Originally published in The American Prospect’s Tapped blog on September 9th, 2015.
A little over a year ago I reported on the Rental Assistance Demonstration (RAD)—the federal government’s new plan to preserve public housing by turning units over to the control of private developers. Instead of Congress supporting public housing through direct subsidies to local housing authorities—a responsibility which they’ve persistently shirked for decades—RAD would enable private companies to rehab and manage public housing units in exchange for tax credits and subsidies. Developers would have to keep rents low, and their contracts would continually renew to prevent companies from turning affordable units into market-rate rentals.
Baltimore residents learned last summer that their city would be converting 40 percent of its public housing stock through RAD, but up until this weekend little was known about how exactly developers would be subsidized. On Saturday, Sun journalist Luke Broadwater shed some light, reporting that the city will issue tax breaks worth millions of dollars, and will sell its public housing complexes “for far less than their state-assessed value.” The nearly $100 million collected from the sales will be invested back into the city’s remaining public housing stock.
Through public record requests, Broadwater found that ten developers will be excused from paying $1.7 million in local taxes per year for at least the next 20 years. In addition to city tax breaks, each developer who buys a public housing complex will also receive millions of dollars from the federal government, through federal tax credits and “developer fees.”
Baltimore is one of the first cities to finalize its deals under RAD, and community members have mixed feelings about how officials pushed forward with the program. Housing advocates, tenants, and union workers have led protests, raising concerns of public housing loss, resident displacement, and middle-class job cuts. In general, the city has not been forthcoming with concrete details to assuage anxieties.
As Broadwater reports, Baltimore’s Board of Estimates approved the tax breaks—“without details publicly revealed or debated” in April by a 4-1 vote. Baltimore’s mayor, Stephanie Rawlings-Blake, controls three of the five board seats. The city comptroller and the city council president hold the other two.
The city council president, Bernard C. “Jack” Young, voted against the tax breaks, citing his general opposition to privatizing public housing. He also worried about the possibility of losing hundreds of public sector union jobs through RAD conversions, like maintenance workers and building monitors.
Carl Stokes, a local councilman, said he’s supportive of the deal because at least the incentives will support low-income people living in buildings that desperately need maintenance and repair. Baltimore has a history of awarding tax breaks to build flashy waterfront developments and tourist attractions.
Nationally, HUD Secretary Julian Castro has called RAD “the answer” to housing issues in many struggling communities. While Congress has so far approved just 185,000 public housing units to be transferred to the control of public developers—out of a total of 1.2 million units—public housing authorities, real estate companies, and other stakeholders have been lobbying Congress to lift the program’s cap. California Congresswoman Maxine Waters sent a letter to President Obama in December urging him to directly fund public housing rather than depend on private developers to save the units. “Put simply,” she said, “if the price of accessing private capital is to put public ownership at risk, then that price is too high.”
As Baltimore’s situation suggests, it might be cheaper for Congress to just increase direct funding for public housing, rather than rely on a costly mix of tax breaks, subsidies, and developer fees. Yet such a move is doubtful to happen any time soon. But while RAD appears to be the most likely way officials aim to preserve crumbling units in the near future, even the most optimistic experts cannot guarantee that it will protect the nation’s public housing units over the long-term.