#162 Summer 2010 — Public Housing Privatization

Does Public Housing Have a Future?

Everybody hates public housing, except the low-income people who live there and the people on the long waiting lists to get in. After years of neglect, the Obama administration wants to save public housing for future generations. Let's let them.

One would imagine that housing advocates would herald PETRA, the Obama administration’s initiative to inject billions of dollars into public housing to make long-deferred repairs. But they’re not. Instead, the proposal, because of its use of private capital, is being viewed as a scheme that will privatize public housing, lead to rising rents and evictions, and eliminate scarce affordable housing.

A recent memo written by some radical urban studies professors makes it seem like Obama wants to hand public housing over to Goldman Sachs or turn it into luxury housing. In an article for Huffington Post, UC-Berkeley professor George Lakoff warns that the administration is trying to “privatize all public housing in America” and “give conservatives a victory they could not have anticipated.” It is, Lakoff wrote, evidence of Obama’s “move to the right.”

The critics raise some important concerns, but their attacks on the Obama administration’s motives and objectives are misguided. They are playing into the hands of most Republicans, who would like nothing more than to destroy public housing. In 1996, Republican presidential nominee Bob Dole said that public housing was “one of the last bastions of socialism in the world,” calling local housing authorities “landlords of misery.” After Hurricane Katrina, Congressman Richard Baker (R-La.) was overheard telling lobbyists, “We finally cleaned up public housing in New Orleans. We couldn’t do it, but God did.”

In the face of these attitudes, liberal critics—including some tenants groups, anti-poverty lawyers, and academics—need to stop the scare tactics and figure out how to seize this rare opportunity of having a president who actually wants to preserve public housing for the long term.

Public Housing in Context

The best-kept secret about public housing is that it actually provides decent, affordable housing for many people. There are also probably more than 500,000 families on public housing waiting lists; in many cities the wait is two to five years — and sometimes longer. Public housing developments are often better — and certainly more affordable — than apartments available to the poor in the private market, which is why the waiting lists continue to swell.

Today there are about 2.3 million public housing residents. Although many of them work, they are among the nation’s poorest citizens, with an average annual household income of $13,414. Without public housing — for which they pay 30 percent of their incomes — they would inevitably be living in substandard slums, paying half or more of their incomes to keep a roof over their heads, or ending up homeless.

Since 1973, Congress has failed to provide adequate funding to maintain and repair these developments. In the past 15 years alone, about 200,000 units have been torn down. Only about 50,000 of those units have been, or are planned to be, replaced. After years of neglect, the nation’s remaining public housing projects now need $20 to $30 billion of critical repairs. Current subsidies aren’t enough to pay for decades of deferred maintenance.

The best solution would be for Congress to simply allocate the funding for a one-time infusion to make long-neglected repairs. But because there are so few people who live in public housing, and because they are not well organized, Congress has little incentive to do so.

So HUD Secretary Shaun Donovan, who has spent his career improving housing for the poor, has proposed that local housing authorities be permitted to borrow money from private lenders to help fill the funding gap. Some tenant groups and their allies worry that, if PETRA passes, private lenders will care more about the bottom line than about tenants’ needs, and put their lives, and their housing, at risk. They worry, too, that private investors might be careless stewards of this valuable housing resource. As one public housing tenant activist testified to Congress in May: “Make no mistake, the private market’s only motivation here is profit, and let us not forget that this is the same private market that just crashed our economy, took billions in taxpayer funded bailouts, and aren’t fixing the mess they created.”

A Shelterforce ad seeking donations from readers. On the left there's a photo of a person wearing a red shirt that reads "Because the Rent Can't Wait."

Given public housing’s history, these concerns are understandable. But given the political and fiscal realities, what’s needed is a way to allow local housing authorities to borrow private funding while maintaining ownership and control of the developments, and protecting the rights of current and future tenants to decent, affordable, well-maintained housing. As the National Low-Income Housing Coalition stated in its Congressional testimony: “Private resources could be public housing’s savior or its greatest enemy.”

