Budget crisis pushes housing authority toward privatization
Facing unprecedented cuts in federal aid that supports Cambridge public housing, the Cambridge Housing Authority is proposing a radical solution: privatization.
The authority wants to transfer more than 2,000 public housing units to private CHA-affiliated companies set up for this purpose. Then it could tap into more generous federal subsidies as well as money from private investors, the authority says in a draft plan for 2012.
Executive Director Gregory Russ assured tenants at a public hearing Thursday that the strategy won’t change “fundamental policies” that govern Cambridge public housing. “There will be no rent increases, and the same lease and tenant rights” in place now, Russ said.
“We see it primarily as a financing mechanism,” he said. The nonprofit private companies that take over “would be controlled by CHA but owned by outside investors,” Planning and Development Director Terry Dumas said.
“We would lock up these projects and make them affordable forever,” she said.
The City Council doesn’t have to approve the proposal; it’s City Manager Robert W. Healy who must sign off. Authority officials plan to brief councillors and will hold informational meetings at public housing developments before submitting the plan at the end of next month.
Of the councillors, Denise Simmons attended the Thursday hearing but did not speak. Henrietta Davis sent an aide to the hearing, and Majorie Decker has questioned authority officials about the plan.
Housing could crumble
Newtowne Court, the city’s first public housing project, was built by the federal government in the 1930s and turned over to the then 3-year-old housing authority in 1938. The city now has 1,374 units for families and 1,002 apartments for the elderly and disabled. In a community where private rents and real estate sales prices have soared, almost two-thirds of public housing tenants have incomes below 30 percent of the area median, or less than $28,900 for a family of four.
Without more aid, their housing could crumble, Russ said. The Obama administration cut public housing operating subsidies by $1 billion nationwide this year, forcing the authority to dip into its reserves, Russ said. “The concern is, you can use reserves, but sooner or later they run out,” he said.
On the maintenance side, most of the city’s housing developments are at least 30 years old and 11 were built in the 1940s and ‘50s. This year Congress allocated $1.9 billion for public housing capital projects nationwide, compared with $25.6 billion in needs, Russ said. The city has a backlog of $228 million in needed modernization.
“At this level the program cannot even keep up with maintenance needs,” he said. “This is the lowest since I’ve been in the business.”
Transferring the developments to private ownership qualifies tenants for federal rent subsidies that would be tied to each housing complex. Those subsidies would provide up to $990 per apartment per month, more than twice the average $450 a month per unit the authority currently gets in operating subsidies, authority officials said.
The authority could borrow against that income stream to bring in more money for sorely needed upgrades, Russ said. And with private ownership of the buildings, the authority could sell special tax credits to private investors, a common source of funds for developing and improving private low-income housing, officials said.
“No guarantee of vouchers”
The strategy may go nowhere. Federal officials must approve the authority’s bid to “dispose” of its housing stock to private entities, and must also okay enough rent subsidies to cover the units. Housing authorities across the country have jumped on the same idea. “Right now there are disposition applications pending for 10,000 to 12,000 units,” Russ said.
“If they approve [CHA’s disposition application] there is no guarantee of vouchers,” he said, referring to rent subsidies. “If we can’t get the vouchers we can’t do the deal.” But he didn’t say how big the voucher shortfall would have to be to kill the plan. Dumas said that the authority might keep ownership public for some developments if there aren’t enough rent subsidies.
Is there a downside to the strategy? Tenants at the hearing seemed more mystified than opposed, though some questioned whether the federal government would keep providing increased subsidies. “What if we lose the housing?” one tenant asked.
“We have the same risk with the current system,” Russ responded.
Ellen Shachter, senior attorney at Greater Boston Legal Services, which represents public housing tenant groups, said the authority’s strategy could indirectly hurt undocumented immigrants who live in state-financed public housing. The authority started federalizing its developments several years ago and might move the remaining state units, part of Jefferson Park, to federal control to reap the advantages of private ownership. Federal projects bar families where there are no legal immigrants.
Cambridge will be one of the few if not the only public housing system in Massachusetts closed to undocumented immigrant families if the authority federalizes the remaining units, Shachter said, while Somerville chose not to convert its state housing projects to federal control because of the impact on immigrant households.
The authority could afford to keep some projects state-financed, she said. Otherwise, “there will be immigrant families that will not be able to find any affordable housing through CHA.”
Dumas said the authority plans major redevelopment of state units at Jefferson Park but has not decided how to finance it. These units are not part of the plan for 2012, she said.
Shachter praised the authority for its expertise and determination to preserve the city’s housing projects, and she didn’t question its commitment to keep tenant protections intact.
Still, she said, “public housing is very closely regulated” compared with low-income private housing, and trying to replicate protections under a private regime could be difficult. “These are complicated legal questions,” Shachter said.