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HPP Lawsuit Leads to National Policy Change Benefitting 200,000 Tenants
10.19.2012 - HPP

Sometimes a phone call asking a simple question can lead to big things.  In 2007, HPP received a phone call from a tenant organizer working with low income residents in a rural Texas HUD Section 8 project.  She had noticed that the residents' utility allowances had not been updated in years, and wondered what could be done.

In Section 8 projects, tenant rent payments are limited to 30% of income.  Rent includes utilities, which means that where tenants pay utilities themselves, they are provided a "utility allowance," which reduces their rent payment dollar for dollar.  Because utility costs generally increase over time, it is important that utility allowances get regularly updated; if the allowance fails to track with increasing utility costs, the net effect is that tenants are paying too much in rent.

Working with the Texas Tenants Union, HPP began representing the residents of Village of Kaufman, and discovered utility allowances (UAs) had not been updated in a decade. We convinced the project owners to update the UAs and adjust rents, but they refused to address the earlier years where they had been overcharging rents as a result of the inadequate UAs.  On behalf of the residents HPP filed suit against AIMCO, the owners, and HUD, to recover for excess rent charges.  The court rejected a HUD motion to dismiss, and then the parties negotiated a settlement.  In the end, the residents received close to $200,000 in compensation.  As one resident put it, "this was just very nearly a miracle."

But there was more than simply this happy ending.  In the course of the lawsuit, HPP lawyers discovered that HUD directives to Section 8 property managers to update utility allowances were not consistent.  Although HUD had explicitly required most Section 8 projects to update UAs, there was a large category of these projects where HUD guidelines were silent on this important issue.  HPP began working with the National Housing Law Project and the Shriver Center in Chicago to investigate further.  We discovered in a survey that property managers for this group of projects frequently were unaware of any obligation to update UAs and therefore did not do so.  HPP, NHLP and Shriver brought this to the attention of the national HUD Office, but there was no response.  Finally, the same three groups wrote to HUD threatening legal action unless HUD took immediate action to remedy the problem.  This finally caught HUD's attention, resulting in the issuance of a national directive to this group of Section 8 properties clearly requiring the regular updating of UAs.  We estimate this policy change affected some 7000 HUD projects nationally, covering over 200,000 tenants—most of whom should now enjoy increased UAs, and decreased rents.

October 2012