The Slow Death of Public Housing

By Jake Blumgart

Joseph Shuldiner has worked in public housing for over 30 years. After a decade in legal aid, mostly handling landlord-tenant issues, he entered the field at the beginning of the Reagan years just as housing programs sustained drastic cuts. He has experienced firsthand the long decline of the nation's commitment to its public housing stock, culminating today in an administration that seems to be trying to save what it can, which isn't much.

Shuldiner is the executive director of the Municipal Housing Authority for the City of Yonkers, with 2,079 conventional public housing units and 2,600 apartments leased through the Section 8 voucher program. The city of almost 200,000 lies just to the north of the Bronx and contains some of the oldest public housing stock in the nation, with repair needs to match. Shuldiner previously has been at the helm of the nation's three largest housing authorities, including the New York City Housing Authority — a mammoth institution which today makes up 15 percent of the nation's public housing. Bill Clinton appointed him Assistant Secretary of Public and Indian Housing in 1993, and in 1995 detailed him to rectify the long-running crisis at the notoriously inept and corrupt Chicago Housing Authority, then under federal receivership.

"It's the job for my dotage — my wife didn't want me around the house so I had to do something," says Shuldiner, referring to his Yonkers position. "Basically we have the issues of a Northeast housing authority: Our stock is aging, the buildings have great needs, [and we've received] inadequate capital money over the years. We are always financially on the borderline. We actually have the same challenges as NYCHA, but the emergencies don't occur every day. That's the difference between having 170,000 units and two or three thousand units."

Regardless of the difference in scale, housing authorities everywhere are facing a crisis. In 2011 HUD estimated that the nation's 1.2 million units of public housing, much of it built between the 1930s and 1960s, required at least $25.6 billion in capital repairs. Congress was unwilling to provide the funds.

The Center for Budget and Policy Priorities reports that the public housing capital and operating fund "lost 25 percent of its inflation-adjusted value since 2001" (emphasis in the original). Since 2011, the repair needs have ballooned, at around $3.4 billion a year, and now stand at about $35 billion, Shuldiner estimates. Congress is now funding the program's capital needs at less than $2 billion annually.

Shuldiner estimates that Yonkers's public housing units require $200 million in capital repairs. The housing authority receives $3 million each year toward those needs. So Shuldiner has decided, almost 80 years after the advent of public housing in America, to take his city out of the program. He wants to take full advantage of the Obama administration's premiere public housing initiative, the Rental Assistance Demonstration program. This will allow him to transfer all of the Yonkers units from the traditional public housing program to either of the project-based Section 8 programs, which are more adequately funded — relatively speaking.

Under this new policy, Yonkers can also more easily mortgage properties and access low-income housing tax credits. These measures are not required under RAD, but might be necessary to cover repair needs because the Section 8 program funding will not suffice.

"If we stay as we are, we will lose our housing stock in 10 years because there's no source of funding," he says. "It doesn't appear as though HUD is capable of giving us the capital funding we need to maintain our buildings. Without the buildings there is no public housing program. So are we going to allow slow death and a steady decline of conditions or attempt to do something about it?"

RAD and the other major policy that largely applies to public housing, the Choice Neighborhoods Initiative, are what the Obama administration has done for the program. Choice Neighborhoods has a broad mission to repair or rebuild decrepit housing and the neighborhoods that surround it. Both programs rely heavily on an ability to leverage private dollars. But both are limited in size and scope. Even if they max out their total number of units, there will still be over one million units left in the capsizing public housing program.

A greatly increased congressional appropriation is the only way to avoid the total demise of public housing, which loses about 10,000 units a year to disrepair. But there is no program less likely to get a multibillion-dollar break.

Never enough

Even at public housing's peak, there were only 1.4 million units in the program. By 2010, there were 131.7 million total units of housing in the U.S., but only 1.2 million public housing units. Even when combined with other programs — Section 8 vouchers, project-based Section 8 buildings, LIHTC-assisted units, and all the rest — government-assisted affordable housing comprises only about five percent of America's housing supply.

Most low-income housing isn't government assisted. Such housing is largely beyond regulation, beyond oversight. Michael Bodaken, executive director of the National Housing Trust, calls this, the majority of low-income housing, "The Great Gray." Few cities, if any, have the resources or political will to monitor the vast tracts of low-income housing that exist without government subsidy.

And because of market imperatives, the housing quality is often low: Why put money into a house whose rents are capped by the low incomes of the tenants? As a result, "In most cities at most times, public housing provides a better alternative than private-sector housing in poor neighborhoods," writes Edward Goetz, professor of housing policy and planning at the University of Minnesota, in his 2013 book New Deal Ruins: Race, Economic Justice, and Public Housing Policy.

Today relatively few people have access to any form of government-assisted housing. The U.S. is officially in the midst of a rental crisis, as wages continue to stagnate, home ownership levels drop, and the need for decent low-income rental housing increases. (A 2015 study by the Enterprise Community Partners found that 25 percent of renters spend half their income on housing costs.)