Improvements Needed

Secretary Donovan needs to do a better job than he did in recent testimony before Congress to address concerns raised by tenants and their supporters.

For example, the legislation contains no cap on the interest rate that lenders can charge housing authorities and allows local housing authorities to charge, with HUD’s permission, rents that are 10 percent over market rate if it’s deemed necessary to attract private loans. There’s no way for HUD to guarantee that local public housing authorities will be able to repay the loans, and if they don’t, what’s to stop private lenders from foreclosing on the developments? Some critics warn that once banks take possession of these projects, they could allow the housing to further deteriorate, or sell them off to private developers for market rate housing, especially in cities where they are located in gentrifying neighborhoods.

The bill does specify that even in the event of a foreclosure, the units have to remain affordable to low-income renters for at least 30 years. Indeed, the current proposal requires that all the public housing repaired under PETRA be affordable to the poor for another 30 years. But the genius of public housing was to provide a permanently affordable stock of noncommercial housing. The nation has already lost hundreds of thousands of privately-owned, government-subsidized housing because the low-income “use restrictions” expired after 20 years. Let’s not make that mistake again. When taxpayers’ dollars build or repair public housing, those units should be available “in perpetuity” for the nation’s poor.

Although Donovan insists that the local housing agencies will retain both ownership and control of the public housing projects, his proposal allows HUD to waive this obligation. While the Obama administration may never exercise this option, the legislation needs to lock in public ownership so that subsequent administrations don’t put public housing on the auction block.

Moreover, HUD should not paint all public housing with the same brush. Only developments that really need repairs should be allowed to participate in PETRA. HUD needs an updated assessment of the physical condition, and cost of repairs, of every public housing development in the country.

According to Donovan, PETRA preserves and even strengthens tenants’ rights against rent increases and unfair evictions — and gives tenants groups an unprecedented right to organize and have a much stronger voice in the day-to-day operations of their developments. Even so, HUD needs to make sure that the next generation of public housing managers — whether they are on the government payroll or hired by local housing authorities — are experienced, qualified, and respectful of tenant organizing. Perhaps what’s needed is a landlord-tenant counterpart to the National Labor Relations Act, giving tenants the right to organize and negotiate collectively with management.

Donovan’s plan requires local housing authorities to give tenants the right to return if they have to temporarily vacate their apartments so they can undergo extensive repairs, and to pay tenants for temporary housing and relocation back to public housing. This is an important protection. To make this work, HUD needs to require that local housing agencies keep track of those tenants and inform them of their right to return.

Donovan wants to allow working-class, even middle-class, families to rent public housing apartments to restore the original Depression-era vision of mixed-income housing and remove public housing’s stigma. This is the correct idea, but it should not be achieved at the expense of low-income tenants. Poor tenants who voluntarily choose to leave should receive housing vouchers so they can find and afford private housing, preferably in middle-class neighborhoods. For that to work, HUD needs to guarantee that there is either sufficient low-income rental housing or market-rate apartments whose landlords will accept HUD vouchers in those areas.

Still, tenant-based vouchers are not an adequate replacement for real units. HUD needs to toughen PETRA’s requirements for replacing low-income units lost and allocate money to make this happen.

Finally, PETRA should not be funded at the expense of other HUD programs, especially the expansion of the housing voucher program for families now living in private apartments that are too expensive or so run down that they put the tenants’ health and safety at risk.

A Rare Moment

Having a president, a HUD secretary, and a Congress who want to invest their political capital — as well as real money — in public housing at all is a rare moment. This may be the last chance for public housing advocates to make a difference, because many of the projects have already reached, or will soon reach, the tipping point when they are beyond repair.

Challenging the Obama administration to clarify and improve PETRA is a good strategy, but challengers should be pushing for what the radical Michael Harrington called the “left wing of the possible.” This is no time for progressive housing activists and advocates to waste time on finger-pointing, name-calling, fear-mongering, or confusing most Republicans’ disdain for the poor and public housing with Obama’s willingness to find solutions that will preserve public housing for America’s neediest families.


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