Housing USA: New York

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6 min read

Public Housing Needs Privatization

New York City’s public housing, once a source of affordable housing industry pride, is in crisis.

In recent years, the New York City Housing Authority (NYCHA) has run a system that devolved into squalid conditions. In 2018, public advocate Letitia James named it the city’s worst landlord. And a judge recently rejected a settlement to appoint a federal monitor, suggesting NYCHA should instead be overtaken by HUD. This caused Mayor Bill de Blasio, who appoints NYCHA’s leadership, to rush out a reform plan that would generate much-needed revenue for the agency, including air rights sales and Rental Assistance Demonstration (RAD) repairs. If his plan passes, it would advance an agenda that has long seemed ominous to New Yorkers, yet is badly needed for NYCHA: privatization.

NYCHA is by far the nation’s largest public housing system, with 325 developments, 2,418 buildings, 175,636 units and 392,259 residents. Another 191,000 residents receive Section 8 vouchers through the agency. NYCHA houses 4.6 percent of the population, and represents eight percent of citywide rental apartments. It receives annual federal subsidies nearing $2 billion, and total revenue nearing $3.3 billion. According to the operating budget, there is, after vouchers, about $2.3 billion left to manage and repair housing. That works out to over $13k/unit annually, which should be adequate for providing decent housing.

Instead, NYCHA runs a substandard service. Part of the problem is a $32 billion maintenance backlog. It doesn’t help that the workers who manage facilities come from various unions that have a reputation for inefficiency. A 2018 New York Post report found that union contracts led to exorbitant salaries and overtime pay, dubious paid vacations and burdensome work rules. For years, the unions refused to provide employees who worked at regular rates outside of their weekday shifts. Repair teams were thus often unavailable on weekends.

This has led to chronic under-maintenance. In recent years, local public housing has suffered from lead paint, vermin, inconsistent heat and hot water, poorly lit stairs and entryways, lax public safety, sewage overflows, broken elevators and about anything else that can go wrong in buildings. While none of the projects have become dystopias, like Cabrini-Green or Pruitt-Igoe, NYCHA housing is increasingly viewed by analysts as a disgrace.

Its reputation hit a new low this past June during a court case where residents testified about living conditions. It was revealed that city officials had repeatedly lied and concealed information from the media and HUD officials. This included covering up the fact that 1,160 children were exposed to lead. The city agreed to pay a $2.2 billion settlement and accept a federal monitor to oversee the authority. But in November, the judge rejected that deal, suggesting that NYCHA instead fall into HUD receivership.

That move would humiliate Mayor de Blasio, claims Howard Husock, vice president for research at the Manhattan Institute, during a phone interview. That is why, several days after the decision, NYCHA released a tentative privatization proposal, which the New York Times reported on.

NYCHA would hand over daily operations for 62,000 apartments to private developers, who would renovate the units using RAD. The developers would get Low Income Housing Tax Credit (LIHTC) equity for repairs, and lease and rent the units at subsidized rates. Another aspect would be for NYCHA to lease or sell air rights to the abundant underutilized space within projects, for the construction of private market-rate development. A value capture mechanism could be installed so that revenue from the new development pays for repairing the old buildings.

The fact that NYCHA hasn’t already pursued this strategy puts it behind other public housing agencies. In 2015, San Francisco used RAD to conduct the largest conversion of government housing into private ownership in U.S. history. Cities on the east coast, such as Baltimore and Washington, DC, are also experimenting with RAD, and there’s a backlog of cities applying to HUD to make the shift. Even NYCHA has rolled out one RAD project, converting the 1,397-unit Ocean Bay Apartments in Far Rockaway, Queens. The Times noted how much better quality those units have been than others in the system. But the insistence otherwise on operating, says Husock, a publicly-run “holdover” agency makes New York City an anachronism.

The selling of NYCHA’s public land, meanwhile, is long overdue. Many public housing developments —known colloquially as “projects”—are scars on the urban fabric. Built just before or after World War II, they have long been ugly, isolated and poorly-serviced by retail, dedicating vast acreage to parking lots or underused parkland. Yet they sit on some of the nation’s best real estate. Selling those empty lots for high-rise redevelopment would create windfalls for NYCHA and more net housing for city residents of all income levels. There’d even be a chance during redevelopment, says Husock, to reinstall the former street layouts, reintegrating the areas with the city.

“The housing authority here needs to consider all potential sources of revenue,” he says. “Selling off land, using some of their open land in the middle of their projects to build supermarkets. But they never thought of themselves as a real estate management company. They thought of themselves as a public housing management company. They need to rethink that.”

January 31st is the deadline HUD Secretary Ben Carson gave NYCHA to make a deal with federal prosecutors. If operations are transferred to HUD, it will likely streamline RAD privatization, since that has become a principle HUD policy. If the city maintains control, privatization (and reform in general) will likely be slower. Already, de Blasio says he doesn’t want to demolish the old buildings, even though that would reduce the maintenance backlog and create yet more space for developing new, affordable replacement units.

“I think that’s horrifying and I could never live with any approach like that,” de Blasio told the Times.

Nor does he want to leverage the labor efficiencies that come with RAD privatization. “Everyone who works for NYCHA now will continue to have a job with NYCHA, period.”

Therein lies the problem: NYCHA is in its present state because of entrenched politics and uncreative approaches. Privatization is a path to escaping this logjam. The city will soon have a chance to embrace it, as so many others have across America.