As the rental crisis deepens, the very low-income tenants often served by public housing — which offers deeper subsidies than the LIHTC — are left with few options, making the preservation and revitalization of the 1.2 million units remaining in public housing necessary. Under President Obama, HUD has not asked for funds commensurate with public housing's repair needs. And Congress has turned down even these inadequate requests. The agency's capital budget has fallen from $2.5 billion in fiscal 2010 to $1.8 billion in fiscal 2015, while the operating budget fell from $4.7 to $4.2 billion.

The Obama administration's public housing policy focuses on two programs, the ambitious yet skimpily funded Choice Neighborhoods and RAD, which promises to remove units from public housing in order to save them.

From HOPE to Choice

HOPE VI was President Bill Clinton's signature public housing policy, spilling over into the Bush years — an epic, $6 billion effort to redevelop dilapidated public housing, usually through demolition. It began in an era when projects such as Chicago's Cabrini-Green and Henry Horner Homes still stood, although the number of units in the nationwide program had already been frozen, destined to decline as private-public partnerships such as Section 8 and LIHTC became the affordable housing standards.

HOPE VI was used to level many of the nation's most distressed properties, replacing them with mixed income housing. Housing advocates and tenant groups protested that it did not contain a one-for-one replacement program. (There was such a requirement at first, but Congress suspended it in 1995, as HOPE VI got under way, and permanently scrapped it in 1998.)

About 110,000 units were demolished using HOPE VI funds, but just 60,000 replacements were provided in the new mixed income communities. Many residents — most of them African American — were displaced from their neighborhoods. One 2003 HUD study found that less than half of the original tenants found homes in the new mixed income housing, in part because of the rescreening procedures in place in some locales. A 2008 study, cited in Alex Schwartz's Housing Policy in the United States, found that less than 25 percent had returned.

HOPE VI also introduced the private market into public housing in a big way. In 1996 HUD allowed the use of private capital to help finance new projects, although much of that funding tended toward areas where investors could see a solid return on the market-rate units. This aspect of HOPE VI led to the kind of partnerships that cash-strapped agencies now hope to use under the new programs.

"HOPE VI to a large extent legitimized the idea of withdrawing from that commitment [to public housing]," says Goetz. "I see Choice Neighborhoods and RAD as the continuation of that. ... I just don't think there are enough people in Congress to champion the idea of truly public housing that is owned and operated by a public entity and remains in the domain of affordability in perpetuity."

Even if Choice Neighborhoods and RAD are a retreat from conventional public housing, they do require two key tenant-friendly things that HOPE VI did not: one-for-one replacement of demolished units and first right-of-return for tenants displaced by the rehabilitation.

Choice Neighborhoods came first and is ambitious. Those who apply are judged by a variety of criteria, but as in the HOPE VI program the housing in question must be deemed distressed for a request to be granted.

Two kinds of grants are available: small planning grants of up to $500,000, of which 63 have been dispensed (for a total of $20 million), and multimillion-dollar implementation grants, of which only 12 have been given (for a total of $350 million). At current funding levels, only 10 percent of implementation grant applications and 17 percent of planning grant applications are awarded.

Unlike HOPE VI, Choice Neighborhoods is meant to take in the whole community. Applicants must propose a target area, prove that they have community input, and be prepared to aid displaced residents in their housing search.

The lead agency must ally with other organizations to provide a smorgasbord of supportive services (including, in HUD's language, "activities ensuring the long-term viability of the neighborhood on an economic, educational, and environmental basis"). The implementation grants, of around $30 million, must be split between housing and, to a lesser extent, these services.

But $30 million isn't enough to build, or even rehab, very much housing, even if a large implementation grant were handed out. Private dollars are leveraged to take up the slack. (HUD claims that $2.6 billion in public and private money is being leveraged by the $350 million from the implementation grants.)

Agencies and organizations seeking the grants must build coalitions of other nonprofits and public agencies to get the services required by the Choice Neighborhoods program, which means applicants must be politically sophisticated. Even those that can't secure the rare implementation grants can still see the benefit of the planning grants — and the networking requirements they've had to fulfill to win it.

"There's a lot happening before the cement gets poured," says Rolf Pendall, director of the Metropolitan Housing and Communities Policy Center at the Urban Institute and leader of several studies of communities that have won Choice Neighborhoods grants.

"Physical progress of construction is often modest in a visible way [at this point], but fairly substantial in the approvals and community consensus background that have to happen to get any major infill project done," Pendall says. "Keep in mind, of course, that the implementation projects are only a fraction of all of the grants. But a lot of those grants created a community process for housing authorities who will then seek to undertake their work using RAD."

Is RAD risky?

RAD debuted in 2013 but was capped out at 60,000 units, a figure that Congress increased to 185,000 in 2014. It gives cash-strapped housing authorities a way to offload troubled public housing units into project-based Section 8 programs that enjoy five times the funding of the public housing program's capital allotment.

