History of US public housing: Part 6, the HOPE revolution
[Continued from the preceding Part 1, Part 2, Part 3, Part 4, and Part 5.]
“Can this man save public housing?” asked the Boston Globe, its cover image hinting at its hoped-for answer, and for four eventful years, Harry tried.
And failed.
Sorry, Harry; admirable try
Indeed, for public housing, the pair of decades of the Eighties and Nineties are one long dreary blur. The inventory was in a systemically impossible situation of adverse selection:
Of capital planning. I’ve previously written at length of the crippling financial dependency imposed on public housing by operating subsidy and modernization funds. As I wrote in that post:
Public housing in the
1. Public ownership. Direct public ownership of the housing.
2. Local ownership. Even if funded from
3. Up-front grants, grant-based funding of all capital costs, therefore no debt.
4. Cheap rents, set at the cost of operations.
Later, when it became clear that the poorest of the poor could not afford even the cheap rents, two more planks were added:
5. Means-tested rents, set at a percentage (initially 25%, today 30-32%) of each household’s income.
6. Federal operating subsidy to bring Net Operating Income back up to zero.
Later still, realizing that zero NOI also precludes capital improvements, HUD added the concept of modernization funds.
For the last forty years, these six elements have formed public housing’s operating paradigm. They are interconnected — if one is housing those who cannot afford even the cost of operations, then one must provide an operating subsidy. Similarly, if the Federal government was going to build and pay for the housing, ran the thinking, it needed to be affordable indefinitely. Not only would there be direct public ownership, the housing authorities would need to be prevented from mortgaging their patrimony.
Each housing authority, as a condition of receiving its funding, signed a declaration of trust — or, in Massachusetts state-funded properties, a Contract for Financial Assistance (CFA) — that encumbers the property comprehensively.
Public housing never could do forward capital planning, because it could never finance its Net Operating Income (NOI), because it never had any NOI. Living hand-in-mouth slowly kills real estate. It did so here.
Of political accountability. Public housing has always been locally administered – but it has always been remotely funded. When one party has operating responsibility and the other party has financial responsibility, like the deadbeat dadfinger-pointing is inevitable – and when that happens, the child in between suffers. With localities able to blame Washington for not funding, and Washington able to blame localities for sloth and corruption, it was easy for each to blame instead of do.
Of political resources. With the rise of public-private programs – Section 221d3 and 236, UDAG and HoDAG and CDBG and HOME, Section 8, the Low Income Housing Tax Credit – most of the political energy around affordable rental went to public-private initiatives and new production. No one in Congress stepped up as the zealous champion to make the reform of public housing his or her crusade over all others. Nobody wanted to tackle the problem – it was too big, too complicated, too politically risky.
Of reform ideas. Unfortunately for public housing, between roughly 1981 and the present day, we have had non-laminar legislative environments, where the Administration and Congress have always been controlled by opposing parties. Non-laminar environment feature political distrust, which leads to over-engineered and over-specified legislation. During the Reagan Era, people like Barney
The rule backfired. Lacking any funds to create new public housing, authorities were unable to demolish decrepit and dangerous structures, unable to de-densify massively overcrowded sites, unable to conduct any financial triage. Forced to feed all apartments, all starved.
Cabrini Green, Chicago, before it was torn down
Of reformist initiatives. These two decades have been discouraging for their lack of public housing intellectual innovation. (Any potential champions would also have been deferred by a speak-no-evil code of silence among public housing experts. Even today, it’s very hard to get a room full of the nation’s public housing leaders to admit that their properties are failing; instead they bemoan HUD’s intransigence and talk wistfully about how full funding of Operating Subsidy would make everything right. It wouldn’t, and the industry’s unwillingness to state that their task is impossible saps any political energy that might otherwise arise.)
Of maintenance. If you can’t pay for everything, the thing you stop paying first is upgrading and preventive maintenance. (The last thing you stop paying is your own administrative fees.) Slowly, slowly, the property atrophies.
Of residents. Both out of mission (helping “the poorest of the poor”) or adverse selection (those who could live elsewhere, did live elsewhere), public housing shifted from being the affordable urban alternative to “the housing of last resort.” That destroyed market competitiveness, and basically eliminated income mixing (with the exception of a few pockets, like
The BHA’s John Murphy, having presided over tenant selection for a quarter century, remains among those who consider this willingness to house the least-advantaged to be a public duty. “What it means is that we don’t really select who we want to live in our units. We can only reject people because they don’t meet the eligibility criteria for one reason or another, whereas [private] landlords, and particularly subsidized landlords, can look at five families and say ‘Well, this one has a minor problem there, and that one has a minor problem there, so we’ll select number four.’ Public housing is base on rejection. If we can’t find a reason not to allow you to move in, then you’ve got to be housed.” Page 369.
