nyc public housing

8/11/2019 nyc public housing

1/32

StrengtheningNew York CitysPublic HousingDirections For Change

A Report by the Community Service Society

Victor Bach and Tom Waters

JULY

2014


2/32

About the Authors

Victor Bach has been Senior Housing Policy Analyst at theCommunity Service Society since 1983. He was a Research

Associate at the Brookings Institution and on the faculty ofthe New School for Social Research and the LBJ School ofPublic Affairs at the University of Texas, Austin. He holds aPh.D. in Urban Studies & Planning from M.I.T.

Tom Waters has been Housing Policy Analyst at theCommunity Service Society since 2005. Prior to joining CSS,Mr. Waters was at Tenants & Neighbors, an organization thatworks to preserve and improve the states existing stock ofaffordable housing. A graduate of Yale, he received his M.A.and is working towards a Ph.D. in Political Science from theCity University of New York Graduate Center.

The Community Service Society of New York (CSS) is aninformed, independent, and unwavering voice for positiveaction on behalf of more than 3 million low-income NewYorkers. CSS draws on a 170-year history of excellence inaddressing the root causes of economic disparity. We respondto urgent, contemporary challenges through applied research,advocacy, litigation, and innovative program models thatstrengthen and bene t all New Yorkers.

www.cssny.org

Layout by Random Embassy

2014 by the Community ServiceSociety of New York. All rights reserved.


3/32

Strengthening New York Citys Public Housing| 1

Table of ContentsIntroduction 2

The Deterioration of Living Conditions, 2001 to 2011 4Resident Concerns (CSS Unheard Third Survey) Resident-Reported Deciencies (NYC Housing & Vacancy Survey)

The Changing Financial Condition of NYCHA, 2001 to 2011 8Declining Federal Support

Declining State Support Declining City SupportAdded Burdens, Only Temporary Relief The Combined Impact of Government Disinvestment Rising Internal Operating Costs

Budget Stresses Hit Home: The Consequences 14Operating Decits

Depletion of Operating Reserves Loss of Capital Funds, Delayed Improvements

Headcount Losses

Directions for Change 17Funding Strategies

Community Development Options Greater Transparency and Accountability Strengthening Resident Organizations Governance: More Independence for the NYCHA Board

Appendix: Condition Deciencies, the NYC Housing & Vacancy Survey 28Endnotes 28


4/32

2 | Strengthening New York Citys Public Housing

Despite its track record, NYCHA has fallen into criticalcondition in recent years, marked by signi cant operatingde cits year after year and accelerating deterioration ofits housing infrastructure. Even before Superstorm Sandystruck in 2012, and the sequestration of the federalbudget took its toll in 2013, NYCHAs operating shortfallin 2011 was estimated at over $60 million. To makematters worse, it had a backlog of over $6 billion in neededmajor capital improvements to its aging buildings. 1

As this report con rms, sustained nancial pressures haveforced NYCHA into unusual gap-closing measures at leastsince 2001. The impact on resident living conditions hasbeen disastrous, spurring a mounting resident outcry aboutelevator breakdowns, perennial water leaks, untreatedmold, and the like. Long delays in getting repairs werecommonoften a year or two. 2

This year the New York City Housing Authority (NYCHA) celebrates an 80th

anniversary. Created in 1934 by Mayor Fiorello LaGuardia, before the 1937 fed

public housing program, NYCHA has long maintained a reputation as the natio

largest and one of its highest-performing housing authorities. With 179,000apartments across 334 developments, it is also the citys largest landlord. At

present it has the distinction of being one of the few large-city authorities to ret

its public housing inventory while otherslike Chicago, Atlanta, and Newark

embarked on massive demolition and conversion.


5/32


As part of Mayor Bill de Blasios ambitious housingagenda, a major challengenot yet fully addressedwill beto restore public housing to decent physical and nancialcondition, to make NYCHA whole again. Public housingis a prime affordable housing resource, comprising one outof every eleven rental apartments in the city, and one out ofevery six occupied by low-income New Yorkers. 3 Against abackdrop of long-term government disinvestment in publichousingby all levels of governmentit is likely to fall tothe city, where the impacts are most directly felt, to attemptto turn the crisis around.

Signs of the turn-around are emerging. In a major stepforward, Mayor de Blasios FY2015 budget ruptured astanding agreement under which NYCHA is required topay the city over $70 million annually for special policeservices, a burden that drains the Authority of limited,already inadequate operating subsidies it receives from theDepartment of Housing and Urban Development (HUD). 4 NYCHA will now retain these funds to invest in operationsand needed repairs. The Authoritys newly-appointedChair Shola Olatoye has embarked on engaging residentsin planning for the future, a process that has been woefullylacking in the recent past.

Whether this will be a relatively good year for NYCHAdepends on Washington. The Obama administrationsFY2015 budget restores public housing funding to full levels,which for NYCHA means a projected increase in operatingsubsidies from $783 million to $903 million. But theadministration has yet to reckon with Congress; the Houseof Representatives seems intent on tightening appropriations.Even with full federal funding under the presidents budgetand relief from police payments this year, last MarchNYCHA projected an operating de cit of $69 million in itspublic housing general fund this year. 5

Chronic federal starvation funding for public housing is atthe root of NYCHAs hard times since 2001. But the stateand the city have also contributed heavily by withdrawingoperating support from the 21 NYCHA developments they

nanced, containing 20,200 units, which are ineligible forfederal operating subsidies to help cover the gap betweenrent receipts and the cost of operations.

The gravity of the situationwhether NYCHA can againprovide minimally decent housing and become nancially

solventcannot be overstated. Continuing decline or,alternatively, the conversion or loss of the inventory, areinconceivable given public housings role as a primary housingresource in this city. Such an outcome would be disastrous,not only for residents, or for hundreds of thousands ofhouseholds on the waiting list, but for the city as a whole.

A well-wrought preservation plan is needed to restoreNYCHA communities to decent condition, assure theAuthority the resources it needs to upgrade and sustainits housing, and strengthen its communities. Toward thatend, this report is an assessment of the factors that overa critical decadefrom 2001 to 2011have marked andcontributed to NYCHAs decline. Based on that assessment,recommendations are put forward to help stem the decline,prevent a recurrence, and assure a positive future for thecitys public housing.

Chronic federal starvationfunding for public housing is atthe root of NYCHAs hard times

since 2001. But the state andthe city have also contributedheavily by withdrawing operatingsupport from their developments.


6/32


[ R E S I D E N T V O I C E S ]

Its time to hold NYCHAaccountable for a lot

of things. But letsstart with xing brokenlobby doors in twodays, not two months.

DeReese Huff Resident Association President

Campos Plaza, Manhattan

The Deterioration ofLiving Conditions,2001 to 2011Dilapidated conditions in NYCHA developments have mademedia headlines in recent years, but the evidence for theseconditions goes beyond anecdotes or sensational headlines.Two random-sample surveys demonstrate how far NYCHAconditions have deteriorated, particularly when comparedto those experienced by low-income tenants in the privaterental market.

Resident Concerns(The CSS Unheard Third Survey)

Every year, the Community Service Society (CSS) conductsits Unheard Third survey of low-income New Yorkers.During the summer of 2012, respondents were asked: Tellme which one of these personally worry you the most?Housing, healthcare, jobs, crime, schools, retirement, andother concerns were listed. The top concerns registeredby NYCHA residents and by low-income tenants in otherrentals are summarized as follows:


7/32


TOP PERSONAL W ORRIES,BY RESIDENT GROUP, 2012

LOW-INCOME RENTERS

NYCHA Residents Subsidized Rentals Private Rentals

Housing (21%) Healthcare (17%) Schools (17%)Jobs (15%) Jobs (15%) Jobs (16%)

Retirement (13%) Crime (15%) Healthcare (16%)

Healthcare (10%) Schools (14%) Crime (12%)

Schools (10%) Housing (12%) Housing (11%)

Crime (10%) Retirement (12%) Retirement (10%)

Strikingly, low-income renters outside of public housingregistered a range of top concerns, including schools,healthcare, jobs, and housing. But for NYCHA residentsthe primary concern was housing, outdistancing all otherconcerns, even crime or safety issues.

That NYCHA residents worried more about their housing,particularly compared to low-income tenants in privaterentals, is puzzling. Public housing residents are, in a sense,the lottery winners, as the long waiting list for NYCHAapartments attests. Unlike rents in the private market,NYCHA rents are guaranteed under federal law to beaffordable, no more than 30 percent of household income.In 2011, low-income renters in private, unassisted rentalscarried a median rent burden of 49 percent of income; nearlyhalf (49%) paid at least half their income toward rent. 6

Additional survey responses shed some light on whyhousing concerns pre-occupied NYCHA residents. Over athird (34%) considered heating, leaks, or major repairsa serious problem, compared to 17 percent of low-incometenants in private rentals. Properly working elevators, doorlocks, buzzers, or intercoms were a serious concern for 38percent of NYCHA residents, against 14 percent for low-income tenants elsewhere. In just a few questions, the surveyresponses pointed to a surprisingly higher incidence ofde cient conditions being experienced by NYCHA residents.By 2012, it had reached a point that their housing hadbecome an overriding concern.