These funding streams also have different regulatory frameworks, which more easily allow for authorities to mortgage the properties for additional funds to repair projects. (Certain types of high-risk loans are disallowed.)

Paying off those mortgages can be a challenge because housing authorities can't raise rents, and Congress is an unreliable guarantor. But the transfer to project-based Section 8 also allows for easier access to the low-income housing tax credit program, which requires private investment in, and at least nominal ownership of, the affordable units.

The extent of private involvement in these RAD-enabled rehabilitations will vary greatly between housing authorities because much discretion is left to local control. (Although, again, one-for-one replacement and first right-of-return are in place.) That's where many of the tenant concerns about RAD come in.

Housing authority ineptitude, corruption, and neglect has a long history in some cities. But the public housing program gives tenants strong legal rights. The project-based Section 8 regulations are different and not as robust. Advocates fear unscrupulous authorities could take advantage of loopholes in the RAD regulations, like one that allows an agency to avoid replacing affordable units left vacant for more than two years.

Other concerns about RAD arise from the risk of mortgaging low-income housing. "Federally subsidized properties are potentially at a greater risk of foreclosure because they depend on annual appropriations to satisfy the debt service," wrote Anne Marie Smetek in a 2012 analysis of RAD in the Virginia Journal of Social Policy & the Law.

"On operations they [HUD] are paying only 83 percent of what the unit needs and on capital they are paying half — adding debt to that formula is foolhardy," says Jon Gutzmann, executive director of the Saint Paul (Minnesota) Public Housing Agency. "We can borrow against a $10 million building, borrow $5 million to fix it up and then pay the debt service? From what? From debt? From future capital funds? Adding debt to properties where you can't impact one-half of the equation — rent — is just too risky."

Saint Paul is one of the nation's unsung successes of public housing. There, according to Gutzmann, 4,300 units are ineligible for Choice Neighborhoods because none of them are severely distressed. (They also forwent HOPE VI for the same reason.) Their units are 99 percent occupied and have been for two decades. They receive 100 percent approval ratings from residents on maintenance work orders. Nor will they participate in RAD, in part because they are restricted by state legislation to owning and managing public housing and Section 8.

Feet first

Back in Yonkers, Shuldiner has already received HUD approval for some RAD conversions and believes approval for the entire stock will come soon. He has gotten 27 proposals from developers seeking partnerships. He could work with multiple developers or just one, but either way he has made clear that the Yonkers housing authority will play an active role in the partnership — the bigger the better.

The only development being left out of the RAD conversion plan is the one that the Yonkers housing authority received a Choice Neighborhoods planning grant for in 2013. But it didn't receive the implementation grant, so the project will be funded entirely through the tax credit process.

Shuldiner doesn't seem phased by the loss. "Choice [demands you] save the development and the people in it and the entire neighborhood — only they don't give you the funds to do it," says Shuldiner. "They are putting a premium on leveraging because there isn't enough money in the program to do the things you have to do to win the award in the first place. Conceptually it's fine; practically it's difficult."

The housing authority has been meeting with tenant groups to prep them on the RAD conversions and get their input on the process. Shuldiner says that once the deals are completed they will include provisions to ensure the properties will revert to housing authority ownership after the tax credits expire. In addition, he hopes to maintain control through ground leases to ensure that the housing authority will have some power over future incomes and maintain affordability in perpetuity. He expects the details to be sorted out in the next year.

"I don't have any philosophical attachment to RAD, don't have an opinion on privatization one way or the other," says Shuldiner. "We are doing RAD because there is a tremendous capital need and there doesn't appear to be any possibility whatsoever that Congress will fund the need. If the buildings fall down it doesn't matter what program you have, there's no housing. So we have no choice. RAD is the only game in town that offers any possibility of getting this done in our lifetime."

"The simplest thing that could be done is for Congress to fund the public housing program adequately," says Shuldiner. "I think it's a big mistake and I think for less sophisticated authorities the loss of government controlled low-income housing is bad news."

Jake Blumgart is a reporter and editor based in Philadelphia.

Resources

Images: Top — Yonkers, New York has 2,079 conventional public housing units and 2,600 Section 8 apartments. With a population of almost 200,000, Yonkers lies just to the north of the Bronx and contains some of the oldest public housing stock in the nation, much of it in disrepair. Among them are the William A. Schlobohm houses. This public housing project served as a filming location for the HBO miniseries Show Me a Hero, which aired in August. Photo by Lydia Thompson, Urban Institute, urban.org. Bottom — This aerial view of Yonkers, New York, shows the ongoing revitalization of the 1940s-era Cottage Place Gardens public housing complex. Schoolhouse Terrace (phase 1, completed in 2015), with its arched entrance, is visible in the foreground; the 188 Warburton Avenue complex (phase 2) is currently under construction on the block behind it. Aerial photograph by Stefen Turner.