The Equity Factor

Risks vs. Rewards: Inside HUD’s Favorite New Program

HUD Secretary Julián Castro endorsed the expansion of Rental Assistance Demonstration (RAD) in a recent speech. (AP Photo/Lauren Victoria Burke)

With the potential expansion of a current pilot program, the U.S. could be stepping closer toward the privatization of public housing — which will have short- and long-term impact on our most vulnerable city residents who depend on such shelter.

The Department of Housing and Urban Development (HUD) estimates that more than $26 billion is direly needed for repairs to the nation’s 1.2 million public housing units. Federal subsidies for the upkeep of these deteriorating complexes began to slip in the early 2000s. Despite the distress that deferred maintenance is causing for residents across the country, it’s become a politically toxic conversation to suggest meeting the capital needs of local housing authorities through direct federal appropriations.

Instead, HUD is throwing weight behind a fairly new plan, Rental Assistance Demonstration, or RAD. RAD allows local housing authorities to mortgage land and buildings to private capital, who then use tax credits to provide subsidized rent through project-based, Section 8 contracts. Repairs would then be able to be made, or the properties could be demolished or rebuilt (replacing the number of units in kind).

At an event last month, HUD Secretary Julián Castro touted the possibilities of RAD’s expansion, saying, “Back in July, the residents of the Magnolia Crossing Development [in Yazoo, Mississippi] wiped away tears as they broke ground on their renovation project. In the past, conditions were so bad that they’d coordinate when to do laundry because their units would flood when too many machines were running at the same time. Thanks to RAD, they are shaping a brighter tomorrow, and communities across the nation want to do the same.”

RAD is currently in a pilot phase; Congress only authorized 60,000 units to be converted. Demonstrating how eager local authorities are for a solution to their maintenance problems, HUD received applications for more than 180,000 units to be converted. Castro is encouraging Congress to lift the cap in HUD’s 2015 budget.

James Hanlon, director of the Institute for Urban Research at Southern Illinois University – Edwardsville is conducting research on the first round of housing units approved for RAD. He emphasizes his findings are very preliminary, but says, “Perhaps more economically viable or otherwise better-off housing projects are potentially more likely to be converted, as opposed to more severely distressed [or] poorer projects. This stands to reason to the extent that better-off projects might be more attractive to potential investors.”

With more than 300,000 units of public housing stock removed from 1990 to 2010 because of chronic underfunding, the fact that only the more well-positioned buildings with more stable-income tenants could be selected for RAD conversion could mean a continued decline of the worst-off places. With public housing currently able to serve only about one-quarter of eligible households and affordable housing growing increasingly rare in many cities, further culling could be disastrous.

(Source: Department of Housing and Urban Development)

While critics of the federal public housing program wonder why residents seem to remain chronically dependent on this housing, recent reports have shown that public housing reforms geared toward poverty deconcentration might not actually assist in poverty alleviation and that the pathways to leaving housing assistance are not fully understood.

In Baltimore, where 4,000 of the city’s 11,000 public housing units have been proposed for conversion to private ownership through RAD, tenants and tenants’ rights groups, have been protesting the program’s implementation.

In a video from one of the protests, Sharon Jones, president of the tenant council of Bel Park Tower tells the crowd, “We want to be able to live in these places. We don’t want to be sent out. We don’t want to be stepped on. We don’t want to be told that everything is going to be alright and the whole time you’re running over us … .”

Jones voices tenants’ fears, which range from the future of affordability, the displacement caused by repairs and potential demolition, and the right to return.

The demand for Section 8 vouchers in Baltimore is dizzying. The Housing Authority of Baltimore is opening its Section 8 program this year for the first time since 2003. It took 10 years to get through the last list. There are only 800 vouchers being made available and a computer-generated lottery will determine who will receive the vouchers and who will be placed on yet another waiting list.

HUD maintains that current residents will have the right to occupy completed RAD projects without rescreening, but Baltimore advocates say those promises haven’t been adequately articulated through firm tenant protections, arguing that “people feel they’ve been talked to and not had the opportunity to participate in a meaningful way.”

Some policy-watchers are also concerned about using the buildings as collateral, and about the long-term viability of public housing authorities keeping up with loan payments. In “Private Funding, Public Housing: The Devil in the Details,” Anne Marie Smetek, of Washington College of Law at American University, contemplates the implications of “exposing housing developments to the unpredictability of the financial market” so close on the heels of the national foreclosure crisis.

“Yes, RAD does newly expose projects to such risk,” Hanlon says, “but not really any more than is already the case for federally assisted project-based housing, and there are certain protections in place for tenants in the event that such housing does go into foreclosure.”

Even so, he wonders about “the broader forces of public housing deregulation and disinvestment within which RAD is situated.” RAD contracts last either 15 or 20 years, but long-term reliability of Section 8 funding is not necessarily sure-fire. Hanlon continues, “While RAD may be about the best one can hope for in the current political climate, it does nothing to alter those broader forces, and in many ways, further advances them toward an increasingly uncertain future for public housing in the U.S.”

The Equity Factor is made possible with the support of the Surdna Foundation.

Alexis Stephens was Next City’s 2014-2015 equitable cities fellow. She’s written about housing, pop culture, global music subcultures, and more for publications like Shelterforce, Rolling Stone, SPIN, and MTV Iggy. She has a B.A. in urban studies from Barnard College and an M.S. in historic preservation from the University of Pennsylvania.

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Tags: affordable housinghudpublic housingjulian castro