Four years ago, Hurricane Ike swept through this island town on the Gulf of Mexico, flooding homes, destroying property and wreaking havoc on the economy. Now, Galveston has become the center of a different type of tempest, as local officials battle the Obama administration over plans to replace 569 public-housing units ruined by the storm. HUD, which funds subsidized housing, is demanding that Galveston build 569 low-income units—as part of mixed-income developments, not old-fashioned projects—or risk losing more than half a billion dollars in storm-recovery funds the city needs to rebuild infrastructure, such as a water-treatment plant, roads and sidewalks. The agency has authorized $109 million in federal funds to replace the lost housing. The debate in Galveston reflects a dilemma poor citizens elsewhere face: As the need for low-income rental housing rises, exacerbated by the economic downturn and the foreclosure crisis, the supply of subsidized housing has shrunk.