Resident-Reported Deciencies, 2002 to 2011(NYC Housing & Vacancy Surveys)

A more systematic analysis of NYCHA living conditionsis possible using data from the triennial NYC Housingand Vacancy Survey (HVS). The HVS asks respondents toreport on the occurrence of seven speci c de ciencies intheir apartments. 7 (See Appendix for the list.) On that basis,it calculates an index of the total number of de cienciesreported by each household. The following two charts trackthe trends in reported de ciencies from 2002 through 2011for three groups of tenants: NYCHA residents, low-incometenants in subsidized/assisted rentals, and low-incometenants in private, unassisted rentals. 8

Over the decade, the proportion of NYCHA residentsreporting three or more de ciencies dramatically increasedfrom 20 to 34 percent of households. In comparison, duringthe same period, de ciency reports by low-income tenantselsewhere, in both assisted and private rentals, had beencomparable to NYCHA rates in 2002, and they remainedrelatively stable through 2011. No doubt, there is a widevariation in living conditions in any one of these sectors,depending on how conscientious owners and managers are.But, as a whole, NYCHA apartments underwent a rapidspread of deterioration that was unmatched in the other

NYCHA SUBSIDIZED PRIVATE

35

30

25

20

15

CHART 1:HOUSEHOLDS REPORTING 3 ORMORE DEFICIEN CIES, BY RENTAL SECTOR,

2002 TO 2011 HVS

2002 2005 2008 2011

P E R

C E N T

O F H

O U

S E H

O L D

S


8/32


RODENTS WATERLEAK

CRACKEDWALL

HEATINGBREAKDOWNS

SEVEREPLASTER

40

35

30

25

20

15

10

2002 2005 2008 2011

P E R C E N T

O F H

O U

S E H

O L D

S

CHART 3:NYCHA HOUSEHOLDSREPORTING SELECTED DEFICIENCIES,

2002 TO 2011 HVS

two rental sectors, where de ciencies remained at relativelystable, lower levels. It is also striking that the increase inreported NYCHA de ciencies was not gradual over thedecadeit occurred largely after 2008, when it appearsNYCHA had reached a critical point.

A similar pattern is observed for households experiencingfour or more of the seven de ciencies. (See Chart 2.)

In 2002, there is relative parity among the three rentalsectors in the proportion of households experiencing fouror more de ciencies. But as the decade progresses, thereis a signi cant increase among NYCHA residents, theproportion nearly doubling from 11 to 19 percent, againwith nearly all of the increase occurring after 2008. And thesteep rise among NYCHA households is unmatched amonglow-income tenants in assisted and private rental units wherethere was only a modest increase in the proportion reporting

multiple de ciencies.

LEADING DEFICIENCIES

All but two of the seven speci c de ciencies in the HVSindex were major contributors to the spreading deteriorationreported in NYCHA apartments over the period from 2002to 2011. Toilet breakdowns increased only marginally, from

13 to 16 percent of households. Households reporting thatthey required additional heating sources rose from 22 to 29percent. The other de ciencies rose much more sharply, asindicated in Chart 3.

Over the decade, the private rental sector, as a whole,performed better than NYCHA in providing low-incomeNew Yorkers with liveable apartments. No doubt this wasdue in part to a strong rental market in which median rentfor low-income tenants increased by 52 percent, from $659in 2002 to $1,000 by 2011, while their median incomeincreased by only 27 percent. Chart 4, when compared toChart 3, shows that the leading de ciencies in private rentals,which were occurring at rates comparable to NYCHA in2002, remained close to their original levels through 2011,

while de ciency reports in NYCHA apartments wereescalating. Rodent infestation was an exception to thispattern: In 2002 it was much worse in the private sector35percent of tenants, compared to 27 percent of NYCHAresidents. Nevertheless, by 2011 the rate for NYCHA washigher37 percent against 33 percent.

The sharp acceleration in reported NYCHA de cienciesindicates that by 2008 a critical point had been reached after

NYCHA SUBSIDIZED PRIVATE

20

18

16

14

12

10

2002 2005 2008 2011

P E R

C E N T

O F H

O U S E H

O L D

S

CHART 2:HOUSEHOLDS REPORTING 4 O RMORE DEFICIEN CIES, BY RENTAL SECTOR,

2002 TO 2011 HVS


9/32


which things rapidly worsened. By late in the decade, themounting outcry of NYCHA residents about conditionsand repairsand their pre-occupation with their housingconditions in the CSS surveyrepresented more than theusual complaints tenants register about their landlords. Thedownward spiral had begun and, even worse, repairs werelagging further and further behind. NYCHA apartments,on the whole, had fallen into far worse physical shape thanrental units occupied by other low-income New Yorkers.Based on these de ciency reports alone, by 2011 NYCHAreached a point where it might have quali ed as the cityslargest and worst landlord.

It remains to be seen whether an accelerated repair

program initiated by NYCHA in 2013 in response toresident protest and growing media attention has resultedin signi cant improvements. In 2014, early in the de Blasioadministration, NYCHA launched a new initiative to assessneeded repairs and monitor progress. Apart from what theHVS conveys, there is little systematic information availableabout how conditions are changing, other than what isavailable from time to time in NYCHA press releases.

In summary, it is doubtful that NYCHA suddenly ceasedbeing the competent large-scale housing manager it hadbeen for nearly seven decades. A 2012 report prepared bythe Boston Consulting Group uncovered a number of tellingmanagement issues that likely contributed to the acceleratingdeterioration of building conditions. 9 However, the evidencesuggests that NYCHAs worsening nancial condition alonewould have been suf cient to have a profound impact on itsmanagement capacity by 2008. It is important to understandwhy and how that happened.

35

30

25

20

15

10

5

2002 2005 2008 2011

P E R

C E N T

O F H

O U

S E H

O L D

S

CHART 4:LOW-INCOME HOUSEHOLDS I NPRIVATE, UNASSISTED RENTALS REPORTING

SELECTED DEFICIENCIES, 2002 TO 2011 HVS

RODENTS WATERLEAK

CRACKEDWALL

HEATINGBREAKDOWNS

SEVEREPLASTER

By 2011, NYCHA reached apoint where it might havequalied as the citys largest

and worst landlord.


10/32


Public housing residentsmust stand together

and demand that thecity and state supportNYCHA as a line item intheir budgets. We aretaxpayers, we pay rent,and we also vote.

Aixa TorresResident Association President Smith Houses, Manhattan


The Changing FinancialCondition of NYCHA What accounts for the nancial decline of a high-performinghousing authority like NYCHA in the period following2001? The short answer is that the Authoritys recent

nancial straits, and the accelerating deterioration residentshave been experiencing, are the cumulative result of growinggovernment disinvestmentat all levels of governmentinthe citys public housing.

Inadequate Washington appropriations were and are stillat the crux of the problem. In 2001, nearly all NYCHAdevelopments were built under the federal housing programand relied on ongoing Washington support. But the stateand the city have also contributed signi cantly to the crisis.As of 2001, NYCHA owned and managed 21 non-federaldevelopments: fteen state- nanced developments (12,200units), and six city- nanced developments (8,000 units) thatwere ineligible for federal funding and depended on stateand city operating and capital supports. In 1998, the statehad terminated its long-standing operating subsidies and thecity did the same in 2003.

The signs that NYCHA was increasingly at nancialrisk over the decade became manifestly clear in the yearsfollowing 2001, as the Authoritys high annual operatingde cits came to be regarded as structural rather thantransitory. The degree to which government was blindto those signs, or inured to them, or chose to disregardthem, is baf ing, particularly at the local level where theconsequences for residents and for the housing infrastructurewere visible and directly felt.

Declining Federal Support

Housing authorities receive two streams of federal subsidiesfor public housing: Operating subsidies are allocatedannually by HUD to support ongoing operations. Institutedin the late 1960s, the subsidies were intended to coverthe growing gap between rising maintenance costs andlimited rent returns from a low-income tenancy. Capital(modernization) subsidies are provided annually for majorcapital improvements to replace structural components ofolder buildings. Both of these are critical subsidies, especially


11/32


to authorities like NYCHA with an aging infrastructure.However, the size of each subsidy stream depends onCongressional appropriations each year in an uncertainenvironment in which public housing is arguably the leastpopular housing program. Once the federal budget is decided,HUD allocates what it receives to individual authorities.

