Will Handing Public Housing Projects to Private Developers Hurt the Poor?

Originally published in Pacific Standard on February 6th 2015.
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On a Wednesday night in early January, 21-year-old Ronald Hunter Jr.—a homeless and mentally ill man living in Buffalo, New York—froze to death. The overnight temperature hit two degrees, but with the fierce wind that night, it felt more like 20 below zero. The medical examiner’s autopsy confirmed that hypothermia killed Hunter. His story is not atypical; homeless people from across the country died last winter from freezing temperatures.

Tragedies like these, especially in the dead of winter, bring the lack of decent and affordable housing into sharp relief. Walk through the streets of any major city (and, increasingly, many suburbs) and you’ll likely see clusters of homeless people huddled under blankets, under folded cardboard boxes, sleeping on sidewalks, on top of park benches. A report released this past fall by the National Center on Family Homelessness estimated that one in 30 American children are now homeless—a record phenomenon attributed to the rising number of families living in poverty, a dearth of affordable housing, and the consequences of widespread domestic violence.

But beyond homelessness, there are other serious, less visible, and less well-understood housing problems with which millions of Americans regularly struggle. The Joint Center for Housing Studies at Harvard found that, in 2012, more than four-fifths of those earning $15,000 annually—roughly how much a full-time worker makes at the federal minimum wage—spent more than 30 percent of their income on housing; two-thirds paid more than 50 percent. With stagnant wages, the financial burden weighs heavily on the middle class too, and is trending upwards.

The housing policy world has a term it uses to refer to the millions of people living in precarious, overcrowded, and unsafe conditions: “housing insecure.” It’s an apt, yet nebulous way to characterize all those who worry about their long-term access to safe shelter. These people aren’t homeless, but they’re vulnerable—often one emergency or missed paycheck away from eviction. Their day-to-day plight, however, is less apparent to the public.

Most people do not get the help they need. Due to high demand, federal housing assistance serves just a quarter of all eligible households. With few vouchers and interminably long waiting lists, more than 2.2 million people rely on public housing to help them get by. But despite the growing need, the federal government has been moving further away from the idea of a state-run public housing system.

Through a new program known as Rental Assistance Demonstration, existing public housing units are slated to be “converted” into something that looks more like the Section 8 voucher program, under which tenants live in privately owned or managed units that are publicly subsidized. Congressional funding for public housing has declined over the years, as support for the program fell and the deteriorating units became more difficult to properly maintain. Consequently, more than 260,000 affordable units have been demolished or removed from the public housing program since the mid-1990s and 10,000 additional units are lost each year because they fail to meet acceptable health and safety standards. Many of these people are forced to double up with family or take to shelters and the streets.

Now with the potential to bring in copious amounts of new funding from private companies, Department of Housing and Urban Development Secretary Julian Castro has dubbed RAD “the answer” to housing issues in many struggling communities.

                                                               

But the long-term consequences of RAD are not yet known. When Congress authorized the demonstration program in 2012, 60,000 public housing units were approved for transfer to private developers—just five percent of the nation’s public housing stock. These developers are incentivized to rehab and manage the units in exchange for tax credits and subsidies, codified within contracts that last for 15-20 years. Yet since its original passage, HUD and a coalition of public housing authorities, developers, and other stakeholders have been lobbying the government to lift the demonstration cap beyond the 60,000 units so that any and all public housing authorities can access these new private funding streams.

Their efforts are succeeding. Included in the $1.1 trillion spending bill that Congress passed in December was a provision to raise the RAD cap from 60,000 units to 185,000 units, or essentially every project sitting on the waiting list.

Not everyone is thrilled about how fast things are moving. Many housing advocates and civil rights lawyers worry that the program will fail to ensure long-term affordability and safeguard tenant protections. Their concerns are warranted: In the past, when the government has relied on private capital to fund low-income housing, many affordable units were turned into market-rate rentals once the developers paid off their 30-year mortgages. And in earlier efforts to rehab buildings through public-private partnerships, thousands of public housing units were destroyed without ever being replaced.

California Democratic Representative Maxine Waters, the ranking member of the House Financial Services Committee, sent a letter to President Obama asking him to reconsider RAD. She urged him to allocate more direct federal subsidies to public housing authorities, rather than relying on private developers to salvage the program. “Put simply,” she wrote, “if the price of accessing private capital is to put public ownership at risk, then that price is too high.”

James Hanlon, the director of the Institute for Urban Research at Southern Illinois University-Edwardsville and a longtime public housing researcher, has been poring through HUD data to try and figure out if there’s any pattern in the line-up of specific housing projects selected for conversion, or if there are any shared characteristics among the housing authorities that have opted to participate. Hanlon notes that although the private sector has been used to fund affordable housing since the 1970s, RAD is unique in its aim to actually preserve the original units. Previous experiments have promoted demolishing aging housing rather than repairing the old units.

Private financing strategies for public housing are also spreading to cities not formally associated with RAD. New York City’s public housing authority, which lacks billions of dollars in needed capital funds, recently finalized a deal to grant private developers a 50 percent stake in nearly 900 public housing apartments across the city. It also plans to create a non-profit to solicit hundreds of millions of dollars in tax-deductible donations from the private sector.

                                                                

While experts and activists have mixed feelings about RAD, the new federal spending bill also included a significant policy win that everyone who works on affordable housing seems to be excited about. The government finally voted to authorize dedicated funding for the National Housing Trust Fund—an entity established in 2008 to provide annual dollars for building and preserving affordable housing.

However, in its current form, this is unlikely to help revive the flailing public housing program; HUD’s working rule stipulates that Housing Trust Fund revenue can only be used to fund affordable housing that is not considered traditional public housing, unless it’s through the RAD program.

But for those who hope to see Congress allocate more funds to traditional public housing, the most likely way is through the passage of Representative Keith Ellison’s Common Sense Housing Investment Act. This bill would raise a lot of new money by reforming the mortgage interest deduction—a tax break that primarily benefits wealthy homeowners. By changing the deduction into a tax credit, more low- and middle-income homeowners would be eligible for tax relief, and high-income homeowners would pay more. The plan is estimated to raise about $200 billion over 10 years. Importantly, some of this new revenue would be directed into the public housing capital fund; the legislation would also revise HUD’s rule to make traditional public housing eligible to receive Housing Trust Fund dollars.

With Congressional deadlock however, this reality is a long way off. For now, one can expect developers and housing authorities to continue striking private-public deals, with variable levels of transparency and oversight.

It wouldn’t be the first time the government, in a rush to do something, expanded a housing program rather hastily. “Hope VI, a public housing redevelopment program in the 1990s and 2000s, began as a demonstration project that had terrible oversight, assessments, and evaluations early on,” Hanlon says. “I think that there needs to be much more judicious forward movement for RAD because many of its implications are not well understood and won’t be felt for a long time.”

Perhaps RAD will turn out to be the housing panacea millions of people have been waiting for. Or maybe it will lead, once again, to the loss of affordable housing units and tenant displacement.

In this moment of doubt, hope, and desperation, “housing insecurity” just about sums it up.

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