#162 Summer 2010 — Public Housing Privatization

The Road to PETRA

From the early days of the public housing program in the 1930s to the present, vociferous opposition has resulted in a host of problems. Understanding the history can help put President Obama's PETRA program in context.

David Schalliol

The view from an apartment at Cabrini Green.

public housing: photo shows the view from an apartment at Cabrini Green

The view from an apartment at Cabrini Green. Photo by David Schalliol

The federal public housing program was created in 1937 as a response to the Great Depression. It grew out of desire to reduce unemployment through a labor-intensive public works program, coupled with a need for affordable housing for the “submerged middle class” — people who were temporarily out of work due to the seriously weakened economy.

Despite the promise of jobs, there were many organized opponents and, in fact, President Roosevelt had to be coaxed into supporting the legislation. Many of public housing’s current problems with capital funding and deferred maintenance can be traced back to early decisions about the program, many of which were a response to opponents’ views.

Public housing was seen from the beginning as a threat to the private low-cost rental housing market. Before its enactment, the president of the National Association of Real Estate Boards summarized the position of dissenters: “Housing should remain a matter of private enterprise and private ownership. It is contrary to the genius of the American people and the ideals they have established that government become landlord to its citizens” (quoted in Nathaniel Keith’s 1974 Politics and the Housing Crisis since 1930).

After a few years of operation, the public housing program was suspended during World War II. It was reactivated in 1949, along with the Congressional mandate that the country should strive to meet the goal of “a decent home and a suitable living environment for every American family.”

In the 1960s, as the oldest buildings were beginning to age and the early tenants were moving into market-rate accommodations, a new lower-income population began to populate public housing. Large numbers of white households were also being replaced by people of color. Both changes made the program easier to stigmatize.

By the 1970s, when the reputation of public housing was, arguably, at its lowest point, some observers of the program claimed: “Had the alternative been significantly superior, the occupants would have voted with their feet and done so willingly and openly, recording their dissatisfaction for all to see” (Eugene Meehan, 1975, Public Housing Policy: Myth versus Reality, p. 135). And yet others noted, “We have, in short, a paradox: nobody likes public housing except the people who live there and those who want to get in” (Alvin Rabushka and William G. Weissert, 1977, Caseworkers or Police? p. xvi).

These negative attitudes affected funding decisions, despite the best efforts of public housing advocates. As early as the 1960s, the problem of insufficient operating funds surfaced and an initial federal subsidy was authorized. In an effort to insulate tenants from having to make up operating cost shortfalls, Sen. Edward Brooke (R-Mass.) sponsored legislation that capped rents at 25 percent of income and provided additional operating subsidies. Over the years, Congress experimented with a number of mechanisms for providing operating funds, but funding has never been sufficient to meet the mounting needs.

A parallel story can be told about efforts to address the capital requirements of the public housing stock. One of the major reports on this topic was produced by the National Commission on Severely Distressed Public Housing in 1992. Its recommendations led to the creation of the HOPE VI program, which provided funding to rebuild some of the most problem-laden and deteriorated public housing developments in the country, transforming them into mixed income housing that is supposed to provide better physical and social connections with the surrounding community. One of the key criticisms of HOPE VI, however, has been that many former public housing residents have been displaced from their homes in the process and that there has been a net reduction in the number of public housing units.

Additional efforts to address the capital needs of the public housing stock were authorized by the Quality Housing and Work Responsibility Act of 1998, in which public housing authorities were given permission to borrow against future anticipated funding. In addition, that act allowed public housing authorities to enter into partnerships with for-profit and nonprofit developers and to access LIHTC and other state-based programs.

While the programs authorized under QHWRA and HOPE VI appear to be making a dent in the overall backlog, significant needs persist. Barbara Sard and Will Fischer estimated that, as of 2009, unmet capital needs totaled at least $22 billion. HUD currently puts the number at $20-30 billion.

Past Decisions — Present Problems

Along with a lack of political will, there are several historical reasons for public housing’s capital needs backlog.

First, the original public housing funding formula was unrealistic for long-term occupancy by low-income households. In that formula, the capital costs of constructing public housing were covered by the proceeds from bonds issued by local housing authorities. The federal government paid the principal and interest on these bonds, but tenants’ rents were expected to cover maintenance and repairs. When the buildings were relatively new and as incomes of the original tenants rose, the formula worked. But as buildings began to age and as a new group of lower income tenants moved in, the funding formula proved to be highly inadequate.

Decades of inadequate federal funding never made up for the problems caused by this original short-sighted formula.

A second contributor to the capital needs backlog was that the opposition by the private homebuilding industry limited where public housing got built and what it looked like. This, in turn, reduced the value of public housing, increased its stigma, and increased capital costs.

In community after community, vigorous campaigns were launched if a development was proposed in an area that might be attractive for private development. As a result, public housing developments were typically sited in the least desirable locales, such as former landfill sites or places inaccessible to public amenities and transportation.

Compounding the locational issue was the poor quality and unattractive design of the buildings. While the exteriors were usually sturdy, often brick, early public housing developments took architectural modernism to an extreme, resulting in unappealing buildings that were easily recognizable and specifically intended not to compete with private rental housing. Developments were often separated from existing street patterns, isolating the structures from their surroundings. Long hallways and the design of other public spaces proved unsafe and costly to monitor, with vandalism creating a need for recurrent repairs.

The interiors and various building systems were often the least expensive available. Over the long-term, subpar heating, windows, and plumbing systems have created higher costs as repairs were more frequent and serious than expected.

Looking Ahead at Public Housing

The criticisms of public housing notwithstanding, the program has managed to provide homes to tens of millions of families over the course of more than seven tumultuous decades. As an experiment in social housing, the U.S. public housing program has demonstrated the importance of creating well-designed buildings that are integrated with their surroundings, using high quality materials that promote long-term cost savings and efficiency, instituting competent management procedures, providing adequate funding for operations and capital replacements, and creating social programs for residents to enable them to attain economic security. Other federal housing programs have also taught us that if the private for-profit sector is involved, programs must be designed so that the needs of the low-income residents, particularly long-term affordability, are not compromised.

Although developing new public housing is no longer viewed as a public policy option in the United States, at the very least, securing the existing stock of public housing for future generations is essential. As we continue to work toward that goal, the lessons of the past are important to consider.


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