During much of the decade following 2001, federal fundingfell short of expected levels. Between 2001 and 2011,NYCHA estimates it suffered a cumulative loss of $640million in anticipated operating subsidies. (See Chart 5.) Thecontinuing losses were stemmed in 2010 and 2011 whenthe incoming Obama administration secured full fundingfor public housing operations. Nevertheless, severe lossesfollowed as a result of federal de cit reduction and budgetsequestration. By 2013, the cumulative operating subsidyloss since 2001 had mounted to nearly $1 billion.

In 2001, the newly-elected Bush administration also endedthe HUD Public Housing Drug Elimination Program (DEP).The 15-year-old program had supplemented the operatingsubsidy stream, providing NYCHA with $35 millionannually, which it used to cover $20 million of the requiredannual payment to the city for police services, with theremaining $15 million devoted to youth-oriented communityprograms. The DEP termination effectively added a $35million burden to NYCHA annual operating costs. The

full police payment of over $70 million was still requiredby the city, and NYCHA chose to continue the communityprograms rather than abort them.

0

-200

-400

-600

-800

-1000

-1200

M I L L I O N

S O F D

O L L A R S

CHART 5:NYCHA-ESTIMATED CUMULATIVELOSSES, HUD OPE RATING & CAPITAL

SUBSIDIES, 2001 TO 2013

OPERATING CAPITAL

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3


12/32


In 2007, NYCHA took a further loss in its expected operatingsubsidies, a reduction of $14 million annually, when HUDimplemented a new, hard-nosed allocation formula. Thenew formula was based primarily on estimated housingmanagement costs in privately-owned subsidized housing,which did not take into account the community servicesand employee bene ts many housing authorities provided. 10 That year NYCHA also lost its HUD designation as ahigh-performing authority, no doubt because of declining

nancial and physical conditions, which led to a furtherreduction in its share of the operating subsidy pool.

In the wake of the 2008 economic recession, Washingtonprovided NYCHA an unexpected opportunity tofederalize its state and city developments, making themeligible for federal operating and capital subsidies. Fornearly a decade, the Authority had been vainly pressing forspecial Congressional legislation to accomplish the same.Under a special provision of the 2009 American Recoveryand Reinvestment Act (ARRA), the economic stimulus bill,housing authorities were given a one-time opportunity tofederalize their non-federal developments. 11 To its creditNYCHA seized the opportunity. By 2010, the 21 state andcity developments were nally brought under the federalfunding umbrella, resulting in an increase of $55 million inannual HUD operating subsidies. Prior to federalization,these developments had incurred an operating shortfallestimated at $90 million annually.

Even with federalization of all developments, the effectof long-term Washington disinvestment was evident. By2011, the annual HUD operating subsidy to NYCHA haddecreased by over $100 million from its original 2001 level.

HUD annual capital subsidy streams also slowed after2001, a cumulative loss that NYCHA estimates at over $1billion by 2013. (See Chart 5.) Not included in the NYCHAestimate is a one-time infusion of $423 million in capital

dollars in 2009 under the ARRA economic stimulus bill,intended for short-term shovel ready capital projectsthat could stimulate the local job economy. Apart from thestimulus package, by 2011, NYCHA was receiving about$63 million less in annual HUD capital subsidies than it hadreceived in 2001.

Declining State Support

Until 1998, New York provided ongoing operating andcapital support for NYCHA developments it had constructedwith state capital. Many had been federalized by that time,but 15 developments remained a state responsibility. AtGovernor Patakis initiative, the state terminated its annualoperating subsidies, which had already reached a low of$10 million. NYCHA estimated the state developmentsgenerated an operating shortfall of about $60 millionannually and unsuccessfully brought suit against the state.Its only recourse was to stretch its limited federal funding tooperate the state developments. In 2007, with newly-electedGovernor Elliot Spitzer in Albany, NYCHA renewed itsrequest that the state pay $62 million each year to cover theoperating shortfall. It received only $3.4 million for asingle year.

Despite the 2010 federalization, state developments continueto sap NYCHA resources, for complicated reasons. In2008, prior to federalization, HUD had nally approveda controversial NYCHA proposal for Section 8 VoluntaryConversion in both the state and city developments. Underthe proposal, 8,400 of the 20,200 units were to be convertedto Section 8 vouchers over a four-year period. NYCHAcalculated that the more generous Section 8 rent streamswould make up for the operating losses. Conversions tovouchers relied on voluntary participation. Current residentscould opt for a shift from the public housing to the voucherprogram without moving. Waiting list families could opt touse their vouchers to rent vacant state or city units as theyturned over.

Due to the 2008 conversion agreement, 8,400 to-be-vouchered units were excluded from the federalization in2010. That is, they would not be considered in determiningHUD operating or capital subsidy allocations. To date thevoucher conversion has fallen short of projections, having

netted only about 2,800 units in six years. As a result,about 5,600 state and city units continue to be operated byNYCHA and receive no operating subsidies.

Between 2001 and the federalization of city and statedevelopments in 2010, NYCHA had experienced acumulative operating shortfall of $660 million due to statewithdrawal, a gure comparable to the cumulative loss inexpected HUD operating subsidies. In effect, the Authority


13/32


had to stretch its limited operating funds, tap its reserves,or transfer federal capital funds into operations in order tosustain the state developments. As of 2014, about 4,000state units are still not vouchered or subsidizedthey incuran operating shortfall of about $15 million annually andcontinue to drain the Authoritys limited operating resources.

Although the state had long provided capital(modernization) funds for its NYCHA developments, in2001 state contributions were reduced from $15 million to$6.4 million. A 1999 State Comptrollers report found rapiddeterioration in the state developments, underlining theinadequacy of the capital commitment against an estimatedcapital backlog of $650 million. 12

The states continuing disinvestment was moderated in2007 with the enactment of the Shelter Allowance Bill(S4329/A7905). Concerted lobbying by NYCHA, labororganizations, and housing advocates succeeded in endinga policy under which the Authority received discountedshelter allowances as rent payments for residents receivingpublic assistance, lower than the full shelter allowance paidto private landlords. 13 (Oddly, other housing authoritieselsewhere in the state were receiving their full shelterallowance.) With about 16 percent of NYCHA householdsreceiving public assistance, the new allowance levels, oncefully phased in, were estimated to net NYCHA an increase inrent streams of about $47 million annually to help close itsoperating gap and reduce its de cit.

Declining City SupportAdded Burdens,Only Temporary Relief

The withdrawal of city support for NYCHA followed apath similar to the state withdrawal, only a few years later.Until 2003, the city regularly provided annual operatingsubsidies to NYCHA for its six developments (8,000units), approximately $34 million that was reduced to $30million under Mayor Giuliani in 2001, enough to coverthe operating shortfall. In 2002, during the post-9/11 scalcrisis, Mayor Bloomberg reduced the subsidy to $13 millionand, in 2003, eliminated it entirely, leaving NYCHA to coverthe operating gap on its own. Interestingly, the Authoritytook no action, as it had with the state, to seek restitution.

In 2003, the mayor also reduced the Department for theAging (DFTA) budget by transferring to the Authority the$29.4 million annual cost of operating 105 NYCHA seniorcenters. 14 The combined $60 million jolt to the NYCHAoperating budget, as it faced a 10 percent cut in federal aid,occurred with the acquiescence of the NYCHA Chair andBoard. During this period, the citys annual capital subsidyto NYCHA was also substantially reduced.

The city subsequently recovered from its post 9/11 scalcrisis, but it never resumed its operating subsidies, evenas the mayor initiated $400 tax rebate checks to the citysnearly one million homeowners in 2004. The six citydevelopments generated an operating shortfall estimatedby NYCHA at $30 million annually, resulting in acumulative loss of about $300 million as of 2010 when thedevelopments were federalized. Since the federalization,the shortfall has been substantially reduced, but there is alingering operating burden of about $8 million annually dueto 2,200 city units still awaiting voluntary conversion toSection 8.

The city was not impervious to NYCHAs mountingstructural de cit. Council budget allocations continued toattempt to ll critical gaps. In 2006, when the Authoritymade its rst public announcement of a major operatingde cit, estimated at $168 million, the accompanyingplan to cover the gap boasted $100 million for one-timetransitional aid from Mayor Bloomberg. But ongoing cityoperating subsidies were not envisioned.

In 2007, the city again contributed capital funds toNYCHA, a one-time commitment of $100 million over afour-year period. This was intended in part to replace HUDcapital subsidies that NYCHA was steadily transferring tooperations to cover its gap.

In 2009, when NYCHA budget constraints threatened

continued funding of community center programs, theAuthority was relieved of the burden, shifting it back to cityagenciesDFTA and the Division of Youth and CommunityDevelopmentwhile NYCHA continued to support centeroperations. In subsequent years, City Council funds helpedto keep centers open and sustain programs, but to thisday there is no clear-cut plan for funding and their futureremains uncertain.


