Section 8 landlords on Guam have been overpaid millions of dollars for years by the Guam Housing and Urban Renewal Authority.
Overpayments will have to continue until all present leases with Section 8 tenants are renegotiated.
The U.S. government may want some of the money back which would delay GHURA’s plans for a new building and will deplete its reserve fund by half.
The huge miscalculation saw payments for utilities added to rent calculations and made thousands of Guam landlords the unwitting and lucky recipients of a bonus payout per month per lease for utilities.
In fact GHURA found out utility allowances should never have been calculated into the Housing Assistance Payment — the Section 8 rent schedule — or officially divulged to real estate agents or landlords.
Somehow interpretation on Guam of how the voucher scheme should be implemented led to an erroneous two-tier system and an over-calculated rate schedule.
The erroneous mass payout of federal money on Guam began with the inception of the U.S. Department of Housing and Urban Development’s Section 8 Housing Choice Voucher Program in 1989 with 51 participants approved and clients gradually joining the program. In 1996 140 participants were approved with 134 participating. At present there are 2 515 participants. It continued undiscovered until April 2003 and uncorrected until October 2003 when a new rental schedule was introduced for new or renegotiated leases.
Elsewhere in the United States and its territories the voucher system has apparently been correctly applied.
The Journal met with Ronald S. De Guzman executive director of GHURA; and Joanne C. Balajadia acting housing manager for the Section 8 program.
De Guzman said “Beginning last year the U.S. Department of HUD began what is called a Rental Integrity Monitoring Review. This was a process that was initiated nationwide. We had our initial RIM Review in April 2003.”
The Section 8 program De Guzman said “is by and large the largest program HUD administers. What they basically wanted to do was be sure the agencies were administering the program properly because of the sheer size and numbers in the program. It was an effort to locate waste any potential problems in the program and I think ultimately it was the federal government’s way of trying to find additional funds to spend on the war.”
De Guzman said HUD officials from Honolulu raised questions. "The payment standard was being misapplied. Previously we had a dual-payment standard basically showing what would be paid for a unit with utilities and without and that was where the problem was." [Previously Section 8 was a certificate program with a final cap. Conversion of clients to the voucher program became mandatory in 2000. Under the voucher program tenants can contribute over the rental cap to the total tenant payment although their contribution has a cap — 40% of adjusted income.]
"Because that was misinterpreted we were overpaying on the contracts. The total payout exceeded the FMR (Fair Market Rate) ” De Guzman said.
Balajadia used the example of a two-bedroom unit that presently has a rate of $999. "If a two-bedroom was running at $999 and the landlord said ‘I’ll take care of the utilities ‘ we added an additional $129 — which is a two-bedroom utility allowance. We exceeded the payment standard of a two-bedroom by the utility allowance. We have to reimburse that $127."
De Guzman estimated that about 70% of GHURA’s 2 515 landlords are receiving utility payments and said that the agency will not reimburse HUD on accounts that are no longer active.
He said a solution has not yet been decided. "It is so preliminary that HUD doesn’t know how they are going to handle this yet as far as corrective action. The initial instruction from HUD was to go back and make corrections on all the files where we were improperly applying the payment standards and overpaying on the utilities."
GHURA is still waiting to hear whether or not it will have to reimburse HUD. "Basically what they’ve said is ‘go back to October 2003 and determine what the financial impact was to the program as a result of the error.’ That number has to be forwarded to HUD and they will at that time make a determination — whether as an agency we’re going to have to pay that amount back to the program " De Guzman said.
If GHURA has to reimburse HUD for those funds since October 2003 — estimated at $1.5 million — it would come out of the Section 8 Administration Fee Reserve Account — which holds the fee for each Section 8 participant — presently at about $3 million. The program on average has an annual surplus of $600 000. On average $2 million per month is paid out through the program.
That reimbursement may be enough to delay construction of GHURA’s new building. With plans completed the request for proposal was due to be issued in March but that may now be delayed. With $1.5 million likely to be returned to HUD leaving $1.5 million with GHURA De Guzman said partial funding might be necessary.
However De Guzman said "They are willing to take a look at the possibility of forgiving the agency and going forward with corrective action." He said HUD understood it would take time to review Section 8 files.
Henry D. Leon Guerrero administrator of the Section 8 program has been administrator since January 1997. He has been on medical leave since May 17. Leon Guerrero has been receiving intermittent medical treatment in Hawaii since then. GHURA officials could not say when he would return to work.
Payment standards used to calculate the Housing Assistance Payment are based on fair-market rent median rents certain criteria in “metropolitan areas ” and a percentile rent method. The Housing Choice Voucher Program Guidebook explains the calculation and application at length.
Individual rents take any mitigating circumstances into consideration and payments — made directly to landlords by GHURA — depend on the tenant’s ability to contribute to the set rent. The tenant’s contribution is known as the TTP. short for total tenant payment.
October 2003 Section 8 Housing
Choice Voucher Program Payment Standard
|Note: Approval of maximum payment is not automatic. Comparables of similar unassisted unit types are used to determine maximum rent.|
* Dec. 1 2002 — Figures are not published by GHURA as a component of thepayment standard.
Source: Guam Housing and Urban Renewal Authority
De Guzman estimated that the Section 8 program has grown nationwide by about 20% a year and that most U.S. counties have about 200 participants.
Guam has 2 515 participants in the voucher program and is one of the regions with the largest number of Section 8 clients.
Included in the 2 515 are about 200 vouchers distributed after Typhoon Chata’an in July 2002 and about 300 distributed after Supertyphoon Pongsona in December 2002. Participants have joined the program after each storm through the years De Guzman said.
The Section 8 program has eight caseworkers responsible for about 320 clients each including 49 tenants at Guma Trankilidat the Tumon housing for senior citizens. The department has four inspectors and three clerks.
However while landlords can expect to get less rental money from GHURA on the one hand on the other Balaja said rentals are deemed low.
"We’ll look at the numbers and if it merits an increase we’ll go before the board and ask for an increase. I believe our rates are pretty low right now. We’re hoping to get all our numbers in and ask for an increase by January " Balajadia said.
De Guzman said it would depend on what the real estate agents survey showed. "Their input is vital " he said.
HUD issues market rents nationwide in October with Guam in the Pacific Islands category. Balajadia said "You can increase it from the baseline — from 90% to 110% — it depends upon the market. You can increase it leave it as it is or decrease it." The decision on what Guam Section 8 rents will be for the coming year is based on a fair market rental assessment.
GHURA faxed out letters in November to more than 25 real estate agencies and additionally to landlords with a large number of Section 8 tenants with a Nov. 24 deadline. As of Dec. 3 Balajadia’s office had received replies from Century 21 Realty Management Co. Century 21 Commonwealth Realty Chamorro Gardens Coral Sea Realty J&G Enterprises Inc. Re/Max Diamond Realty South Pacific Estates Tanota Partners and Winner Apartments. Balajadia said she had received a full list of properties and their rentals managed by Commonwealth Realty Management Co. from Christopher K. Felix principal broker. “He was really helpful ” she said.
Those that had not yet replied Balajadia said included BHI Realty Guahan Apartments Hemlani’s Apartments Today’s Realty and W. Yamamoto Realty. "We’re slowly getting them in." MBJ