Privatizing Public Housing, RAD-ically
by Jessica Schieder, 3/11/2014
A national initiative, the Rental Assistance Demonstration (RAD), has privatized public housing structures across the country. Cities including San Francisco and Chicago plan to turn over as many as 3,000 and 11,000 units, respectively, to the private market.
In a country where, on average, there are only 29 available and affordable rental units for every 100 extremely low-income households looking to rent, some housing advocates are highly skeptical of privatization, which has reduced the number of public housing units available while benefiting for-profit property managers.
Supporters of the privatization initiative say the plan would bring needed funding to help renovate and improve the public housing complexes. Nationally, more than $20 billion of additional spending in repairs is needed to maintain public housing structures.
In many cases, however, a portion of the funding for such renovations under private management would still ultimately come out of government coffers in the form of tax credits, as opposed to direct spending – identically impacting government balance sheets.
The residents of the housing units, which are privatized, will be given Housing Choice (Section 8) housing vouchers after two years – an alternative form of housing support – which they can use to stay in their current homes or move into other subsidized housing units.
The Housing Choice voucher program has been praised for its flexibility and the choices it gives vulnerable households. However, the program separates ownership of public housing structures from oversight, requiring housing authorities to do business with a plurality of private landlords. Under such arrangements, the Housing Authority remains responsible for overseeing the private landlords, ensuring the housing provided meets at least minimum safety and health standards.
While the Housing Choice program, along with other programs, suggests there are alternatives to traditional public housing structures, obvious underfunding of existing public housing structures and shortcomings of previous privatization deals have left many advocates skeptical that privatizing public housing is a silver bullet in the long run.
Baltimore is one city that is both in need of additional dollars to renovate public housing and in need of additional housing for vulnerable populations – including seniors, the disabled, and low-income families. Baltimore plans to turn approximately 40 percent of its public housing, including 22 public housing complexes, over to private businesses.
The city currently offers approximately 10,700 units of housing, supporting only a portion of the 27,978 households who applied during late 2013. The privatization is expected to further reduce the units of public housing available.
Without careful planning, the supply of housing for vulnerable households could be severely reduced or made more expensive. Community members and advocacy groups have voiced concern that the terms of the contract in Baltimore were shaped without public input.
The trend in public housing privatization is part of a larger trend – with states and localities tying their belts tighter and tighter, direct spending for programs has evaporated, and support for communities has increasingly relied on tax breaks.
Support for affordable housing has been shifting from spending to tax expenditures since the mid-1990s. The chart below, as presented by Ingrid Gould Ellen of NYU and the Furman Center for Real Estate and Urban Policy during a talk at the Tax Policy Center, shows the increasing importance of Section 8 housing, as the number of traditional public housing units have decreased.
The blue line represents the rise and decline of public housing units as infrastructure has deteriorated, spending has dried up, and structures have been sold off. By contrast, the green and orange lines represent the provision of Low Income Housing Tax Credits (LIHTC) to private investors in affordable housing and Tenant-Based Section 8 housing, which pays landlords for providing affordable housing to vulnerable households.
The trend, as displayed, is away from traditional public housing to privatized schemes in which the for-profit sector is incentivized with tax subsidies to provide housing. The shift has only partially compensated for the simultaneous underinvestment in existing public housing structures, and private-sector solutions have not offered a comprehensive solution to address the affordable housing deficit.
Notes: The above chart was presented at a Tax Policy Center event on Jan. 24, 2014 by Ingrid Gould Ellen. More information about the LITHC (Low Income Housing Tax Credit) program, as well as other housing programs, can be found at HUD.gov, the website of the Department of Housing and Urban Development.