overlapping questions and overlapping responsibilities, but I think it’s all now working out in a good direction,” he said. “I really can’t comment further at this point, Irma Gorham would be able to answer — at this point, that’s the way we’re handling the questions.”

Gorham said allowing the dual-pricing structure to persist in the city created competition among the agencies to recruit landlords into their programs, instead of uniting forces to focus on helping needy families.

“Landlords would come in and say: ‘The city pays more,'” Gorham recalled. “We’d say ‘OK’; we didn’t try to convince them to stay with us. We knew it was competitive and they had different options. If the money is calling you elsewhere, then OK, as an owner that’s your choice.”

Several of the former Section 8 caseworkers arrested by federal authorities in March were accused of accepting bribe money from a property manager, identified in court documents as a “cooperating witness,” to steer Section 8 voucher holders toward renting CW’s apartments.

Tenants were often unaware of the two systems, even though it could mean one tenant paying more rent for a comparable apartment, depending on which agency the Section 8 voucher came from. “They told me that these landlords weren’t supposed to get an apartment beyond a budget of $1,300,” said Paterson Avenue resident Johnson. But she said she couldn’t find anything in that range on the city’s program.

“They should have direct apartments just for Section 8,” she said. “Not make us rent from landlords that rip us off.”

Landlords approached for this article declined to comment about their experiences with Section 8.

Reconnecting the pieces

In the wake of dismantling the city’s Section 8 division in October 2006, the Paterson Housing Authority has been left to sort out the chaos it inherited from the city. Gorham said her staff has been working to sift through hundreds of boxes of case files transferred over to them.

“I would say it was in total disarray,” Gorham said of the city’s Section 8 program. “We found files missing documents; we found there was no real process of verifying information.”

Gorham said many files lacked proper rent calculation forms, payment records, verification of tenant income, and other forms required by HUD. Of more than 1,000 Section 8 vouchers administered by the DCD, Gorham said only a third of the files had been computerized, as required by HUD.

“The rest are boxes of paper files,” she said. “Everything was hard copy.”

HUD had found similar shoddy record-keeping in its own audits of the city’s Section 8 program over the years. In 2003, it downgraded the agency’s rating from “satisfactory” to “troubled.”

“We have found various deficiencies in the (city’s) management of its Section 8 program, and we have therefore supported the city moving the program to the PHA,” said a HUD spokesman, who said he cannot be named as per department regulations.

Gorham said the Housing Authority hired an auditor to review the city’s program, and filed a corrective-action plan with HUD. In January, she sent a letter to all Section 8 landlords advising them that every apartment would be re-inspected, and all landlords would have to go through a re-certification process to continue to receive Section 8. She also warned them that the housing authority would be bringing all rents into the 90 percent range of fair market rate.

Gorham said it could take as long as six more months to fully integrate the two programs and create one computerized system to guard against corruption and abuse. She said landlords and tenants had been cooperative so far, and asked those on the waiting list to be patient.

“The Section 8 assistance voucher program is such a great housing resource for our community that without it, I think that we could look at families actually going into that homeless category,” she said. “We’re doing this because we know how important this program is to families that need this rental assistance.”

Reach Samantha Henry at 973-569-7172.

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Timeline

1976

HUD awards the first set of Section 8 vouchers to the City of Paterson. The Paterson Housing Authority asks the city’s Department of Community Development to administer them.

1996

HUD gives the Paterson Housing Authority a group of Section 8 vouchers to help relocate families displaced by the demolition of public housing. The city will maintain two Section 8 programs for the next decade.

2001

In a yearly self-evaluation required by HUD, the city’s Section 8 program (DCD) ranks itself “Standard” with a 74 percent compliance rating. The Paterson Housing Authority gives its own program a “Standard” rating, with a 64 percent compliance score.

2002

HUD sends the DCD a letter warning that they are going to audit the Section 8 program, and conducts an on-site review a few months later.

In a yearly self-evaluation required by HUD, the city’s Section 8 program (DCD) ranks itself “Standard” with a 62 percent compliance rating, down 12 percent from the previous year. The Paterson Housing Authority gives its own program a “Standard” rating, with an 88 percent compliance score, an increase from the previous year.

2003

This year in its HUD-mandated self-evaluation, the city’s Section 8 program (DCD) ranks itself “Standard” with a 69 percent compliance rating. The Paterson Housing Authority gives its own program a “Standard” rating, with an 83 percent compliance score.

HUD conducts an initial Rental Integrity Monitoring review, to see if the DCD’s income verification process and rent levels are being correctly calculated. Following the review, it lowers the DCD’s Section 8 program to “Troubled,” and reduces its compliance rating to 46 percent.

2004

The year after HUD’s rent integrity review, the city’s Section 8 program (DCD) ranks itself “Troubled” with a 46 percent compliance rating. The Paterson Housing Authority gives its own program a “Standard” rating, with an 88 percent compliance score.

HUD conducts a re-review of the DCD program, to see if its previous findings have been addressed. It cites several things still wrong with the program, including 100 percent noncompliance with rental recertification requirements.

The DCD submits a Corrective Action Plan to HUD, after the required deadline. HUD initially rejects the plan on the basis it does not include the required timetables for corrective action.

2005

This year, the city’s Section 8 program (DCD) elevates its standing to “Standard” with a 68 percent compliance rating. The Paterson Housing Authority gives its own program a “High” rating, with a 96 percent compliance score.

2006

In October, the DCD’s Section 8 program is dismantled and all vouchers are transferred to the Paterson Housing Authority. The authority continues to administer both programs under separate budget lines and with separate waiting lists, while it works to integrate them into one program.

In a yearly self-evaluation required by HUD, the housing authority is tasked with filing the HUD reports on behalf of the DCD’s program, which it absorbed. It ranks the DCD’s program “Troubled,” and gives it a 33 percent compliance score. The housing authority gives itself a “Standard” rating with an 89 percent compliance score.

2007

Fourteen people are arrested following a 14-month undercover operation by federal authorities, which uncovers allegations of corruption and bribery in the Section 8 programs in Paterson and Passaic.

Source: U.S. Department of Housing and Urban Development

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