States Challenge Loss of Millions in Federal Housing Awards

By: - August 8, 2011 12:00 am

More than a dozen states could lose millions of dollars a year in federal contracts to manage low-income housing programs in a move that is supposed to save the federal government $100 million a year.


For states, losing the contracts also could mean more layoffs of the state employees who no longer would be needed to help run the program.


Delaware is one of 17 states that got outbid to manage a Section 8 contract, the main federal low-income housing program, The News Journal (New Castle-Wilmington)reports . Losing the $1.3 million contract from the U.S. Housing and Urban Development (HUD) does not affect the amount of subsidies available to landlords who rent to low-income tenants, only who oversees the program, which now will be an outfit in Alabama, the paper explains.


Elsewhere, the housing authority of Arkon, Ohio, was recently awarded the contract to administer New York’s Section 8 program, while a state agency in  Idaho will manage programs in Arizona , Hawaii and Utah . The full list of contract awards is here .


The reason states are losing their contracts is because HUD decided to put all project-based Section 8 contracts across the country up for re-bidding for the first time since 2000.  According to Bloomberg, only public housing agencies and certain state or local entities could bid on the contracts, although the winners can hire contractors to do the work.

HUD decided to lower the amount in fees that the winning bidderss could keep for themselves. Under the previous contracts, the winning bids could take 3 percent of the rent of the units. Those fees could vary from several hundred thousand dollars to as much as $20 million, reports Bloomberg. Now, the limit is 2.5 percent. Successful bidders averaged 1.7 percent.


The Oregon Department of Housing and Community Services may have to lay off 14 people after it lost a $4.2 million contract to an outfit in Bremerton, Washington, Northwest Public Radio says .


These states have appealed the decisions, as have state agencies in Arizona , Kansas , Maryland , Massachusetts , New Jersey and Rhode Island . Nationwide, states and local agencies stand to lose HUD contracts valued at $220 million a year in Section 8 contracts, according to Bloomberg’s estimates.


In Louisiana , the loss of a $1 million HUD contract there has resulted in finger-pointing. State Senator Lydia Jackson, a Democrat, said she worried that Republican Governor Bobby Jindal’s effort to consolidate several housing agencies put the contract at risk, The Associated Press reports . The Jindal administration contends the Louisiana Housing Finance Agency deserved to lose the contract because it didn’t manage the contract well. The agency disputes that contention, saying it won high marks for performance. HUD says local politics wasn’t a factor and the winner was based solely on the application and the bidding fee. 

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