It’s budget season and President Trump’s first proposal to Congress has sent shockwaves through all levels of government for the audacity of its cuts. Nowhere is that clearer than at HUD, where he is proposing $6b in cuts. NYCHA, which gets two-thirds of its $3.2b operating budget from HUD, could be devastated. However, recent plans to inject private capital into NYCHA (to offset some of its $17b in outstanding capital needs) show how much is at risk to the long-term mission of providing public housing by grasping for private sector funds under these circumstances.
The Trump Administration has always been clear about gutting HUD and why – because it helps the wrong people. Much of the President’s “skinny budget” is merely symbolic posturing, with little chance of passing through Congress, but I would bet a lot of these HUD proposals would find sympathy from conservative Republicans.
NYCHA is a telling example. By far the largest public housing agency in the country, it provides homes for over 400,000 poor and low-income residents across 2,500 buildings and 176,000 units. In addition, it also provides housing assistance through Section 8 vouchers for another 200,000 residents. If it were its own city, it would be the 30th biggest city in the country.
However, it’s made up of poor and low-income residents, many of them very old or very young, with the majority of them representing minority communities. When President Trump speaks of“making America great again” and “America first” he is simply not speaking to or for this population. The Republican Party, and frankly some parts of the Democratic Party, has little interest in helping residents of New York City in general, and poor, minority residents specifically.
That’s why NYCHA has already received word to expect $35 million in cuts for the rest of 2017. This would dramatically reduce the agencies ability to fund its operations and Section 8 programs – even before the more dramatic cuts to HUD in the president’s budget proposal. It has been called “devastating” by Shola Olatoye, the chair of NYCHA.
Public housing still gets a bad rap in the broader public image, but the truth is far more inspiring, which makes these cuts all the more depressing. Despite years of poor management in the past, in 2016 the agency actually saw a surplus of $21m - which is now entirely wiped out. And despite some major issues, to be expected across such a large footprint, the vast majority of residents have a positive view of their homes. There is a waiting list with nearly 260,000 families who want to move in. This isn’t a failed government program, it’s a shining example of a living, thriving public commitment to housing.
The main problem facing NYCHA is the $17b in outstanding capital needs that remain unfunded (compounded by the missing $3b promised by FEMA for Sandy recovery.) Many of the complexes were built at the height of the New Deal and are over 70 years old. These buildings need new roofs and plumbing, remodeled fixtures and appliances, lead paint removal, new electricity and energy investments - just to name a few of the daunting list of projects. This was true even before the Trump budget proposal and only becomes more of a threat to NYCHA’s long term viability if its operating budget keeps getting hacked apart (it was already potentially facing a deficit of $200m by 2020).
Starting during the Bloomberg Administration, NYCHA has increasingly turned to the private sector for ideas to make up for its funding gap. One part of Mayor de Blasio’s 2015 plan, NextGeneration NYCHA, has called for selling underutilized NYCHA-owned land to developers in exchange for committing 50% of new units to affordable housing. It hopes to net 10,000 additional affordable units on NYCHA land, with about 7,000 market-rate units.
This part of the plan has been extremely controversial with residents and housing advocates. Though there are reasonable arguments to be made around selling certain pieces of land on individual developments, ‘underutilized land’ in many cases seems to mean a parking lot or a playground. Many residents would question how underutilized this land actually is (and some feel under-represented in these conversations).
NYCHA has also partnered with private developers to upgrade some of its existing housing stock in exchange for equity stakes in those developments, which some advocates worry is the beginning of a slow creep towards privatization of public housing.
In the Far Rockaways, NYCHA has placed over 1,400 units in HUD’s Rental Assistance Demonstration Plan (RAD) that removes them from public housing and instead enrolls them in a Section 8 program. This allows the agency to partner with private lenders to qualify for mortgage-backed tax breaks netting significant revenue while removing fixed costs.
The program began under President Obama and has many supporters in the housing world, however, despite its outlined tenant protections, there is a distinct risk that these units will eventually lose the federal funding that protects them (more likely now, surly) forcing them to convert to market rates eventually.