14/32


The city is also responsible for the largest, longest-lastingdrain on NYCHAs limited operating resources, in the formof $100 million in payments the Authority is required tomake to the city each year. As of 2013, NYCHA paid over$70 million annually for above-baseline police services,$29 million for PILOT payments in lieu of property taxes,and close to $2 million for special sanitation services. 15 Noadditional HUD operating funds support such paymentsthey divert the limited operating resources NYCHA receivesfrom resident rent payments and sub-adequate HUDsubsidies. In the decade following 2001, the cumulativediversion of NYCHA operating funds to the city totaled over$1 billion. (In his FY2015 executive budget, Mayor de Blasiorelieved NYCHA of police payments for the year, but theagreement has not been terminated.) While these paymentsdo not constitute disinvestment, they raise the policyquestion of whether the city should continue to draw on theAuthoritys operating funds as NYCHA faces a signi cantstructural operating de cit year after year and residentsincreasingly face substandard living conditions.

Throughout the decade, the city continued to includeNYCHA in its capital budget, but much that support camein the form of City Council member item contributionsfor speci c purposes, rather than regular appropriations.

From 2001 to 2005, the annual capital contributionaveraged $7 million and rose from 2006 through 2011 toan average of $28 million annually, in part a response torising resident complaints about failing elevators, poor frontdoor security, and other building problems.

The Combined Impact ofGovernment Disinvestment

The large NYCHA de cits and the rapid deterioration inresident living conditions since 2001 are the cumulativeresults of the erosion of government support at every level,not just the federal level. The pattern becomes clear once theoperating shortfalls generated at each level of governmentare combined. (See Chart 6).

From 2001 to 2004, before the major federal cutbacks,NYCHAs shortfall was primarily the result of state andcity withdrawal. From 2005 through 2008, federal budgetslashes to operating allocations below expected levelsaccounted for most of the shortfall, but the effects ofuncovered state and city developments were still signi cant.By 2006, the shortfall, amounting to a $168 million de cit,was acknowledged as a structural problem and NYCHA

CHART 6:NYCHA PUBLICHOUSING OPERATINGSHORTFALL, BYGOVERNMENT SOURCE,2001 TO 2013

300

250

200

150

100

50

0

M I L L I O N

S O F D

O L L A R

S

CITY STATE FEDERAL

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

2 0 1 2

2 0 1 3


15/32


announced a long-term plan to address it. In 2009 as theSection 8 voluntary conversion phased in, state and cityunits became less of a drain on operating resources, althougha substantial proportion7,000 out of 8,400 unitsremained unconverted and continued to be a signi cantburden. 16 In 2010 and 2011, full HUD funding during theearly Obama administration and the ARRA federalizationof state and city developments eliminated the federalshortfall, while unconverted state and city units extracted ashortfall of $27 million a year that continues on that scale.Subsequent federal de cit-reduction measures in 2012 andsevere sequestration cuts in 2013 again played the majorrole in driving the NYCHA shortfalls and the Authorityscontinuing de cit position.

Over much of the decade after 2001, the state and citywithdrawal had telling consequences for NYCHAs de cits,exacerbating the drain on its resources, even beforeWashington cutbacks took their toll. But with federalization,the effect of lingering, unfunded state and city units is nowminor compared to the dramatic federal withdrawal. TheObama administration has proposed large increases in itsFY2015 budget, but the effects of a divided Congress, andthe expense-cutting agenda of House Republicans, have yetto be gured in.

Rising Internal Operating Costs

At the same time government was disinvesting in NYCHA,its internal operating costs were soaring. Although theAuthority is sometimes criticized for its high operating costscompared with other nonpro t housing providers, it shouldbe noted that unlike other providers NYCHA is subject tolocal civil service regulations and employee bene t standards,as well as federal prevailing wage requirements.

Surprisingly, operating costs, and the components thatdrive them, are not systematically reported or trended byNYCHA at annual Council budget oversight hearings. Butthe dramatic increases are abundantly clear from severaldocuments. Between 2001 and 2005, NYCHA utility costsrose by 42 percent from $304 million to $430 million;pension costs soared by 752 percent from $7 million to$55 million; and health insurance costs increased by 44percent from $76 million to $120 million. 17 A 2011 CouncilCommittee report summarized later trends: Since Fiscal2002, employee bene t costs have risen by approximately

73 percent, largely due to the increase in pension costswhich have gone up by more than a $100 million a year.In addition, utility costs have nearly doubled from $268million in 2002 to $527 million in 2008. Overall, NYCHAsoperating expenses have increased by 25 percent since Fiscal2002 while HUD operating subsidies have only increased by8.8 percent. 18

Apart from the respite provided during the early Obamaadministration, following 2001, NYCHAs operatingresources continually declined as state, city, and federalgovernments withdrew nancial supports. At the sametime its operating costs were rapidly in ating as a resultof internal cost pressures. This is a recipe for nancialimplosion and insolvency. To NYCHAs credit it hasmanaged to pull through year after year with a projectedoperating plan that optimistically addresses the problem.Whether those plans will be realized is an open question.


16/32



We need change,more transparency,

and oversight, nota cash machine forprivate contractorsand consultants.Without this, NYCHAmay not exist in the

future.Nancy OrtizResident Association President

Vladeck I and II Houses, Manhattan

Budget StressesHit Home: TheConsequencesNYCHAs nancial problems since 2001 are the consequenceof a scenario of government disinvestment decisions,which were oblivious to the stresses the Authority faced.Even more disastrous, they led to the rapid deteriorationof resident living conditionsanalyzed in the previoussectionparticularly after 2008 when the cumulative effectsof tightened annual budgets began to be felt. In effect, thesavings achieved by government through disinvestment werepassed on as costs to vulnerable residents, who were more andmore dealing with substandard conditions, what one outragedresident leader recently described as third world conditions.

Other intermediate consequences are also signi cant:operating reserves were depleted to cover the de cit gap;scarce capital funds were lost as they were transferred tosupport operations; and headcount reductions reduced theworkforce, diminishing front-line eld operations neededto keep up the developments.

Operating Decits

Given its uncertain funding environment, it is dif cultfor NYCHA to budget without successive revisions. As aresult, any attempt to chart the NYCHA operating de citover time must take into account the inherent uncertaintiesin such calculations. At the end of each calendar year,NYCHA prepares a projected four-year budget, based onassumptions about expected funding levels, revenues, andthe yield of special gap-covering measures. But the federalbudget is not decided until the following October. At twosuccessive City Council oversight hearings on the NYCHA

budget, the Authority may present a revised budget andde cit estimates that incorporate more current information,such as the presidents proposed HUD budget or themayors executive budget.

The gap-covering measures described in NYCHA budgetpresentations further confound de cit estimates. Somemeasures are subject to unexpected delays, such as theimplementation of rent or fee increases, or completion of the


17/32


18/32


While these capital transfers helped bandage a loomingde cit, the sad irony is that they further delayed majorimprovements in the Authoritys capital plan. Such delaysno doubt contributed to the disastrous impacts on residentquality of life. Deferring a major improvement, like therepair of a leaking roof or replacement of an aging boiler,only served to accelerate building-wide problems, raisemaintenance costs, and diminish living conditions.

Headcount Losses

Beginning in 2003, NYCHA used planned workforcereductions to address its de cit position. At rst it assuredCouncil members that the reductions would be obtainedonly through attrition; there would be no lay-offs. But by2006, lay-offs were planned to bring down headcounts andreduce costs. There were assurances that resident serviceswould not suffer: that the lay-offs would affect largelyadministrative positions, rather than front-line operationsneeded to maintain services at current levels. Ultimately,both tiers of workers were affected. (See Chart 8.)

NYCHAs total headcount underwent a decrease of 20percent, from 14,700 in 2001 to 11,800 in 2011. Cuts inoperations staff were more modest, a 6 percent decreasefrom 9,700 to 9,100 staff. While NYCHA held to itsassurances that administrative staff would take the bruntof the cuts, the net reduction in operations personnel nodoubt had an impact on housing management services.Between 2001 and 2005, the Authority had also reduced itsmaintenance and operations contracts (by $24 million), andcut back on overtime ($24 million). 25 Continuing headcountreductions, as well as reduced contracting and overtimecommitments, meant fewer personnel resources for normalmaintenance and operations, no doubt contributing to themounting problems of disrepair and deterioration.

1500

1400

1300

1200

1100

1000

900

800

CHART 8:NYCHA WORKFORCEHEADCOUNTS, TOTAL AND OPERATIONS,

2001 TO 2011

2 0 0 1

2 0 0 2

2 0 0 3

2 0 0 4

2 0 0 5

2 0 0 6

2 0 0 7

2 0 0 8

2 0 0 9

2 0 1 0

2 0 1 1

TOTAL OPERATIONS

In effect, the savings achievedby government throughdisinvestment were passed

on as costs to vulnerableresidents, who were more andmore dealing with substandardconditions, what one outragedresident leader recentlydescribed as third worldconditions.


19/32



In order to start thedialogue, NYCHA must

be transparent from dayone. Consult. Listen. Act.NYCHA must build thetrust back.

