Revitalize to privatize?
Critics say Obama’s public housing plan needs rewiring
In the past 15 years, more than 150,000 units of publicly owned low-income housing have been torn down across the United States. Most of the remaining 1.2 million units, built in the ’50s and ’60s, are sorely in need of repairs, something the Obama Administration has proposed fixing by letting housing authorities borrow money from private banks.
The idea has raised hackles among public-housing tenants who say that, far from saving the nation’s low-income units in the long run, Obama’s fix would subject government-owned properties to foreclosure and put 30-year “use agreements” on public housing that would lead to mass sell-offs when they expire.
The plan is in legislation called the Preservation, Enhancement and Transformation of Rental Assistance Act (PETRA) of 2010, a $350 million proposal that the Department of Housing and Urban Development (HUD) introduced in Congress last month. PETRA would allow public housing authorities to do something they cannot do now: mortgage or take out private loans on public property.
The money would be used to start fixing an estimated national backlog of $20 billion to $30 billion in repairs that has grown over time due to federal underfunding and will, HUD said, only lead to more demolition if left unchecked.
PETRA would allow owners of public or private HUD subsidized housing to do something else that worries tenants: raise their rent levels, on paper, to market rate, and in some cases, 10 percent more than market rate. Tenants would still pay only 30 percent of their income in rent under the proposal, but the federal government would make up the rest in increased subsidies to a building to generate enough cash flow to attract loans, as long as Congress keeps funding PETRA.
The legislation also puts no cap on how much interest a bank can charge.
“It’s going to mean a necessary increase in HUD subsidies,” said Rick Harrison, one of two Seattle Housing Authority tenants invited to give HUD input on the bill in Washington, D.C., earlier this year. “If down the road, they lose their subsidies or there’s a cutback in them and they’ve borrowed money based on the higher income, they’re going to be a world of hurt.”
In a hearing before the House Financial Services Committee on May 25, Chairman Barney Frank and Rep. Maxine Waters grilled HUD Secretary Shaun Donovan about the possibility of privatization. But even in foreclosure, David Lipsetz, a HUD senior policy advisor, said June 18 in a phone conference with housing advocates in Seattle, D.C. and New York, that PETRA’s 30-year use agreements would ensure the number of units and rent remain the same if a private owner were to acquire a bankrupt property.
In the here and now, said Linda Couch, deputy director of the National Low Income Housing Coalition, (NLIHC) there is nothing to stop the continued hemorrhaging of public housing, which is one reason the coalition is working to make changes in the bill. The bill is expected to undergo major revisions before Frank’s committee takes it up again, she said. The NLIHC and the National Alliance of HUD Tenants want to see a requirement that repairs be made to the buildings borrowed against, which is something that is not in the bill now, Couch said. They also want a guarantee of permanent affordability. And, “We believe there should be no use agreement whatsoever in the PETRA bill,” said Judy Montanez, a board member with the HUD tenant group.
For public housing authorities, whose mission it is to provide low income rentals, the privatization issue is “a bit of a red herring,” said Bob Watson, deputy director of the King County Housing Authority (KCHA). Most lenders, he said, don’t want to foreclose on properties with covenants.
If Congress approves the $ 350 million in funding for phase one of PETRA, Lipsetz said the new subsidies should facilitate loans and upgrades for 280,000 units in fiscal year 2011.
Few of them would be in Seattle. HUD considers KCHA and the Seattle Housing Authority high-performing agencies that are allowed to sell tax credits to private investors. As a result, SHA has already redeveloped or refurbished most of its properties, entering them into private partnerships that relinquish ownership after 15 years.
“It’s going to mean a necessary increase in HUD subsidies,” said local tenant Rick Harrison, but if housing authorities “they lose their subsidies or there’s a cutback… they’re going to be a world of hurt.”
Originally published by Real Change. © www.streetnewsservice.org