Never mind Mr. Murphy’s misapprehension of affordable resident selection procedures; his quote captures the quintessence of willing adverse selection of residents.
Of administrators. Administered locally as it is, public housing is directly or indirectly controlled by the mayor. The opportunities for patronage – both in resident selection and in choosing whom to hire for the many jobs entailed in a housing authority – are immense and perpetual. Small wonder that authority after authority has been accused of being overstaffed with the mayor’s political friends, or used as a convenient political perk for campaign contributors, senior officials who need to be moved laterally out of the public eye, or loyal aides looking for a comfortable job. After all, how hard can it be?
[In 1975, Court-appointed BHA master Bob] Whittlesey regarded the BHA as a “second-rate business” staffed by “good, well-meaning people who had adapted to a system.” The Authority was not only “basically bankrupt” but riddled with “ineptness.” It was so racked by internal mistrust that senior-level personnel “wouldn’t even talk to one another.” An incompetent legal staff lost all its eviction cases ‘;so management wouldn’t bother to bring them any more.” The maintenance system was paralyzed by jurisdiction battles and union rules: carpenters couldn’t fix broken windows because they weren’t glaziers, while glaziers said they couldn’t put boards up because they weren’t carpenters. As Whittlesey saw it, “that’s the way the whole thing worked. It was never meant to be any kind of business.” Page 340.
No one’s responsibility?
A few years back, Harvard’s Graduate School of Design did an operating cost study, using FHA public-private properties as a comparison, and found a fountain of statistical evidence supporting the conclusion that public housing as an inventory costs more to run than comparable HUD property.
Though many of my friends in public housing will mount a spirited defense of their system, they long ago lost the political war. By the mid-1990s, under the leadership of unlikely champion Rick Lazio (R-NY), chair of the House Housing Subcommittee, the Republican Congress had had enough, and succeeded to enacting the Quality Housing and Work Responsibility Act (QHWRA, pronounced kwa-rah). During the fight, Chairman Lazio described his opposition in terms reminiscent of Harry Truman:
“a conspiracy between those people who don’t give a damn about the poor and those people who are perfectly satisfied maintaining the poor in the federal slums that have been built.” Page 383.
Harkening back to the Puritans’ never-answered question, QHWRA once again linked housing to work. In Puritans, Professor Vale devotes many hopeful pages to QHWRA, but as one who’s lived with it for more than a decade, QHWRA unfortunately signifies almost nothing. So endemic is the political and policy failure of public housing that for the last half-decade, the Administration, with nary a peep from Congress, has continuously, callously, and unconscionably cut public housing’s funding below even subsistence level, with what seems to me to be the logic that since you’re starving anyway, you’re too weak to resist if I steal some more of your food. You’ll do what you must to keep alive a little longer, and you’ll die on someone else’s watch.
Hang in there, public housing, I go off duty in a few months
More significant than QHWRA was the 1992 enactment of a public-housing revitalization program known as HOPE VI. Under HOPE VI, HUD provided massive grants to individual public housing properties that went through a transformation – usually complete demolition and rebuilding, with lower density – into mixed-income communities. To make this work, other than a handful of early adopters, all HOPE VI properties now use the full panoply of affordable housing resources, anchored by the Low Income Housing Tax Credit but usually also consuming large amounts of state’s tax-exempt bond volume cap.
HOPE VI was “worst first,” with the most severely troubled properties receiving funding. While understandable, this led to the perverse result that the money usually flowed to the worst properties … which were often owned by the least capable housing authorities. Such large, one-shot funding flowing through a deeply troubled housing authority meant protracted delays, political dogfights over the proposed uses of funds, and upwardly spiraling costs. Small wonder that the program has drawn fire continuously since its adoption – although ironically, for all the wrong reasons.
What made HOPE VI revolutionary was how, with the willing embrace of its housing-authority recipients, the program repudiated nearly all of public housing’s 1937 tenets:
* Privately owned, not public. HOPE VI properties were transferred out of public ownership into a single-purpose limited partnership.
* Operate to generate NOI. The deed of covenant preventing the owner from financing the property was canceled, and henceforth the property would operate just like any other independent owner.
* Private-public partnership, not governmental. While in theory a housing authority could be the sole redeveloper, in nearly all the cases, a private development company took the lead role – and had to, because the housing authority itself was neither professionally nor financially acceptable to the capital markets.
