Just Say No to NYCHA Privatization

Julián Castro, the United States Secretary of Housing and Urban Development (HUD) between 2014 and 2017, declared his presidential candidacy for 2020 on January 12, joining a rapidly growing field of indistinguishable centrist losers who’ll spend the next two years masquerading as bold progressives. His speech made use of Obama-style platitudes (“Brainpower is the new currency of success!”) while highlighting a campaign platform that included “universal” healthcare (not “single-payer”) and “affordable” college (not “free”).

HUD’s signature innovation under President Obama was Rental Assistance Demonstration (RAD), a program intended to facilitate the redevelopment of public housing in partnership with private investors. Unlike the Clinton-era scheme HOPE VI – which demolished high-rise projects and rebuilt them as mixed-income, privately managed New Urbanist communities, with drastic reductions in their numbers of affordable units – RAD seeks to preserve existing housing stock by tapping private capital to pay for the rehabilitation of buildings whose upkeep has become too costly for underfunded public housing authorities (PHAs).

Under RAD, by converting public housing to Section 8 (which directs HUD subsidies to private landlords in exchange for reduced rents for low-income renters), PHAs replace fluctuating federal allocations of capital funds with guaranteed revenue streams against which developers, in many cases attracted by tax credits, can borrow from private lenders in order to bankroll renovations by relatively inexpensive, non-union contractors. RAD authorizes PHAs to lease or transfer ownership of their properties to private entities, which, however, are mandated in either case to afford tenants “many of the resident processes and rights available under public housing, such as the ability to request a grievance process and the timelines for termination notification,” in addition to providing funds for tenant participation activities, per HUD.

Legally, RAD prohibits eligibility re-screenings of public housing tenants, all of whom must be “grandfathered in” after a RAD conversion. If a developer’s repair plan necessitates the temporary displacement of residents, they are officially guaranteed the right of return.

The National Housing Law Project (NHLP), a legal advocacy center in San Francisco, asserts, however, that developers often ignore these regulations: “RAD tenants are routinely re-screened at the time of conversion for income, criminal history, credit, and other requirements,” which “has resulted in evictions and monetary buy-out packages that force tenants to move from the property” after RAD conversion. NHLP also reports that owners of RAD properties have in many instances “explicitly impeded or prohibited tenant organizing efforts” (which are protected by federal law) by preventing the distribution of leaflets, disrupting meetings and elections, threatening “to have non-tenant tenant organizers arrested for organizing tenants,” and refusing to distribute mandated funding to tenants associations.

PHAs typically sell RAD to public housing tenants on the basis of two promises, neither of which is completely true: first, that RAD won’t lower the number of units for low-income tenants on any converted property, and second, that RAD won’t cause rents to go up. RAD loosely purports to embrace both of these principles, but the fine print makes room for a few exceptions. First, it allows for a “de minimis” reduction of five percent of the total units in the development (with a cap of five units for large developments). After that, any eliminated unit is required to have sat vacant for two years at the time of the RAD application or, by its elimination, to benefit “assisted households” through “facilitating social service delivery (e.g., converting a basement unit into community space).” Efficiency units may also be reconfigured into a smaller number of one-bedrooms.

Most public housing tenants in the United States pay rent equivalent to 30 percent of their income, and the same is true of RAD tenants. But thanks to provisions that ensure that even the maximum rents in public housing remain relatively low, many residents with higher incomes pay a flat rent instead – that is, if the flat rent designated by the PHA (in accordance with HUD regulations) is less than 30 percent of their income. RAD does away with the flat rent, and for those who used to pay it, the “new rent will be phased in over a few years,” by HUD’s account.

According to a 2018 report by the United States Government Accountability Office (GAO), which confirmed the NHLP’s allegations, “HUD has not yet developed procedures to monitor RAD projects for risks to long-term affordability of units, including default or foreclosure” on debt-financed properties. Despite these problems, NHLP “support[s] the goal of the RAD program to preserve affordable housing” and urges greater oversight and tighter regulations rather than an abandonment of the program.

Until 2016, NYCHA resisted the siren song of RAD despite the inducements of HUD secretary Ben Carson, who has authorized the conversion of 455,000 units under the program, which Castro had capped at 185,000. But following the press’s dazzled reaction to RAD renovations at Ocean Bay in Far Rockaway (Bloomberg News: “As NYC Public Housing Tenants Suffer, a Glimmer of Hope Emerges”), Mayor de Blasio announced NYCHA’s intention late last year to use RAD to rehabilitate 62,000 homes by leasing a third of its properties to private developers, while retaining half ownership of the buildings and full ownership of the land. In reality, FEMA’s contribution of Hurricane Sandy recovery money had funded a larger share of Ocean Bay’s improvements than the private developers had.

Following multiple scandals, NYCHA remains mired in ignominy, and as de Blasio scrambles to come up with a plan to avoid a federal takeover, even more RAD – along with the sale of NYCHA’s air rights and the construction of market-rate housing on its open space – seems inevitable. When de Blasio promised “brand new everything” at NYCHA in his State of the City address last month, this was what he was talking about.

So far, no plan to privatize the Red Hook Houses has emerged, which may owe to the tremendous scope of the complex’s needs. Despite’s RAD’s conception as a program to finance repairs in those dire cases where a PHA’s budget presents no match for a public housing development’s level of deterioration, the buildings that private companies find most attractive are the ones that need the least work, and PHAs have used RAD to offload properties in perfectly good shape, a practice that HUD has okayed. GAO found that about a third of accepted RAD applications don’t include a plan for new construction or rehabilitation.

Many of RAD’s problems could be fixed by better implementation. But calls for reform miss the more essential point, which is that RAD is stupid, and it shouldn’t exist in any form.

It may be worth stating the very basic fact that the provision of decent, well-maintained housing for the poor is not a financially profitable endeavor. It never has been, and it never will be. The involvement of the private sector in this task is, at bottom, incoherent. The only advantage it has over NYCHA – as even most RAD proponents are aware – is that, given the right incentives, it can access the money needed to pay for NYCHA’s capital improvements, and right now, NYCHA can’t. But in the long run, the taxpayers will have to pay investors back for fronting the costs of public housing repairs – plus a little extra for their trouble, or else they wouldn’t have any reason to invest. Why don’t we just do it ourselves?

The problem, as usual, is political will. Liberals and conservatives alike have given up on public housing, and it’s not because our country can’t afford it. We allow our elected officials to spend $700 billion on the Department of Defense and $40 billion on HUD. It’s a choice. We could make a different choice if we wanted to.

Ironically, NYCHA has embraced privatization at a moment when the need for the decommodification of housing should be clearer than ever. The popularity of Medicare-for-All shows that Americans have finally come to understand that capitalist markets don’t always do an adequate job of producing or distributing essential goods and services, and that certain basic needs can’t be met by invoking the profit motive. If housing is a human right, then housing must be guaranteed to all, and only government can guarantee it.

As gentrification threatens to push all but the wealthy out of America’s cities, we should be looking to expand public ownership of urban real estate, not decrease it. Left to their own devices, private developers will spit out luxury condos until the end of time. In the narrowed imaginations of our subservient political leaders, the only recourse is to offer these developers tax credits, subsidies, and upzonings in exchange for some small quantity of housing for the poor, the working class, and the middle class, at the edges of their skyscrapers for the rich.

It’ll never be enough. The fundamental challenge ahead is not financial but ideological: we have to realize that we don’t need private developers. And while we’re at it, let’s please not vote for Julián Castro.