Maria GuzmanResident Association President

Harborview Terrace, Manhattan

Directions For ChangeThe reality is that, absent new initiatives, NYCHA willcontinue to face signi cant nancial pressures for theforeseeable future that, despite its best efforts, will placeresidents at increasing risk of abject living conditions andfurther deterioration. The deferral of small repairs, no lessmajor improvements, will make matters worse as theylead to costlier problems down the road. Even without thedisaster wrought by Superstorm Sandy in 2012, NYCHAwould still be in critical nancial and physical condition.

To make any real progress, NYCHA will need a majorinfusion of capital to catch up with billions of dollarsof backlogged infrastructural improvements. And it willneed all the operating resources it can muster to resolveoutstanding repairs, restore decent living conditions, andmaintain sound housing management standards. Congress,normally averse to investing in public housing, is now evenmore divided and preoccupied with de cit reduction. It isunlikely that Washington will come through in time, if ever.

An administration proposal to expand the HUD Rental

Assistance Demonstration (RAD) might allow NYCHAto convert a few developments to long-term project-basedSection 8 contracts under private ownership, in order to usethe enriched rent stream to nance capital improvements,but the provision still has an uncertain future in Congress. 26 Even the rosy prospect of a well-funded National HousingTrust Fund focused on expanding the supply of affordablehousing may not contribute to the preservation of existingpublic housing. 27 As things stand, the initiative to restore andpreserve NYCHA homes will have to come from elsewhere.

NYCHAs decline since2001 naturally conrms

the importance of adequatefundingboth operatingand capital fundingif itis to rebuild its housing andrestore its reputation.


20/32


The recommended directions for change that followare made in that context. NYCHAs decline since 2001naturally con rms the importance of adequate fundingboth operating and capital fundingif it is to rebuild itshousing and restore its reputation. But other changes,institutional changes, are also important if the destructivecycle that began in 2001 is to be stemmed and preventedfrom recurring. Prevailing institutional arrangements madeit possible to mask the gravity of the situation that facedresidents and the Authority alike and for government atevery level to ignore its responsibilities, at times withoutNYCHA resistance. The resulting costs were ultimatelypassed on to vulnerable residents in the form of abject livingconditions that threaten the future of their communities. The

lack of useful, reliable information about NYCHA nancesand conditions have made it more dif cult for concerneddecision-makers to be responsive to the growing crisis.The Authority did not bene t from its relative insulationfrom public scrutiny. Greater public accountability andtransparency on NYCHAs part are critical to its future.

Funding Strategies

To address the current $7 billion backlog in major capitalimprovements, the city and the state must make a long-term(ten-year) commitment to signicant capital investment ininfrastructural improvements to NYCHA buildings.

If federal appropriations levels continue, NYCHA will receiveonly about $2.5 billion in HUD capital subsidies over the nextdecade to meet a projected backlog of major improvementsestimated to mount to $15 billion. There may be opportunitiesfor NYCHA to generate revenues to meet capital needs, suchas the leasing of available land for redevelopment envisionedunder the recent In ll/Land-Lease plan, but they are unlikelyto generate enough funds to bridge the capital gap.

Major infusions of additional capital will have to comefrom the city and the state, what some leaders are calling aMarshall Plan for NYCHA. Moreover, these commitmentswould be appropriate and just. State and city withdrawalfrom responsibility for their NYCHA developments forcedthe Authority to cover an annual operating shortfall of $90


21/32


million from 2001 to 2011 by transferring nearly a billiondollars in reserves and scarce federal capital subsidies intooperations. At a minimum, the state and city should see thatthose otherwise irreversible losses are retrieved. Even if theirdevelopments are now largely federalized, the state and cityhave an obligation to make up for the losses they incurred,as well as an af rmative obligation to contribute to the well-being of NYCHA and its residents.

Moreover, it is not unusual for the city and the state tomake major capital investments in private development. Forinstance, in 2006 alone, the city committed $254 million todevelopment of the new Yankee and Mets stadiums, alongwith $325 million in tax exemptions. It is time to makecomparable investments in restoring the public housinginfrastructure. One potential source would be to dedicatea stream of capital from the excess revenues of the BatteryPark City Authority. Under a 1979 city-state agreementthose revenues were to be channeled into rehabilitationand construction of affordable housing in other off-siteneighborhoods. Battery Park City, originally conceived as amixed-income community, had been redesigned as an upscaleresidential and commercial development. The agreementwas a trade-off that promised potential revenues to addressaffordable housing needs elsewhere in the city. At present,however, the excess revenues ow into the citys general fund

and designated state usesonly a small portion have beeninvested over time in affordable housing. 28

NYCHA has been criticized for being slow to carry out itscapital commitments, even at current funding levels. TheAuthoritys development record in the decades followingWorld War II suggests otherwise, as does its recent handlingof the time-limited $423 million federal capital infusion underthe economic stimulus bill. If NYCHAs capacity to undertake

and expedite large-scale capital improvements needs to beimproved, that objective should be given serious considerationby both NYCHA and City Hall. Reforms to avoid delays andfast-track city mechanisms for approving NYCHA capitalprojects, as well as possibly consolidating the developmentcapacity of the Department of Housing Preservation andDevelopment (HPD) with the Authoritys, are importantoptions for the city. Doubts about NYCHAs capacity shouldnot be used to deny the Authority and its residents thecapital resources needed to rebuild the citys public housing.

The city should terminate standing agreements requiringNYCHA to pay for special services and PILOT payments (inlieu of property taxes).

NYCHA needs to retain its operating resources in order tomanage its housing inventory and catch up with outstandingrepairs. At present, the Authority is required to pay the cityover $100 million annually out of limited operating funds:over $70 million for above-baseline NYPD services,$29 million in PILOT payments, and $2 million for specialpick-ups by the Sanitation Department. NYCHA receivesno supplemental federal funding above the HUD formulaallocation of operating subsidies to pay for these costs. Inthe case of the police payment, NYPD already providessimilar services to private landlords free of charge under theOperation Clean Halls program. NYCHA residents feel theyare being taxed twice for police services that they have a rightto expect simply by paying city income taxes. To his creditMayor de Blasio has already relieved NYCHA of this years$70 million NYPD obligation, but the 1995 NYC-NYCHAmemorandum of understanding governing police paymentshas no expiration date and needs to be formally terminated.

NYCHA should also be exempted from PILOT payments inlieu of property taxes. Under federal law, housing authoritiesare permitted to enter local agreements for reduced propertytaxes. But in New York, many nonpro t housing providers

and institutionsincluding museums, hospitals, universities,houses of worship, and government properties 29areexempted from property taxes. Given its enormous nancialpressures, NYCHA should also be exempt.

NYCHA should explore revenue-generating strategies, suchas leasing available land for redevelopment, provided acommunity consensus can be reached on plans for the future.

Major infusions of additionalcapital will have to come fromthe city and the state, what

some leaders are calling aMarshall Plan for NYCHA.


22/32


Underutilized land in towers in the park developmentsoffers a potential opportunity to use scarce land resourcesto generate needed revenues to support operations andcapital improvements, to expand the supply of affordable,low-income housing, and to improve community servicesand amenities. (See later section on community developmentoptions.)

The city should take over the costs of operating NYCHAcommunity and senior centers.

The Authoritys Community Operations Department hasan annual budget of over $60 million, which includes theoperation of NYCHA community and senior centers. Thecost of supporting these centers is not factored into HUDsformula for calculating operating subsidy allocations. As aresult, sustaining the popular centers adds to the strain onNYCHA nances. For that reason, the centers have beenunder continual threat of closing in recent years, usuallyat the objection of City Council members in the affecteddistricts. Periodically, the City Council has stepped in toprovide the bridge funding for continuation, or the cityarranged to pass on costs to the Department for the Agingand the Division of Youth and Community Development.None of these are permanent arrangements; each year theissues are raised and the outcomes are uncertain.

Given its nancial stresses, and the priority it needs to accordto management and repairs, NYCHA cannot be expectedto support the community centers for the foreseeable future.There are also questions about whether the Authorityprimarily a housing management and development entityhas the competence already available in appropriate citydepartments that are experienced in administering the

existing citywide network of community programs andcenters. The city needs to step in and provide a stable fundingand administrative base to keep the existing NYCHA centersopen and use them to meet community needs. A city takeoverof these responsibilities would relieve NYCHA of the ongoingoperating cost burden and assure residents that these popularservices and facilities will continue.

The city and NYCHA should press the state for a longoverdue increase in the public assistance shelter allowance.

One out of every six NYCHA households (17%) receivessome portion of income from public assistance. Theshelter allowance portion of public assistance has not beenincreased since 2003, when it was set at $400 monthly for athree-person household, despite the rapid rise in rents sincethen in urban areas of the state. In 2007, when the state

acted to end the discounted shelter allowances NYCHA wasreceiving, the full increase added $47 million annually to theAuthoritys rent revenues.

