Affordable Housing Institute : US

Cuts in public housing operating subsidy are starting to bite hard, and as this New York Times story reports, the New York City Housing Authority (NYCHA) is taking steps it would rather not have to take:

 

The New York City Housing Authority, landlord to more than 400,000 poor New Yorkers, is facing a budget shortfall of $168 million and has proposed narrowing the gap by charging residents new fees and increasing old ones for everything from owning a dishwasher to getting a toilet unclogged.

 

 

More alarming than the absolute dollar amount is its scale: NYCHA’s operating budget is just over $1.6 billion (.pdf slide 6), so the operating losses are 10% of expenses. 

 

New York’s Housing Authority, the largest in the country, operates 345 developments around the city, including nearly 2,700 buildings and 181,000 apartments. Half of its operating income comes from its federal subsidy; most of the rest comes from rent from its tenants.

 

The downward trend is not easy to reverse, the more so because NYCHA has already been covering very substantial operating losses heretofore:

 

Since 2001, the agency says, it has spent $357 million from its reserves to close repeated budget gaps; this year, for the first time, it no longer has enough reserves to cover the shortfall.

 

So it has proposed charging tenants $5.75 a month to run a washing machine, $5 a month to operate a dishwasher, $10 a month for a separate freezer. Parking fees will rise to $75 from $5 a year on April 1.

 

To put that in context, the average family has lived in NYCHA housing for 19 years, has a household income of $18,940 (roughly 27% of New York City’s $71,000 median family income), and pays $342 monthly in rent.  [Probably net of utility allowances. -- Ed.]

 

The authority says most of the “utility surcharges” on appliances have long been in place and have not risen in more than a decade.

 

Because people value only what they pay for, the fees are probably long overdue:

 

Tenants say few fees were ever imposed. “Only in extreme cases where a door was bullet riddled or somebody kicked the front entrance door and it was not based on wear and tear,” said Gerri Lamb, the citywide chairwoman of the Resident Council of Presidents, a tenant group. “And certainly not this amount of money. I’ve been in public housing over 35 years and there’s never been a set listing of charges that was given to the residents.”

 

These changes are more a symbolic wakeup call and less an economic solution:

 

“It’s the thought that counts”

 

The tenant fees are expected to generate about $1.5 million in revenue.  

 

That’s less than one percent of the shortfall, so …

 

The Housing Authority board has asked its senior staff to come up with a plan to balance the budget while preserving basic services, minimizing the impact on the most vulnerable residents and finding what the board called “creative ways to streamline service delivery.” The authority has also appealed to federal and city officials for help.

 

“We’ve got a committee working on it non-stop.”

 

The authority is caught in a classic squeeze, with expenses up:

 

According to the agency, expenses have skyrocketed.  Contributions to its employees’ pension fund increased by 866%, to $62.6 million, between 2001 and 2005, in part because of market fluctuations and new state laws, a problem faced by scores of government agencies. Further, utility costs rose by 45%, health care costs by 42% and workers’ compensation by 39%.

 

Revenues down:

 

At the same time, authority officials say, the federal operating subsidy for public housing nationwide has remained flat, and the authority’s federal operating subsidy has shrunk by $14 million. The agency is also responsible for 21,000 apartments formerly subsidized by the city and the state that no longer get any subsidy.

 

“Look, it’s not my problem, talk to my dad.”

 

People value only what they pay for.

 

“The chickens are coming home to roost,” said Representative Jerrold L. Nadler of Manhattan, who added that the federal government was taking less responsibility for public housing. “The Housing Authority has, by one ingenious means or another, been holding it together with spit and baling wire. This could be really devastating.”

 

Not right away, Mr. Nadler.  What’s more likely? 

 

 

Like a spinning top losing its momentum, a property does not so much collapse as spiral down:

 

1. Property loses money. 
2. Owner starts deferring maintenance.  “That refrigerator can go another year.”
3. Buildings look shabby or tired.  No one thing stands out, but the atmosphere is downbeat.
4. Apartments get harder to rent.  NYCHA will have some insulation, but less than it might like. 
5. Landlords lower their credit standards, because they have fewer families from which to choose.
6. Some new tenants wear the property harder.
7. Other tenants move out because they find the complex less pleasant living.
8. Operating losses increase.  And return to Step 1.

 

The problem is this death spiral starts slowly, and by the time it becomes seriously visible, it is very expensive to correct.

 

“Where do we start?”

 

Even worse for housing affordability, what is happening to New York is happening all over the country:

 

Continuing cost cuts are likely to have a profound effect around the country, with the nation’s 1.2 million units of public housing in danger of deteriorating, housing experts fear.

 

Who’s next?

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