The Chattanooga Housing Authority's intent was to encourage mixed-income communities by giving housing preferences to people who had jobs.
But some applicants realized they could get a job, move to the front of the waiting list for housing, then quit the job right after they landed an apartment.
"So what we found was a lot of people would take advantage of jumping over people on the waiting list when there wasn't real intent to continue working," said CHA Executive Director Betsy McCright.
And if housing applicants quit jobs after they got housing, there was nothing CHA could do about it, said Eddie Holmes, the housing authority's board chairman.
"Unless they committed a crime or a fraud, we couldn't kick them out," Holmes said. "We have people who have learned how to manipulate the system."
Officials were unable to say how many such problems there have been, but one thing was clear: The ones hurt most by the scam were those on the waiting list.
The issue came to light at last week's CHA meeting, where agency officials unveiled a revised policy aimed at foiling the scammers. The new rule requires housing applicants to have worked at a job for at least one year at the time they submit their housing application if they want to move to the head of the waiting list for housing.
It doesn't matter if the job is part-time, full-time or a job-training program; all are treated equally, officials said.
The housing authority addressed the problem this month after site managers, customer service representatives and housing officials formed a committee to make the application process more uniform, officials said.
It was the committee members who noticed the pattern. Holmes said the agency also had received some anonymous calls about people who got jobs to get housing and then quit the job.
About 2,000 people are on the waiting list for public housing, according to the CHA. No job is required to apply for housing.
Some saw the scam as desperation rather than dishonesty.
Rondalia Simmons, a 33-year-old mother of three, moved into public housing in November 2010 after waiting four months. She said she was homeless, sleeping under bridges and in emergency rooms before she got an apartment at College Hill Courts. She said she understands people doing what they think is necessary to get housing.
People aren't criminals when they work the system, she said, they're just trying to stay alive.
"It's survival," she said. "The people are just trying to find somewhere to live."