Community Development Options

Given the citys plan to expand affordable housing and thescarcity of developable sites, there is growing pressure to use

City Council funds have helpedto keep NYCHA community andsenior centers open, but to thisday there is no clear-cut plan forongoing funding and their futureremains uncertain.


23/32


Effective communityengagement must be part of theredevelopment planning process

from the start, in decidingwhether and how it will shapethe future of the community.

available land in NYCHA communities. Redevelopment ofthe tower in the park design of many developments mayin some markets also be an opportunity to generate revenueto meet capital improvement and repair needs. It can also bean opportunity to bring in retail and commercial facilitiesresidents want and better integrate the NYCHA campuswithin the fabric of the surrounding neighborhood. But noneof this can happen without building a community consensusabout how the future should be shaped. Communityexperience under the recent NYCHA In ll/Land-Lease planhas been largely negative and Mayor de Blasio has done wellto scrap NYCHA plans and go back to the drawing boards.Any future plans for redevelopment in NYCHA communitiesmust respect the following principles:

Effective community engagement must be part of theplanning process from the start, in deciding whether andhow redevelopment will shape the future of the community.

The objective of such engagement is to negotiate and resolvethe natural tensions between the interests of the existingcommunity and those with a stake in physical redevelopment.Affected NYCHA resident organizations, community boards,and other key stakeholders must be included from the start.Resident leaders must have access to independent legalrepresentation and as-needed technical assistance, rather thanrely exclusively on NYCHA staff for information and advice.

An effective model for community engagement remains to becreated. If NYCHA is successful, it could serve as a modelfor other cities.

NYCHA must comply with the Uniform Land Use ReviewProcedure (ULURP).

ULURP is the prevailing city standard for community reviewof redevelopment plans. Whether NYCHA is presentlyrequired to comply with ULURP is a matter of legal debate.

Given the sensitivity of many resident leaders to privateredevelopment in their midst, and recent cases in whichNYCHA overlooked the affected resident organizationsand community boards, the best interests of all stakeholderswould be served if NYCHA complied with ULURP in all ofits redevelopment initiatives.

Residential development in NYCHA communities must, to the maximum extent feasible, be affordable to low-incomeNew Yorkers and offer current residents priority access tonew units.

The goal of generating NYCHA revenues throughredevelopment, a potential in some if not all developments,needs to be balanced against the overriding need foraffordable rental housing in the community at large. Theappropriate balance will need to be struck by NYCHA andthe community, based on feasible redevelopment options.Resident leaders often speak to the special needs of theirsenior residents. Providing seniors with new apartmentsmay also help to free up under-occupied NYCHAapartments for larger, overcrowded households. Once itis funded, the recently established National HousingTrust Fund (NHTF) may be an important source ofdevelopment capital. Although NHTF is primarily targetedat expanding the supply of affordable housing, there maybe ways in which new residential development can alsohelp support major capital improvements in the surroundingNYCHA community.

Where the community sees t, appropriate zoning strategiesshould be considered to protect NYCHA residents fromunwanted development activity.

Special districts and preservation zones have been used inthe past to help protect vulnerable communities and preservethe fabric of existing neighborhoods. Such zoning strategiesshould be considered, particularly in market areas wherethere are strong incentives for upscale development.


24/32


Greater Transparency and Accountability

NYCHA, like other authorities, is an independent para-governmental entity with its own governing board,appointed under prescribed rules. But its autonomy haslimits. Because Washington is its nearly exclusive fundingsource, the Authority must comply with federal laws andregulations; it is subject to HUD review and approval onfunding determinations, required annual plans, and newinitiatives. Since housing authorities are created under stateenabling legislation, they are also subject to Albany oversightif not control. Remarkably, NYCHA is the only municipalhousing authority exempted from review and regulationby the State Authorities Budget Of ce. At the city level, themayor exerts an important in uence on NYCHA throughappointment of the Chair, who serves at his/her pleasure, andthe rest of the governing board. The City Council exercisesoversight of the NYCHA budget and can command of cialtestimony at specially called hearings on speci c concerns.But the Council has no formal role in revising or approvingthe NYCHA budget as it does for city departments.

NYCHA formally accounts for itself at least three times ayear: two City Council oversight hearings are held on itsannual budget, usually in March and another in May or

June. Under federal law NYCHA must prepare an AnnualPlan. The Draft Plan, usually released in late spring, isfollowed by a required public hearing during the summer,before the Final Plan is submitted to HUD for reviewand approval in October. The Plan contains little, if any,budget information, although its executive summary mayestimate the operating de cit or simply con rm a balancedbudget even in years that NYCHA faced a structuralde cit. Naturally, the narrative summary presents NYCHAsaccomplishments for the previous year and its plans for thecoming year in the best possible light.

FINANCIAL ACCOUNTABILITY

The decade after 2001 points to glaring gaps in NYCHAtransparency concerning its budgetgaps that that madeit dif cult for the City Council and the concerned publicto comprehend the gravity of its nancial predicament andthe potential consequences for its resident communities.Prior to 2006, NYCHAs testimony before the Council wasinconsistent in reporting annual de cits, unless members

drew it out. And the issue was usually soft-pedaled in thestring of annual NYCHA budget testimony from 2001to 2005, as it were a now-you see it-now-you-dontapproach to de cit reporting. It wasnt until 2006atwhat Chair Tino Hernandez called a de ning moment inits history 30that NYCHA openly announced its $168million operating de cit, along with a plan to bridge thegap. Only then was public attention drawn to the previous

ve years of nancial strain. The New York Times reported,Since 2001, the agency says, it has spent $357 millionfrom its reserves to close repeated budget gaps; this year, forthe rst time, it no longer has enough reserves to cover theshortfall. In the same article, Representative Jerrold Nadlerwas quoted, The chickens are coming home to roostThe Housing Authority has, by one ingenious means oranother, been holding it together with spit and bailing wire.This could be really devastating. 31 A subsequent report bythe Independent Budget Of ce (IBO) estimated that from2001 to 2005 the Authority experienced an operating gapthat totaled more than $414 million, an average of $83million annually. 32 Intelligence about the NYCHA de cit waslargely retrospective. In the following years, NYCHA budgetreporting to the City Council improved considerably, butmuch remains to be done.

An independent, annual nancial audit and analysis ofNYCHAs budget position and plans should be released prior

to City Council budget deliberations each year.

City Council members have several sources of information attheir budget hearings. Council staff prepare a brief summaryreport on the NYCHA operating and capital budgets.Shortly before the hearing, NYCHA submits a current orupdated version of its four-year operating and capital plan,including a highlighted summary of its accomplishmentsduring the prior year and the outlook for the future. AtCouncil hearings, the NYCHA Chair provides narrativetestimony, at times with presentation charts, before members

have an opportunity to ask questions.

That Council questioning does as well as it does in ferretingout key issues in the budget is to its credit. The short staffreports vary from year to year in their coverage and may notbe consistent in their approach to key gures. The Chairsnarrative testimony is structured to draw selective attentionto the Authoritys accomplishments and present its problemsas solvable. Budget documents are detailed in certain


25/32


respects, such as revenue sources, projected headcounts,and anticipated gap-covering measures. But they usually fallshort on such things as an analysis of the prior-year budgetagainst actuals; shifts in overall operating costs and theunderlying driving causes; the state of operating reserves;planned transfers from capital dollars to operations, and thelike. Until recently, NYCHA budget plans did not distinguishbetween the public housing general fund and the Section 8Voucher fund, preferring to aggregate authority-wide gures.Charts on cumulative federal losses in operating and capitalsubsidies over past years have become ritual, but none of thekey parameters in NYCHAs budget are treated to similarlongitudinal trend analysis. Incisive questions by Councilmembers may not be answerable on the spot, in which caseNYCHA promises to provide members the information,which does not necessarily become public.

An independent, annual nancial audit and analysis wouldnot only provide the key parameters and trends needed tounderstand where NYCHA has been and the implications ofprojected budget plans, it would also include an assessmentof the risks ahead, particularly when gap-covering measuresrely on uncertain assumptions about federal legislation andappropriations. Because the quality of the periodic reportsissued by the citys Independent Budget Of ce on NYCHA

nances have been consistently high, IBO would be a naturalnominee for conducting the audit.

Ideally, sound, independent nancial information, ratherthan overly optimistic projections, would better underlinethe nature of NYCHAs nancial predicament and, inturn, help spur appropriate action, particularly at the localand state level. It can only serve to further the interests ofNYCHA and its residents. It may be the only corrective toa process that in the years following 2001 made it possiblefor NYCHA to soften the real implications of its mountingde cit position, de ect the blame from City Hall, and present

itself as in full control of the crisis.

