Section 8 ripoff? Delaware landlord agrees to pay $430,000 to settle federal lawsuit

More than 70% of the 544 homes in Sparrow Run are rentals, and about 100 are in the Section 8 voucher program. (Cris Barrish/WHYY)

More than 70% of the 544 homes in Sparrow Run are rentals, and about 100 are in the Section 8 voucher program. (Cris Barrish/WHYY)

When federal authorities accused Delaware landlord Christopher Lukacs of scamming the Section 8 housing voucher program, he claimed that the government was only suing him because agents could not find evidence he “knowingly” rented to drug dealers and violent criminals.

Lukacs also asserted in court papers that he had done no wrong and tried to get the case dismissed by a U.S. District Court judge in Wilmington. He argued that New Castle County officials had approved the rents he charged to Section 8 tenants in the Sparrow Run neighborhood in Bear.

The Section 8 voucher program provides federal subsidies to help low-income earners, elderly and disabled people find affordable housing. Tenants who qualify for a voucher pay about 30% of their income toward their monthly rent, and the government pays the rest.

The rents Lukacs had charged to his Section 8 tenants had indeed been approved by county officials. But the lawsuit filed in December 2020 charged that he filed false statements to get those approvals.

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Court papers said he did so to hide the fact that he illegally charged higher rents to federal voucher recipients than to tenants who did not receive the federal subsidy. The bogus reports he allegedly filed were done to “justify the inflated rent’’ charged to clients with vouchers, the lawsuit said.

Despite his vehement protests, this week Lukacs and his two rental companies, Goodfish Enterprises and Reliant Property Management, agreed to pay the government $430,000 to settle the case. While Lukacs did not admit wrongdoing, he also agreed to reduce the rents charged to certain current Section 8 tenants, said David Weiss, U.S. Attorney for Delaware.

Weiss said landlords who overcharge the federal government “take money that should be used to help additional needy families.” He pledged that his office will continue to “aggressively pursue those who attempt to profit by ignoring the laws that ensure that public money is not wasted.”

Lukacs, who lives in West Chester, Pa., could not be reached but his lawyer, Douglas J. Cummings Jr., told WHYY News he had no comment on the lawsuit or settlement.

Lawsuit: false reports filed to ‘justify the inflated rent’

Lukacs and his entities own about 90 homes in the neighborhood of 544 aging two-story townhomes, the lawsuit said. At that time he rented “roughly 19” of the homes to Section 8 clients and the rest to tenants who did not receive federal assistance.

The Section 8 program, officially called the Housing Choice Voucher Program, is overseen by the U.S. Department of Housing and Urban Development.

The rules for Section 8 require that landlords don’t charge higher rents to voucher recipients than they charge to tenants who live in comparable units but don’t get federal assistance, the lawsuit said.

Landlords also need to file monthly reports and certify that they are complying with that rule.

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The lawsuit said that going back to at least January 2015, Lukacs had received a total of about $950,000 in voucher payments. But he engaged in fraud to secure some of those payments, the lawsuit said.

Court documents cited a handful of examples.

In April 2018, Lukacs filed a false report to get the federal subsidy on a 1,225-square-foot home with three bedrooms and one bathroom, the lawsuit said.

The proposed monthly rent: $1,150.

Regulations required him to list the “three most recent unassisted rentals of comparable properties,’’ the lawsuit said. Instead, he listed older rentals whose average rent was nearly $1,150, and omitted two more recent rentals whose rent was $1,000 — $150 less than he proposed charging.

One of the properties was not even comparable, the lawsuit said. It had four bedrooms and was 1,675 square feet — more than 35% larger.

Over a 25-month period, Lukacs received a rent subsidy between $611 and $920 toward the tenant’s $1,150 monthly rent, even though tenants in comparable units without vouchers paid less in rent.

Sparrow Runs, located in Bear, was once known as Brookmont Farms. (Cris Barrish/WHYY)

‘I’m glad that the people caught them’

Sparrow Run, once known as Brookmont Farms, consists of tightly clustered homes laid out in a horseshoe shape with one road that winds around the neighborhood.

About 70% of the homes are rental units, and about 100 are rented through Section 8, said Carrie Casey, general manager of the county’s Department of Community Services, which oversees county housing programs.

Casey said the neighborhood is the frequent target of police activity and has been identified as a “hot spot” for crime.

County housing official Carrie Casey says the demand for Section 8 homes far exceeds the supply, but rules be followed by landlords. (Cris Barrish/WHYY)

Sparrow Run residents had little to say about the lawsuit being settled this week.

Some said they owned their homes and the case did not affect them.

Others said they didn’t want to get involved in a legal matter or speak out and potentially jeopardize their relationship with their own landlord.

One rental agent who declined to identify himself said the system works better when landlords follow the rules.

One Section 8 recipient whose landlord is not Lukacs but also did not want to give her name said the owner of her home is fair, and responds quickly when repairs are needed. The woman, who uses a wheelchair and once suffered a stroke, said the federal crackdown is a welcome one.

“I’m glad that the people caught them,’’ she said. “My landlord is good. I don’t know about the other ones but if they are asking for more money from the government, they should be investigated.”

‘Latest effort by the federal government to aggravate us’

Lukacs, in an affidavit filed in the case in April 2021, said he had complied with the regulations of New Castle County, which administers the federal program in its jurisdiction.

He also argued in the affidavit that he had been under investigation by HUD’s inspector general since 2017.

“It is my feeling that they were looking, over these past four years, to find evidence that we knowingly rented properties to [Section 8] tenants who were engaged in ‘drug-related or violent criminal activity.’”

The feds found no such evidence against him, so “it appears that this litigation is the latest effort by the federal government to aggravate us,” Lukacs wrote. “They have succeeded. Based on how we have been treated by the federal government over the last few years, we have decided to no longer accept” voucher recipients as tenants.

The only people who will suffer, he wrote, are future voucher “tenants here in New Castle County, who now have fewer options of where they may call home.”

Despite his declaration more than a year ago that he would no longer offer rental units to tenants with vouchers, Casey said Lukacs still has about 12 Section 8 units in Sparrow Run.

Citing the lawsuit that said Lukacs filed bogus statements, Casey said, “We take issues of fraud, whether that’s with a landlord or with a tenant, very seriously, because it is so incredibly challenging to end the stigma of the bureaucratic administration of our program.”

The Lukacs case “just further puts the sigma or a black eye on what the Section 8 program is and isn’t.”

Casey said the need for affordable housing is at crisis levels among low-income residents. She said the county has about 1,800 units that qualify for vouchers but the need is twice that number.

To that end, she wants Lukacs to continue renting through Section 8 as long as he complies with the rules.

“I would like him to do it right, because this is where we are in the world,’’ she said. “I mean, to be honest with you, it worries me that he would be getting out of the housing voucher program. Because that’s one more landlord we’re losing.”

That would only serve to hurt his 12 tenants with Section 8 vouchers.

“Where,’’ she asked, “are they going to go?”

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