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Private Developers Will Soon Maintain 62,000 NYCHA Apartments

Inside the apartment of a tenant at the Andrew Jackson Houses in the Bronx
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Inside the apartment of a tenant at the Andrew Jackson Houses in the Bronx Kevin P. Coughlin / Office of Governor Andrew M. Cuomo

Years of neglect and underfunding have left New York City’s public housing in a state of deep disrepair. Things have gotten so bad that in June, federal prosecutors excoriated the city for endangering residents by exposing them to mold and lead paint. On Wednesday, a federal judge rejected a settlement that would have installed a monitor to oversee the authority, believing it just didn’t go far enough. The city estimates it needs $32 billion to bring its 178,000 apartments to a state of good repair.

Now, according to the NY Times, City Hall is strongly considering an Obama-era federal housing program that allows Public Housing Authorities to turn public housing over to private landlords and convert them into Section 8 Housing.

The Rental Assistance Demonstration (known as "RAD"), which has been fervently embraced and expanded by the Ben Carson-led Department of Housing and Urban Development (HUD), allows private developers to use Section 8 funding to make desperately-needed repairs to public housing stock while being able to tap into private financing to fund it. This solution for public housing repairs shifts the funding burden for these apartments from an ever-dwindling amount of money to Public Housing Authorities set aside by the federal government to long-term Section 8 housing, which, by law, must be renewed whenever it expires. Section 8 limits rent to 30 percent of a tenant’s income.

“Section 8 housing is still funded by the federal government,” Kathie Soroka, who was senior counsel to the general counsel at HUD during the Obama administration and was highly involved in the creation of the RAD program, told Gothamist. Soroka is currently a counsel at Nixon Peabody in their Affordable Housing and Real Estate practice. “The rationale behind the program was the inability of the current structure of the public housing program to address the capital needs. If you were looking at the overall public housing stock and the patterns of congressional funding for the public housing program, we saw a loss of about 10,000 to 15,000 public housing programs every year because the capital funding over time was not able to keep up with the capital needs.”

Other cities that have struggled to maintain their public housing, including Chicago and San Francisco, have used RAD, where tenants no longer directly interact or pay their rent to a city agency — but rather a third party developer. The developers would also be responsible to provide services and maintenance for the tenants. According to the Times, the plan would cover 62,000 apartments, just over a third of the city’s public housing stock.

“Section 8 is one of the most successful programs providing thousands of people with housing across the city,” Councilman Ritchie Torres told the Times. “Developments that have been starved of resources for decades will have new roofs and new boilers.”

While this represents a massive expansion of the program, this isn’t the city’s first experience with RAD. In 2017, the city converted 1,397 units of the Ocean Bay Apartments in Far Rockaway to Section 8 housing, which is now under the management of the private developer Wavecrest Management. The conversion drummed up $560 million in repairs to the complex.

The planned expansion would generate at least $15 billion in renovations to public housing across the city, according to the Times.

In other cities where RAD has been implemented, tenants have complained about the level of oversight from HUD, and questioned whether developers are holding up their end of the bargain. ProPublica and The Southern Illinoisan just published an investigation today showing that HUD routinely gives passing grades to complexes that are infested with mold and vermin, and quotes a former HUD official under the Clinton and Obama administrations who says the oversight program is "pretty much a failure."

The plan also places more financial risk on public housing — the repairs would be partially paid for by mortgages taken out by dozens of different development companies. The very recent past paints an alarming picture of what happens when mortgages go bad in a hurry.

But Soroka believes that the risk to public housing is minimized by a series of protections built into the program which gives HUD final say over who would take over the property in the case of a foreclosure and designates its use for public housing, no matter what a developer decides to do.

“If there is a bust or foreclosure that underlying land still belongs to the housing authority,” Soroka told Gothamist. “They still have a seat at the table in terms of any kind of refinancing or workouts of that property.”

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