The federal government spends upwards of $100 billion per year on housing subsidies spread across numerous departments, including the Department of Housing and Urban Development, the Treasury Department (including the low-income housing tax credit, or LIHTC, historic, and energy tax credits), and the Department of Agriculture (rural housing subsidies), to name the largest.
These programs and their predecessors have existed for decades, yet there has never been a comprehensive, governmentwide forensic audit to determine where this money goes, whether it improves housing outcomes, or to identify “waste, fraud, and abuse.”
But that is about to change. The Department of Government Efficiency is now turning its watchful eye on HUD’s sprawling network of subsidy programs. The audit must go beyond HUD, extending to non-HUD programs such as LIHTC and rural housing programs, which both operate as upfront capital subsidies and tenant assistance. Without this full accounting, taxpayers remain in the dark about whether these programs truly deliver on their promises or simply funnel billions into inefficiency and mismanagement.
A promising sign came when HUD Secretary Scott Turner called for a proper accounting of these subsidies during his confirmation hearing, insisting on fiscal transparency before expanding the programs further.
A proper forensic audit must go beyond surface-level reviews. It must trace every subsidy dollar from its initial disbursement to its ultimate effect on housing supply and affordability and be done site-by-site. Many housing projects are built with multiple layers of taxpayer-funded subsidies, only to be torn down and rebuilt with a new round of subsidies or to require additional government funding years later for rehabilitation while still receiving ongoing rent subsidies for tenants who cannot afford the units on their own.
Few examples illustrate the waste and inefficiency of the current system better than Andrews Terrace in Rochester, New York. Originally built in 1975 for $20 million, this 22-story, 526-unit complex was designed to attract middle-income residents back to downtown Rochester. Over time, it transitioned into HUD Section 8 housing for elderly and disabled residents. Today, nearly all the units are reserved for residents earning up to 50% of the area median income.
Like many publicly subsidized housing projects, Andrews Terrace fell into severe disrepair. Masonry deterioration forced the City of Rochester to revoke its certificate of occupancy, condemn the balconies, and impose sidewalk closures to protect pedestrians from falling debris. However, money was not put aside for such repairs.
To address these problems, Andrews Terrace is now being rehabilitated with funding cobbled together from various sources: LIHTC equity and construction loans, Fannie Mae financing, tax-exempt bonds, federal and state historic tax credits, state and local subsidies, and a new Section 8 contract providing tenants rent subsidies for another 20 years.
When factoring in Section 8 payments alongside the new $335 million investment, the total taxpayer burden from 1975 to 2045 will likely exceed $500 million — a staggering $1 million per unit.
Even more shocking is that this rehabilitation project does not create a single new housing unit. Meanwhile, in Rochester, a new single-family home currently lists for an average of $422,000 and an existing one for $150,000 — a fraction of what taxpayers are spending per unit on this so-called affordable housing project.
Andrews Terrace is not an outlier — it’s the norm under LIHTC, where so-called affordable housing is created by stacking multiple layers of federal, state, and local subsidies, only to then require rental subsidies for nearly half of the tenants. The true cost of these developments is nearly impossible to track, buried under a maze of financing mechanisms. In California, LIHTC projects now routinely cost $1 million per unit to build, a shocking price tag that underscores just how inefficient and unsustainable this system has become, as even some on the left, such as Ezra Klein, will admit.
This system suffers from what can be called the five C’s of housing failure.
Crowding Out: LIHTC often displaces private-market housing rather than adding to supply. Studies show that for every 100 LIHTC units built, up to 100 private units are lost.
Cost: The average LIHTC unit costs taxpayers $450,000, compared to $0 for a private development that it replaces.
Complexity: LIHTC requires 2,060 pages of federal rules along with state-level red tape. The real winners? Lawyers and consultants.
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Corruption: A 2023 Government Accountability Office report found minimal federal oversight of LIHTC, leaving it rampant for fraud.
Cartel: A small group of specialized developers and nonprofit organizations has mastered the LIHTC system, profiting handsomely while shutting out competition.
We need DOGE to conduct a full forensic audit of all these housing subsidies. Only by shining a light on the true cost of these programs can we build the case for reform. As the saying goes, sunlight is the best disinfectant.
Edward Pinto and Tobias Peter are the co-directors of the American Enterprise Institute’s Housing Center.