* Income mixing enforced. Deconcentrating poverty and creating a higher-income and mixed-income population were explicit goals, often reinforced by income-band quotas and underwritten with rent concessions and subsidy to make the numbers work.
To balance the income-mixing goal against the public-housing imperative, most often current residents were given a ‘right to return’ (provided they were lease-compliant). In practice, many HOPE VI properties were so decrepit (say, 30% occupied at the time of transfer) that less than a quarter of the post-renovation population consisted of those who live there before.
* Long-term financing from the capital markets.
In other words, all of the changes took away from the property what had made it uniquely public housing, and retrofitted it into a standard HUD/ LIHTC private-public partnership model. As I’ve previously written, HOPE VI was a complete subsidy portage, changing the entire physical configuration, the legal configuration, and the financial configuration, and keeping only the mission and some of the original residents.
Representative of HOPE VI is Professor Vale’s quoted example, Mission Main. [Full disclosure: As Recap, I worked with one of the two co-developers in building a financial model of the post-HOPE mixed-income NOI and feasibility.] Built in the 1940s in barracks-style parallel walkups with over thirty units to the acre,– appalling density for anything other than a high-rise, Mission Park’s 1,100 family apartments were reconfigured into 535 townhouses – half as many homes.
Complete with realigned streets and all-new site plumbing and environmental remediation of the soil,
Rather than a demonstration of the [Boston Housing Authority's] abilities to manage a public housing turnaround, the Authority now proposed that Mission Main be both redeveloped and managed by private-sector firms. Instead of a project-centered reinvestment, the BHA reconceptualized the Mission Main HOPE VI plan as a broader neighborhood revitalization strategy based on the development potential of the land, even including controversial plans for a land swap with a neighboring university, which the developer rejected. All the various changes soured the relationship between the BHA and the Mission Main tenants, yielding a protracted impasse. […]
(Asbestos from the buildings got into the soil, necessitating a very expensive removal – but that’s another story.)
The private management team (Winn/ Peabody/ Cruz) issued a marketing brochure called “Mission Main: A World of New Beginnings” that completely avoided the phrase public housing. … Three hundred households from the former Mission main project [that is, just about 25% of the original 1,100 public housing units – Ed.] were expected to return to the site, interspersed with households paying market rents of $1,400 per month for a two-bedroom unit. Slowly but surely, the sixty-year-old brick boxes of the old Mission Hill project gave way to a new streetscape of pastel townhouses. Page 373.
Mission Main specifically and HOPE VI generally were an industry-supported complete repudiation of the Roosevelt business model, in favor of the Mission-Entrepreneurial Entity model, with MEEs as the driver. Even as they represent the only new life breathed into the legacy-public-housing inventory, they also sounded a death knell for a way of doing business begun under
As I’ve previously written (in Public housing: the Ghost of Christmas Yet to Come, public housing must be comprehensively reinvented, because it is dying:
So it has been with public housing — the first species of government-assisted truly affordable housing, an inventory of over one million apartments that are in dire need of revitalization, not just of the physical property, but also of their ecosystemic environment.
Over time, public housing migrated to a customer base that cannot afford even the operating costs.
Although evolutionary pressures make no value judgment, they do have rules, and the law of economic gravity is catching up with the inventory. As so often happens, everything is breaking down all together. Someone has to point out the consequences:
He sat very close to his father’s side upon his little stool. Bob held his withered little hand in his, as if he loved the child, and wished to keep him by his side, and dreaded that he might be taken from him.
The problem is not the properties themselves, nor the authorities themselves, nor the subsidies themselves, but the interconnected and self-reinforcing Gordian knot of a system that is engineered to fail.
When a whole delivery system creaks and collapses, as I believe is occurring here, the only solution is root-and-branch change. Mere tweaking will not suffice. The systemic elements are interdependent: removing or dramatically modifying one part compels compensatory changes in other parts.
Confronted with the endless Gordian knot, Alexander slashed through it with a stroke of his sword.
Problems are insoluble only if you accept unstated conditions. For too long, public housing has meekly accepted an intellectual servitude whereby housing authorities are presumed unable to manage their own financial and operational decisions — unworthy, in HUD’s eyes, to be treated like owners.
A housing authority’s essential functions – everything else is technical
It’s time for housing authorities to think like owners, to act like owners, and to be given the powers and responsibilities of owners.
The need will not vanish. The inventory will not vanish. The policy imperative will not vanish. We need to find the essential housing authority:
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