Los Angeles to Pay $38.2 Million in Settlement Over Alleged Misuse of HUD Funds

The City of Los Angeles has agreed to pay $38.2 million to settle allegations of misusing Department of Housing and Urban Development (HUD) grant funds. The settlement, announced on August 26, 2024, resolves claims that the city knowingly violated federal accessibility requirements in its affordable housing projects over a period of more than a decade.

The case highlights the critical need for municipalities to maintain strict compliance with federal regulations when utilizing government grants. Los Angeles was accused of repeatedly failing to meet accessibility standards mandated by Section 504 of the Rehabilitation Act, the Americans with Disabilities Act, and the Fair Housing Act.

The compliance failures alleged in the lawsuit included:

1. Failure to ensure 5% of units were accessible for people with mobility impairments and 2% for those with visual and auditory impairments.
2. Structural non-compliance issues such as excessively steep slopes and inaccessible counters and thresholds.
3. Neglecting to maintain a public list of accessible units and their features.
4. Failing to implement policies ensuring that people needing accessibility features occupied appropriate units.
5. Not designating a city employee to coordinate accessibility efforts.

Perhaps most significantly, the city was accused of knowingly submitting false annual certifications to HUD, claiming compliance with grant requirements despite these ongoing issues.

This case serves as a cautionary tale for other grant recipients about the importance of rigorous compliance programs. It underscores that mere certification of compliance is insufficient; organizations must actively ensure and document their adherence to all applicable regulations.

The settlement also demonstrates the effectiveness of whistleblower provisions in uncovering non-compliance. The case was initially brought under the False Claims Act by a wheelchair user and a disability rights advocacy group, highlighting the role of citizen oversight in enforcing regulatory standards.

As municipalities nationwide struggle with affordable housing challenges, this case emphasizes that accessibility cannot be overlooked in the pursuit of development goals. It serves as a reminder that compliance is not just a legal obligation, but a fundamental aspect of ensuring equitable access to housing for all residents.

The substantial settlement amount reflects the seriousness with which federal authorities view such violations. It should prompt other jurisdictions to review their own compliance procedures carefully to avoid similar costly outcomes.

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