In the East Village, NYCHA has sold 50% of its stake in several developments, notably Campos Plaza on Ave C to L+M and PDP Triborough in exchange for $350 million over the next 15 years. Campos I has already seen parts of the $100m investment from developers in the form of remodeled units, a remodeled façade, and a new park. However, a portion of those units can now be rented at market rate, with the private developers capturing the difference between market rates and the 30% income cap NYCHA can charge residents.
In both cases, NYCHA has contractual protections in place to dismiss their private partners if they are unhappy with their services; and they have right of first refusal if they wish to sell their stakes. That sounds good, but in reality NYCHA has gone down a road where they can’t risk scaring off potential private developers by dismissing them and they can’t anticipate being more financially solvent in 15 or 20 years based on current federal and state support.
Private developers, even the most progressive, know this. Maybe things work out well under this model, but these developers have more protections than NYCHA if it doesn’t. The risk is real that these units will leave public housing. It’s also opened the door to rationalize more private intervention in the future, perhaps across entire developments.
It’s difficult for me to criticize the Mayor or NYCHA employees for pursuing every option to fund its operating costs, especially given the federal hostility to its mission even before President Trump’s arrival. The majority of the initiatives outlined in NextGen deserve our support, including investments in infrastructure, more effort on efficiency gains in management and energy, tenant-centric empowerment and reach out, and new interior/exterior design guidelines, and a non-profit fundraising org. If you accept the reality that we live in, this is probably the best you can get.
However, this already frustrating reality is going to get a lot worse very quickly because so much of NYCHA’s plans rely on current HUD funding commitments. Those are going to decrease, even when the President’s budget gets chopped down through Congress. How much can this plan work without the predicted fed funding? Mayor de Blasio has come out forcefully against the proposal but, cautioned that it's just the beginning of the process. That reeks of hoping for the best and reeks of not working out.
But I also think this reality is unacceptable, cuts or not. NextGen talks about the origins of NYCHA during the heights of FDR’s New Deal through LBJ’s Great Society. There were 30 years of successful federal and state commitment to public investment in housing, along side a viable, competitive private sector. That's the reality we should live in again - with public housing on the offensive, not the defensive.
But don’t conflate the two. Public housing should remain committed to being public. Selling off to the private sector slowly over another 30 years will betray the values at the heart of the program. As a republic, we should commit ourselves to offering affordable housing to all citizens. We already have a model that shows it can work if we remain committed to it. Even for all its leaky roofs, NYCHA still serves almost half a million New Yorkers, which shows that public housing is a strong investment the city and the country.
Instead, for the last 30 years, too many housing advocates and government employees have been apologizing for the decline in funding, largely amongst themselves, rather than making the easy case for more funding to the broader public. They have accepted that the private sector is the only answer even though it hasn’t been in previous housing crisis. They have accepted a reality that will only lead to public housing’s demise. All Americans would suffer in its absence.
We should, once and for all, reject the outdated narrative of public housing’s failure and reclaim the real one – that public housing works. Public housing is a commitment to and an investment by Americans for Americans. It has worked in the past and continues to work today.
We should be parading NYCHA around the country as a sign that supporting public housing is not just a great social program, but also a phenomenal economic development program. We should be organizing NYCHA residents together with NYCHA employees to promote its virtues to other Americans, rural or urban, who would benefit from more federal intervention in housing. We need to be a loud, passionate group that shifts the conversation politically. A Tea Party for government investment.
NYCHA is fighting for its life, but if it recognizes and embraces that its fight is a bigger one for the right to affordable housing for all Americans, for a return of federal commitment and investment in public life, I believe it will find allies across all parts of the country. Rather than being a symbol of past ‘failed government overreach’ it should be a symbol of hopeful, smart government investment. The cause has the security of being true and the obligation of being right.
The answer is clear – NYCHA must endure without conceding to the private sector. It must endure without conceding to cynical dismissals of its purpose or possibilities. It must endure in the Trump Age, because the ebb and flow of history will inevitably bring in another age, one committed again to the power of government and the power of public housing. NYCHA, its residents, and supporters should focus on bringing on that age sooner than later.