ACCOUNTING FOR PHYSICAL CONDITIONS:COMPLAINTS, REPAIRS, AND CODE VIOLATIONS

The fundamental mission of a housing authority is toprovide decent housing for low-income people at rentsthey can afford. That NYCHA may no longer be able

to assure residents minimally decent housing is a basicfailure of its mission. Greater NYCHA transparency andaccountabilityconcerning resident complaints, repairs, andcode violationsmay not by itself generate the funds theAuthority needs to restore its housing, but open access to therelevant information will, at the least, speak to the severityof conditions under which residents are living, so that is notdismissed as the usual litany of tenant complaints aboutlandlords. Once the facts are known, NYCHA has greaterincentive to reform its housing management practices, evenwithin current funding constraints, to better serve residents.And concerned government decision-makers, resident leaders,and advocates have more of the information and ammunitionthey need to press for the resources NYCHA needs.

The central problem is that standing institutionalarrangements shield NYCHA from the kind of scrutiny andenforcement to which any private landlord is subject. TheAuthority, like any owner or landlord of a multiple dwelling,is required to comply with the citys housing maintenanceand building codes. NYCHAs relative immunity from cityenforcement and exposure serves to mask the way in whichresident complaints and demands for decent conditions inpublic housing are handled, while the city effectively looksthe other way. Simply put: What happens in NYCHA stays

in NYCHA.

NYCHAs relative insulation from city code enforcementand open records on code violations in effect assigns itsresidents to second class citizenship without access to theminimal code enforcement measures, no matter how faultythey are, to which tenants in private multiple dwellings areentitled. For NYCHA residents to gain greater leverage incommanding repairs and improvements, at the least they

NYCHA residents should haveparity with other tenants,in their right to city code

enforcement, the recordingof complaints and violations,and independent inspections.


26/32


deserve parity with other tenants in their right to city codeenforcement services and their access to open records aboutlandlord infractions.

The bifurcation of the code enforcement systemNYCHAresidents versus other tenantsbegins at the point ofcomplaint. Private tenants can register a complaint aboutconditions by phoning the 311 Citizen Service Center,where the complaint is recorded and assigned a number, thenreferred to the NYC Housing and Preservation Department(HPD) for appropriate follow-up, depending on its urgency.If necessary, an HPD inspector from the Code EnforcementUnit will be sent to inspect the premises and, if con rmed,the violation will be classi edA, B, or C in terms ofseverityand recorded, pending further action.

A NYCHA resident phoning 311 is instead referred tothe Centralized Call Center (CCC), created by NYCHAin 2007 as an innovative, ef cient citywide mechanism forreceiving resident complaints and scheduling repair orders.Systematic data on NYCHA complaints and responses isnot available, but several problems are acknowledged aschronic. Repair appointments are scheduled a year or two inadvance, unless they are emergencies that require immediateattention. Successive calls over long periods are necessaryto see a repair throughone call to report a leak, a secondcall once the leak is repaired to plaster the wall, a thirdcall for a painter to cover the newly plastered wall. If theresident cannot be present at the appointed time, anothercall for a future appointment is necessary. Once a residenthas a repair order, an on-site NYCHA staff member can beassigned to inspect, who may simply declare the complaintunfounded before removing it from the system. Anecdotalreports suggest that much depends on the attitude andconscientiousness of front-line management in followingthrough on complaints. Unless a NYCHA resident brings anaction in Housing Court and an HPD inspection is requestedby the Court, there is no independent, external con rmation

of the reported de ciency. By and large, only a few residentstake the ultimate step of pursuing NYCHA in court.

The NYCHA system is opaque. None of the informationrecorded by CCC concerning complaints, repair orders andresponses, or outstanding, potentially serious violations isavailable outside of NYCHA. Apart from what little can belearned about living conditions through the HVS, the onlyregularly available information is what can be gleaned from

the Authoritys occasional press releases, which inevitablyreport progress. Disclosures of the actual state of NYCHAconditions are rare. In 2012, The Daily News, as part of ascathing series of reports on NYCHA, exposed the ndingscontained in an unreleased Boston Consulting Group reportestimating a backlog of 338,000 repair orders. 33 In late 2013,then Public Advocate Bill de Blasio instituted a specially-designed Repair Watch website to monitor NYCHArepairs, but it is no longer functional.

Institutional arrangements also exempt NYCHA frompublic exposure for outstanding code violations. HPD andthe Department of Buildings maintain open, public databasesfor any multiple dwelling in the city there is a recordof outstanding code violations. Unlike other owners, NYCHAis insulated from any such exposure. There is an institutionalunderstanding, it seems an implicit agreement, that con rmedviolations in NYCHA buildings are not to be recorded.

The bifurcation of the code enforcement system is to someextent sustained at the Housing Court level, where in somecourts there is a special section for NYCHA cases. NYCHAresidents cannot access the part of court used by othertenants to bring repair cases. 34 Instead, they must use thesection devoted to NYCHA non-payment and holdovereviction cases. Private tenants have the advantage in court ofan independent HPD inspection con rming the complaint,but absent a special inspection ordered by the Court,NYCHA residents must rely on the court to decide betweentheir testimony and opposing evidence presented by NYCHAattorneys with access to internal records.

There is an argument to be made that it would becounterproductive for NYCHA to be subject to nancialpenalties of the kind imposed on private owners for failureto respond to violations. If inadequate funding is at the coreof the Authoritys inability to make necessary repairs andcapital improvements, the imposition of penalties would

only lessen its capacity to respond. For that reason, therecommendations forwarded here concentrate solely onaccountability and transparency issues.

NYCHA residents should have parity with other tenantsin the city code enforcement process, in the recording ofcomplaints and in access to independent inspections. It isrecommended that the NYCHA resident complaint system beintegrated into the citys 311 Citizens Service Center.


27/32


Consolidation of the complaint system would have obviouscost implications for the participating agencies. Openingthe 311 system and HPD code enforcement to NYCHAapartments will extend their jurisdiction by 179,000households, many of them with multiple complaints.NYCHA would bene t from eliminating the CCC, freeingup operating funds for repairs or the cost of expandedinspections by HPD and the Department of Buildings. Itis the citys responsibility to enforce its codes, whethersuspected violations occur in NYCHA or other residentialbuildings. That the city keeps its distance from NYCHAbuildings and its residents legitimate complaintsis remarkable.

Outstanding code violations in NYCHA buildings must beincluded in the public data bases maintained by HPD and

the Department of Buildings.

There is no apparent reason why NYCHA should beimmune from public accountability for the conditionof its buildings or why the city should disregard codeviolations in public housing. The Authoritys opaqueness iscounterproductivemasking the known facts makes it moredif cult for government decision-makers to understand theextent and seriousness of the problems, or to respond tothem. NYCHA needs to make the facts known.

An independent management audit of the NYCHA system for managing repairs and capital improvements should beconducted biannually to assess progress.

A 2010 report prepared by the Boston Consulting Groupuncovered weaknesses in the way NYCHA housingmanagement functions are organized and in the capacity ofthe Authority to commit available capital funds to actualimprovements. Another report prepared by Local 237Teamsters Union made recommendations for improving on-site, front-line housing management functions. 35 Given theage of NYCHAs large bureaucracy, an external assessmentmay be necessary to identify needed management reformsand assess the Authoritys progress in implementing them.

A Repair Watch website should be created to enableresidents to track NYCHA progress in the repair and capitalimprovement process.

The kind of website created by the Of ce of the PublicAdvocate in 2013 as an on-site resource for monitoringrepairs should be continued under the current PublicAdvocate, Letitia James. It should also include the monitoringof capital improvement plans at each development.

Strengthening Resident Organizations

The HUD 964 regulations on tenant participation in publichousinglong considered a resident bill of rightslay outclear guidelines for forming resident associations that mustbe recognized by housing authorities and included in theirdecision-making. Yet, about one third of NYCHAs 334developments have no resident association representingtheir communities. While some elected resident leaders haveconsiderable strengths, as a rule existing associations aresmall, dependent on a few committed long-term leaders, andweakly organized within the community at large. 36 Newly-elected of cers usually receive little training or orientationto their roles. If NYCHA is to engage and partner withresidents in exploring community development options,improving conditions, and moving forward on specialinitiatives, it must have strong, well-informed, organizedresidents to work with.

Resident leaders should be encouraged to engage qualiedindividuals and organizations to provide training in residentorganizing and leadership, as well as needed technicalassistance.

Since 2003 HUD has allocated TPA (Tenant ParticipationActivity) funds speci cally for such purposesclose to $3million comes through NYCHA annually. Currently anestimated $17 million in TPA funds remain unexpended,which can be used to contract quali ed resources to providetechnical and organizing assistance. Ideally, these resourcesshould be independent parties outside of NYCHA, to

ensure that they best serve resident rather than institutionalneeds. Fortunately, New York City is blessed with a numberof quali ed nonpro t organizations who can assist instrengthening the voice of residents.

The Citywide Council of Presidents (CCOP) should take theinitiative to reach out and form resident organizations indevelopments where they dont exist.


