'Get Tough' program tackles housing problems The Clinton Administration has announced plans to crack down on landlords who are abusing federal housing programs by enriching themselves at the expense of the poor.

The U.S. Department of Housing and Urban Development (HUD) and the Department of Justice are cooperating in the "Get Tough" program, which is focusing on the 50 communities with the largest concentrations of HUD-assisted housing.

"Our message is simple," says HUD Secretary Andrew Cuomo. "If you are a landlord and you abuse your position, your lease is up. HUD is not in the business of subsidizing rich landlords so they can live in luxury while they let their tenants live in slums."

Most landlords participating in HUD programs are responsible people who fulfill their requirements to provide affordable housing, Cuomo says. "Our job is to identify and stop the minority who are abusing the program."

Enforcement actions, which HUD and the Justice Department may pursue against problem landlords, include prison sentences, civil fraud judgments, mortgage foreclosures, bans on participation in federal programs, recapture of misused housing assistance funds, substantial fines and appointment of new housing managers.

HUD will also propose legislation to strengthen its authority against bad landlords. The legislation would prevent landlords from using the bankruptcy laws to delay or avoid foreclosure or other enforcement actions, make people convicted of equity skimming liable for all losses suffered by HUD, make criminal equity skimming a money laundering offense and impose criminal penalties on anyone who obstructs a federal audit dealing with HUD funding.

Attorney General Janet Reno says U.S. attorneys are ready to proceed with cases that HUD refers for possible prosecution. "Landlords who receive federal funds must realize that if they don't play by the rules, they will lose out in the end," Reno says. "We will work closely with HUD in its intensified effort to pursue unscrupulous landlords."

GAO issues report on low-income housing tax credit The U.S. General Accounting Office (GAO) has issued a comprehensive report on the low-income housing tax credit program that shows that the program exceeds statutory low-income targeting requirements. The report says improvements are needed in the administration of the tax-credit program, but it makes no recommendation on whether the program should be continued or terminated.

The program, which was created by the 1986 tax act, provides a 10-year credit for investment in the construction or rehabilitation of low-income housing. The credit for each year of the 10-year period is about 9% for construction and rehabilitation expenditures and 4% for acquisition associated with rehabilitation. The construction and rehab credit is also reduced to 4% when federally subsidized financing is involved.

Tax-credit project owners must set aside at least 20% of the units for tenants with incomes at or below 50% of area median. However, the GAO report found that about three-fourths of the 172,000 credit-supported units placed in service from 1992 to 1994 were occupied in 1996 by households with incomes at or below 50% of median.

Combining additional rental assistance with the credit made deeper targeting possible. About 39% of the households had rental assistance, and they had average incomes of $7,860, or about 25% of area median, compared with $16,700 for households without rental aid.

The average cost of a tax-credit unit was about $60,000, and the present value of the average tax credit per unit over the 10-year credit period was about $27,300.

Supporters of the tax-credit program were generally pleased with the report. "The GAO has confirmed by thorough research what we believed from our own experience, that the housing credit is working better than any program before it to produce needed affordable housing and that this housing is in fact serving those most in need," says Paul Grogan, president of the Local Initiatives Support Corp. (LISC).

The report recommends a number of changes in federal and state administration of the tax-credit program to improve controls over costs and assure compliance with other program requirements. For example, it calls for the Internal Revenue Service to issue regulations requiring independent verification of developers' information on sources and uses of funds. It also recommends IRS action to make sure that states submit sufficient information on inspections and reviews to determine that they have complied with their project monitoring plans.

Three-fourths of the credit-supported units placed in service from '92 to '94 were occupied in '96 by households at or below 50% of median.

About 39% of the households had rental assistance and had average incomes of $7,860.

The average cost of a tax-credit unit was about $60,000, and present value of the average tax credit per unit over the 10-year credit period was about $27,300.

Barry G. Jacobs is NREI's Washington Correspondent and editor of Housing and Development Reporter.