Public housing’s dependency trap: Part 2, the lawsuit
[Continued from yesterday’s Part 1.]
Yesterday we saw that public housing’s real estate is placed into a dependent position, with structural negative NOI as a consequence of its rent structure, and a complete inability to finance its capital requirements. That system means that the larger-body funder (here, the state) has a moral duty to cover the operating deficits. As the plaintiffs in BHA v. Massachusetts state in their complaint (numbers reference paragraph numbers in the complaint):
17. Recognizing this reality, the Massachusetts Legislature has mandated in Section 32 that “any deficiency in the budget of a housing authority caused by such reduced rental shall be paid by the Commonwealth to the local housing authority in an amount equal to the difference between the tenant’s rent and the prorated costs of operating that unit.” (Emphasis supplied.)
18. Section 32 also establishes that the revenues collected by the housing authorities, coupled with the subsidy just described, “will be sufficient” to allow the housing authorities to (1) pay the principal and interest on their bonds; (2) meet the costs of insurance; (3) provide for the maintenance, operation and use of their affordable housing projects; (4) satisfy administrative expenses; (5) create reserves designed to satisfy bond payments; and (6) provide tenant services. (Emphasis supplied.)
19. These statutory provisions establish that the Commonwealth has an explicit obligation to make up the shortfall between rents paid by tenants and the amount actually needed to operate public housing. Without this assistance, the housing authorities cannot meet their own statutory obligation to furnish decent, safe and sanitary housing to low-income residents of
(For a pdf copy of the 32-page complaint, email me at davidalexandersmith@yahoo.com.)
“Shall” is a key word. Does ’shall’ mean ‘regardless of other funding priorities’? Legally that’s tricky, as it represents an attempt to bind the sovereign:
Hard to bing a guy whose face is stamped on the coinage
22. To fulfill this statutory mandate, the Commonwealth, acting by and through the [Department of Housing and Community Development, successor to the Executive Office of Community Development], has entered into a series of “Contracts for Financial Assistance” (“CFAs”) with the housing authorities. These CFAs relate to specific low-income housing projects operated by the housing authorities and ordinarily remain in effect for a period of forty years.
Not to undermine the plaintiffs’ legal case, but I find nothing in the CFA as a contract that explicitly obligates the state to fund the request, nor does the CFA have any provisos governing what happens if the state fails to fund. Funding failure is, at least from the CFA’s perspective, unthinkable.
Indeed, so unthinkable is it that the Executive Office of Administration and Finance (EOAF) has recently reprogrammed its computers to reject real budgets if the deficits are larger than the Romney Administration’s arbitrary caps. In a bizarre world worthy of Kafka,
One day Gregor Samsa woke up and discovered he was an administrator
34. Rather, the EOAF requires the DHCD to submit proposed budgets that have specified caps unrelated to, and substantially less than, the actual costs associated with running the various low-income housing units run by the housing authorities.
With the same lordly simplicity of the
78. Some numbers in the template, including the operating deficit which represents the subsidy that the Commonwealth must pay to the housing authorities, are automatically calculated by the DHCD’s software program in accordance with other values entered.
“We control the income lines, we control the expense lines.”
79. These calculated sums are then mechanically transferred to appropriate areas of the budget, and cannot be over-ridden or changed by the user.
80. The DHCD’s computerized system is programmed to reject the completed budget if any line item entry exceeds an amount predetermined by the DHCD. Thus, the electronic system rejects proposed Budget Forms that deviate in any way from the procedures outlined in the Budget Guidelines.
81. For example, the system will reject the housing authorities’ proposed Budget Forms if the overall value for [the Annual Non-Utility Expense Level] exceeds the annual percentage increase set forth in the Budget Guidelines.
The authorities, long used to working with bureaucracies that treat any submission as an admission against interest, have sought to register their protest:
85. For example, in 2005, the BHA hand delivered its budget documents instead of fling them electronically, and crossed out the portion of the certification form that characterized the budget as establishing reasonable funding.
Mandating certification is a trick long used by HUD.
That same year, the CHA printed out and mailed its budget forms to the DHCD so that it could provide accurate budget numbers and refrain from signing the budget certification page. In both instances, the BHA and CHA sent a cover letter to the DHCD to explain their reasons for deviating from the electronic filing system and to communicate their displeasure with the overall budget submission process.
If the housing authorities’ pleadings are correct, EOAF has been aggressive in demanding compliance with its alternative reality:
86. Each time housing authorities have attempted to circumvent the electronic filing or certification requirements in order to submit accurate budget numbers, the DHCD has rejected the proposed budget and forced the housing authorities to re-file their Budget Forms and certification page through the electronic system.
87. When it rejects the Budget Forms, the DHCD also threatens to withhold funding, in part or in whole, if the housing authorities do not fully comply with the mandates set forth in the Budget Guidelines. Through these threats, the DHCD coerces the housing authorities into certifying and submitting budgets that do not contain accurate information.
“Are you ready to submit a budget we’ll accept?”
While I have no knowledge of the specifics here, such behavior by an imperious housing bureaucracy is in my experience quite common. The plaintiffs’ complaints ring true.
The squashed budgets must be funded elsewhere:
I’m sure you’ll find room somewhere
93. Since the CHA cannot ignore the mandatory property insurance expense, it has been forced to fund the net 271% increase in [property insurance] expense by shifting funds from other areas of the budget at the expense of other programs from which the funds were diverted.
94. Choices like the one described above create a domino effect, which effectively handcuffs the housing authorities’ management of their units, and leaves them with no way to proactively arrange for desperately needed repairs or replacements.
[Handcuffed by dominos? Block that metaphor!]
Are they handcuffed together?
Why is EOAF doing this? To hear the plaintiffs tell it, solely to balance the budget:
49. The process followed by the DHCD and EOAF completely subverts the budgetary procedure contemplated by statute and in the CFAs by making the housing authorities’ ANUEL value a foregone conclusion.
Regardless of why EOAF has adopted this posture, there can be no doubt it is bad policy, harmful to families, destructive to housing authorities and to their housing stock. A government cannot simultaneously run at a loss, strip an owner of all its financing options, and expect it to house the state’s poorest citizens. The authorities are absolutely right to have litigated:
Steve Young, an attorney at Holland & Knight who represents the three housing authorities, said they filed the suit as a last resort. “While we have been working with the DHCD in an effort to address these problems, and have made some progress, it has become clear that judicial intervention is the only way to resolve this problem,” Young said.
Making this even more ironic is that Governor Romney just appointed his spokesman to the board of the Brookline Housing Authority:
Even as the move drew sharp criticism, Governor Mitt Romney yesterday stood by his appointment of his spokesman, Eric Fehrnstrom, to the Brookline Housing Authority.
Will Fehrnstrom be happy to learn he’s suing his boss?
Former governor Michael S. Dukakis, a lifelong
“The real point is, this guy has never been involved in the civic life of the community and has absolutely no track record when it comes to affordable housing,” said the former Democratic governor. “This thing was made on the merits? How can that possibly be?”
Fehrnstrom scoffed at Dukakis’s remarks.
Does he look like he’s scoffing?
“Just because I don’t attend Democratic Town Committee meetings with Mike Dukakis doesn’t mean I’m not involved in my community,” he said.
“As the father of two young children, I’ve been active at many different levels, and my wife is a social worker with clients who live in subsidized housing in
“We’re well aware of the importance of keeping
Doubtless Mr. Fehrnstrom will be quick to appreciate the consequences of the state’s breaching its obligation, certainly moral and quite possibly legal, to fund public housing.