28/32


CCOP is a nine-member body, consisting of residentassociation presidents elected from nine districts thatspan the city, to represent all NYCHA residents inAuthority decisions and plans. Available TPA funds canbe used to contract quali ed organizations to reach out tounrepresented developments and explore whether and how aresident association can be organized.

Resident leaders and organizations should be encouraged to participate in the broader community, where they can nd potential support and key resources to increase theirstrength.

Too often NYCHA resident leadership insulates itself fromthe outside community, relying primarily on the Authorityfor needed information and resources. In the recent In ll/ Land-Lease controversy in the eight targeted developments,support from outside resourceslegal and housingadvocates, community boards, organizing groups, andconcerned elected of cialswas instrumental in increasingthe leverage of the involved resident associations. Linkageswith community boards, neighborhood housing and servicegroups, legal and policy advocates, as well as liaison with

local elected of cials, can be important sources of assistanceand outside support for resident agendas.

Governance: More Independencefor the NYCHA Board

Housing authorities were intentionally created asindependent bodies with para-governmental powers, in orderto insulate them from local political tides and assure theircontinuity. NYCHA is now governed by a seven-memberBoard appointed by the mayor. It includes a salaried Chairwho serves at the mayors pleasure, and six voluntary,unsalaried members, at least three of whom must beresidents. Except for the Chair, board members have a xedterm of of ce, but can be recalled by the mayor simply byproviding reasons.

This re ects a recent shift in the governance structure thattook place in 2013, away from a high-salaried Board and asingle voluntary resident member. 37 Despite the change, inNew York City the NYCHA board remains effectively themayors board.

At those times when NYCHAs well-being and the mayorsagenda are in alignment, the institutional synergy can servethe Authority well. That seems to be the case presently in thenew de Blasio administrationconsider the relief grantedto NYCHA from $70 million in NYPD payments in themayors budget this year. But with mayors who are lesscommitted to public housing or its resident constituency,NYCHAs governing structure may be problematic.

The period from 2001 through 2011 illustrates some of theproblems. During that period NYCHAs governing boardconsisted of the Chair and two term-appointed members,all well-salaried. 38 NYCHAs nancial decline is, in part, acase study of the perils of Mayor-NYCHA relations when,under these institutional arrangements, they are not quitealigned. For example, in 2003 Mayor Bloomberg terminatedoperating subsidies for city- nanced NYCHA developments,sharply reduced city capital commitments, and passed onto NYCHA a $24 million burden for community centerprograms, at the same time the Authority was grapplingwith the states withdrawal from its 15 developments anda decreasing federal budget. All of this was done with theconsent, if not the full acquiescence of the NYCHA Chairand Board. Even after the city emerged from its post-9/11

scal crisis, the citys operating subsidies were never resumed.

NYCHA may be governed bya mayorally-appointed Board,but once appointed they should

have sufcient distance from themayor, so that they can single-mindedly serve NYCHA withoutrisk or threat of recall.


29/32


Whatever political sacricesare necessary, it needs to berecognized that this is a crucial,

dening period in NYCHAs history.

The relative silence of the board about the required $100million annual NYCHA payments to the city (and $3 millionin capital funds for police cars) is another telling example.At a time when NYCHA was tipping toward or running asigni cant structural operating de cit, none of the Chairsspoke out, except when questioned by the City Council.Often their budget testimony included special praise forthe mayor.

When it comes to the question of the Authoritys nancialsolvency and the risk of imposing increasingly abject livingconditions on vulnerable residents, the Chair should beable to be resolute in defending NYCHA without threat ofimmediate discharge. The Chair and the Board should beable to exercise an independent voice that speaks truth toCity Hall about what is necessary to keep NYCHA whole.The Authority may be governed by a board of mayoralappointees, but once appointed they ought to have suf cientdistance from the mayor, so that they can single-mindedlyserve NYCHA without risk or undue threat of recall. 39

It is recommended that all seven mayoral appointees to theNYCHA Board, including the Chair, be voluntary and serve

for xed terms, subject to recall only for cause. The Boardshould have the power to contract a chief executive ofcer(CEO), who serves at the pleasure of the Board, to manageand speak for the Authority.

This governing structure would create the needed distanceof the Board from direct mayoral control. As such theproposal is not likely to be endorsed by any sitting mayor. Itwill require broad support from City Council and from thestate legislature, which would be responsible for enacting itin legislation.

In Summary

In summary, the analysis con rms the reality of the appallingliving conditions in NYCHA apartments reported byresidents and the media for several years. But the Authoritysreputation or its competence should not be at issue; itperformed relatively well until its resource base fell apart inthe period following 2001. Government defunding was andis the root cause of the accelerating deterioration over the lastdecade. The state and city were major contributors to thatdecline, often at levels equivalent to the federal disinvestment.They should be open to a major role in restoring NYCHA.

Moreover, existing institutional arrangements that makeNYCHA opaque to public scrutiny need to be changedthose that mask the Authoritys nancial condition and itsfailures to comply with local housing and building codesbecause they cloak the real consequences of governmentdefunding and, as a result, deprive residents, advocates,concerned elected of cials, and the interested public ofthe information they could use as ammunition to press forneeded resources. The NYCHA Board also needs to be freerto act as a leading advocate for the Authority. Its governancestructure should be reconsidered to assure the Board theindependent voice it needs to better make the case for itselfand its residents.

The recommended directions for change attempt to addressthe driving factors underlying NYCHAs current nancialand infrastructural problems: the lack of suf cient operatingand capital funds; an insular lack of transparency thatconceals the gravity of its predicament, even from those whomight help; and structural governance issues that inhibit theAuthority from pressing for what it needs.

Whatever political sacri ces are necessary to move in

these directions, it needs to be recognized that this is acrucial, de ning period in NYCHAs history. It faces anerratic Congress, uncertain support from local and stategovernments, and a limited capacity to generate therevenues it needs even if it draws on private capital. Thecoming decade will be a critical test for the Authority andits residents.


30/32

Appendix

Condition Deciencies in the NYCHousing & Vacancy Survey (HVS)

The analysis of condition de ciencies in this reportis based on the expanded list of seven de cienciescovered in the HVS:

Heating breakdown Additional heating required Rodent infestation Cracks or holes in the walls, ceilings, or oors Broken plaster/peeling paint larger than 8.5 x 11

inches Toilet breakdowns Water leaks


Endnotes1. The capital backlog for the national program is $26 billion. See U.S.Department of Housing & Urban Development,Capital Needs in the PublicHousing Program , June 2011.

2. See: Community Development Project of the Urban Justice Center, A

Report Card for the New York City Housing Authority: Residents Evaluationof NYCHA and Recommendations for Improvement , August 2011.

3. As used here, the term low-income refers to household incomes withintwice the federal poverty level, currently up to $39,600 for a three-personfamily.

4. The agreement was forged in a 1995 Memorandum of Understanding(MOU) between the city and NYCHA when housing authority police weremerged with the New York Police Department.

5. NYCHA testimony and presentation charts, City Council hearings on theNYCHA Budget, Committee on Public Housing. March 21, 2014.

6. See: Victor Bach and Tom Waters,Making the Rent: Before and After theRecession , Community Service Society, 2012 (revised 2013), page 7.

7. It should be noted these deciencies refer only to conditions withinapartments. They do not include building deciencies, such as elevatorbreakdowns, broken front-door locks, problems in common spaces.

8. Subsidized/assisted rentals include project-based Section 8 and Mitchell-Lama rental developments, as well as private rentals assisted with Section 8vouchers. Low Income Housing Tax Credit developments are not identied the HVS.

9. Boston Consulting Group,Reshaping NYCHA Support Functions , August2012.

10. Harvard University Graduate School of Design,Public Housing OperatingCost Study, Final Report , June 6, 2003.

11. Only four states had non-federal public housing: New York,Massachusetts, Connecticut, and Hawaii.

12. Ofce of the State Deputy Comptroller for the City of New York,Deterioration of Public Housing in the State and City Projects Operated bythe New York City Housing Authority , July 1999.

13. New York public assistance is bifurcated: It includes a shelter allowanceintended to cover housing costs and a cash grant to meet other needs.These are 50 percent federally funded, the rest equally shared by the stateand city. As a result the discount had constituted a savings for the state andcity.

14. In return NYCHA received $29.4 million for transitional (six-month)

employment of public assistance recipients. The equivalency of the twotransfers remains unclear.

15. NYCHA also pays the Department of Environment Protect (DEP) about$90 million annually for water and sewer services not included in theanalysis.

16. State and city shortfalls are estimated in proportion to their overall shareof units.

17. See: NYCHA,Budget Summary , April 2006, and NYC Independent BudgetOfce,Examining NYCHAs Plan to Preserve Public Housing , June 8, 2006.


31/32


18. City Council Committee on Public Housing,Preliminary Hearing on theNew York City H

nyc public housing

Documents