Goodbye Public Housing?

Originally published in The American Prospect on November 12, 2015.
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In 2013, the U.S. Department of Housing and Urban Development (HUD) launched the Rental Assistance Demonstration (RAD) program—a far-reaching effort to preserve the government’s affordable units by transferring them into the private sector. Rather than have Congress directly fund local housing authorities to support the program, RAD allows private companies to rehab and manage public housing units in exchange for tax credits and subsidies. The contracts, which are set to continually renew every 15-20 years, require developers to keep units affordable for low-income tenants.

While Congress initially authorized just 65,000 units to be transferred—roughly five percent of the nation’s 1.2 million public housing stock—it later upped the RAD cap to 185,000 units, under pressure from the Obama administration and a coalition of public housing authorities, real estate developers, and other stakeholders. In August 2014, I took a deep look at the RAD program, and explored the concerns that tenants and housing advocates shared about its risks.

Last week I spoke with Alex Schwartz, a professor of urban policy at The New School, who has been researching some preliminary RAD data. He presented his unpublished findings at the International Sociological Association RC43 Conference this past September.

One key assumption behind RAD is that public housing was never that politically popular to begin with, and that it’s unlikely it’ll become more popular in the near future. Due to its low level of political support, (despite residents who live there being relatively satisfied), Congress has financially starved the program for decades; HUD estimates that nearly $30 billion would be required to repair and rehab the units at this point. And the longer it takes to make such repairs, the more unsafe and uninhabitable the units will become. Each year, roughly 10,000 units are permanently removed from the public housing program, through demolition or dispositions.

Through RAD, public housing units are “converted” into Project-Based Section 8 rentals, thereby becoming eligible for debt financing, tax credits, and other private funding sources that can be used to help cover rehab and maintenance costs.

While Congress has decreased federal funding for public housing over the past two decades, it has increased funding for project-based rental assistance during this time. Between fiscal year 2005 and fiscal year 2015, appropriations for project-based rental assistance increased by 82 percent, and appropriations for public housing’s Capital Fund decreased by 27 percent.

In other words, by transferring the affordable units out of the public housing program into one that has received more political and financial support, RAD proponents feel they will be better able to preserve the physical units over the long haul, even if they become less “public” as a result.

In his paper, Schwartz explains that:

Historically, because project-based rental assistance is largely used to support low-income properties with subsidy contracts involving private owners, Congress has been reluctant to undermine these contracts by failing to appropriate adequate sums for the program. If appropriations for project-based rental assistance falls short of the need required by the subsidy contracts, the properties would be at risk of foreclosure. At times Congress has delayed its appropriations for this program, and sometimes it has provided funding for less than a full year, but it has seldom cut back support for project-based rental assistance by a substantial amount.

The biggest takeaway, for me, is that there’s a great possibility that public housing will ultimately end in the United States. While RAD is often framed as a way to “save public housing”—that’s not quite accurate. RAD is designed to help fund much-needed capital repairs, and provide financing options to keep the units habitable and affordable in the future. But the only way it works is by transferring the properties out of the public housing program, and into the Project-Based Section 8 world.

Schwartz thinks there are some units that are in such bad shape, located mostly in high-poverty neighborhoods, that not even tax credits, mortgage financing, and other RAD funding streams will be sufficient to attract private developers to fix them up. In light of this, the Obama administration requested that Congress appropriate $10 million to the RAD program, to help repair those units with particularly challenging needs. But Congress was adamant that RAD remain a “revenue-neutral” program, and refused to do so.

What this means is that if RAD expands, which it likely will, then we’ll see most affordable units transferred out of the public housing program, and those that remain will be the ones in the most abysmal shape.

“If people had a bad image of public housing before, it’ll just get even worse,” said Schwartz in an interview. “It’s analogous to the health insurance pool—where all the healthy people leave, and then you’re just left with just those who have the most expensive health needs.” Ultimately Schwartz thinks that whatever properties remain in the program will be left to decay until they are eventually demolished once and for all.

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Details Emerge for Baltimore’s Plan to Privatize Public Housing

Originally published in The American Prospect’s Tapped blog on September 9th, 2015.
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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.