REDEVELOPING PUBLIC HOUSING

Julia Vitullo-Martin, March 2008

There's no landlord on Earth quite like the New York City Housing Authority. It's enormous—by far the largest housing authority in the country—influential, and imposing. It owns some of the most attractive property sites in New York—and some of the worst. Many celebrated people have lived in its buildings, and many notorious ones as well. Most of its residents are doubtless hard-working, striving New Yorkers, though relatively little is actually known about them. Some 44 percent of households receive at least a portion of their income from employment, while 14 percent are on public assistance. About 35 percent of household heads are aged 62 or older, and 34 percent have some form of disability. A family's average stay in public housing is almost 18 years. The average rent is $362 monthly—which, of course, is not nearly enough to cover NYCHA's operating expenses.

In startling contrast to nearly every other big-city system NYCHA has fought hard over the years—against the bitter opposition of local advocates and Washington bureaucrats and politicians—to maintain working families and income diversity in its projects. For this, every New Yorker should be grateful. Other authorities produced housing of last resort for the desperately poor. While this almost happened in New York—in the 1980s NYCHA was politically coerced into making the poorest households, including the homeless, their highest priority—in the 1990s NYCHA renewed its traditional commitment to working households. Today, 49 percent of residents have incomes above the poverty line. This proportion is likely to increase, since roughly two-thirds of tenants accepted in the last two years are gainfully employed.

With its 343 projects holding over 178,000 units and housing nearly 406,000 residents, NYCHA owns one of every 13 rental units in the city. Even more important, it owns property throughout the five boroughs, some of it in middle- and upper-income neighborhoods, reflecting a long-standing policy of avoiding the calamity of excessive concentration of low-income, non-working households in neighborhoods from which working families then flee. One problematic result, however, is the frequent presence of low-income, sometimes deteriorating high-rise projects in gentrifying neighborhoods. Even so, the dispersal of public housing gives nearly every neighborhood an interest in NYCHA's well-being.

Because NYCHA's operations demand government subsidies, its financial problems have become dire in this era of cutbacks. The State of New York stopped all operational funding for public housing in the 1980s, leaving the city to make up the difference. Since 2001 the federal government has withheld $611 million from the Operating Fund Formula’s allocation to New York; for fiscal 2008, it is withholding almost $90 million. The result is that NYCHA has been running hefty annual deficits for several years. Even with the $45 million in workforce and expense reductions it has made, NYCHA's deficit this year stands at $190 million. Last year it handled part of its deficit by using $100 million in capital funds to cover operating expenses—a fiscal contrivance that can’t often be repeated. For one thing, NYCHA needs its capital funds to make substantial improvements to its buildings.

DIRE PROBLEMS, READY SOLUTIONS
Because NYCHA owns tens of billions of dollars worth of property all over New York, it has the ability to solve its own financial problems by selling at least some of them on the open market. What's more, NYCHA's property is mostly in pretty good shape. "Even at the nadir of public housing in this city," points out Douglas Apple, NYCHA's general manager, "the buildings never experienced the physical deterioration common in other cities. The population did shift, but the buildings stayed sound."

The market value of its projects can be estimated by looking at adjacent sales. NYCHA's Jacob Riis, Lillian Wald, Bernard Baruch, and Alfred E. Smith Houses in Lower Manhattan, for example, are immediately south of the 110-building Peter Cooper Village and Stuyvesant Town developments, which were sold by MetLife last year for $5.4 billion. Stuyvesant Town is only moderately more attractive than Baruch. Both developments are groups of mundane towers-in-the-park. Baruch or Jacob Riis or any NYCHA project could be just as marketable with proper redesign and management.

NYCHA's assets in Lower Manhattan are simply one possibility among many. Bordering the hipster sections of Brooklyn are the Art Moderne Williamsburg Houses. NYCHA has several projects in the vicinity of the privately owned Starrett City rental complex, for which a developer last year offered $1.3 billion. The federal government vetoed the sale for regulatory and political reasons, but the offer indicates what NYCHA itself could collect were it to go that route.

NYCHA could experiment by starting with those well-located projects for which developers would pay top dollar. Or it could instead designate projects—like some of the old, deteriorating, state-financed ones on Manhattan's Upper West Side—that are troubled and in need of a serious make-over. New York has many respected developers—both for-profit and not-for-profit—who would readily work with NYCHA. Indeed, some already have.

In 2005, NYCHA sold an empty lot and several dilapidated scattered-site buildings on University Avenue in the Bronx for one dollar to developer Peter Magistro, who renovated them into exceptionally attractive housing. "We're developers and managers, and we take care of our property," says Magistro. "That means we keep our buildings ship-shape. The building at 2001 University was so bad when we first saw it in 1998, in such terrible condition, filthy and drug-infested, that my brother said, 'It doesn't need a renovation. It needs an exorcism.' But we're in business for the long term, and things have worked out. You have to look at a project over 30 years. Will it work? Is it sustainable?" Today, the buildings are still beautiful and blend flawlessly into their neighborhood—no indication that they were once burned-out wrecks in an area notorious for abandonment and decay.

Equally important is figuring out how to weave into their neighborhoods the huge traditional projects that planner Jane Jacobs called "self-isolating." Ironically, even though they seem to loom over adjacent blocks many of NYCHA's projects are actually underdeveloped. "NYCHA has all sorts of development rights that haven't been exploited," says Michael Lappin, the president of the Community Preservation Corporation, a bank consortium that is New York's largest not-for-profit mortgage lender. He proposes that NYCHA exploit the value of its property by building to the full zoning envelope. "Have a good planning outfit go to Baruch or Jacob Riis," says Lappin, "and figure out how much density is allowed now and how much could be permitted under new zoning. Add on, add up, or build in between. One of the touchstones of this country is the belief in economically and culturally diverse communities, which could be created where isolated projects now stand." However configured, the projects in Lower Manhattan are worth billions of dollars.

Indeed, architect Michael Kwartler, who undertook a study of public housing, "Building in Your Own Backyard," in 1989, concluded that NYCHA has so much unused floor area in its projects that the city would not even have to rezone for NYCHA to be able to reap development benefits on its sites. "It could simultaneously redevelop and reintegrate its projects into their neighborhoods," says Kwartler, though he adds that many of the site plans are idiosyncratic, since "over the years NYCHA has tried almost everything."

IT'S BEING DONE IN ATLANTA
Meanwhile, the Atlanta Housing Authority, ranked in the early 1990s as the nation's fifth-largest authority and the seventh most troubled, has been doing this since 1996—working with private developers to demolish its old projects and replace them with attractive one- and two-family townhouses built in vernacular style.

Although the new houses are beautiful, they're not Atlanta's real innovation. "We are not making a nicer box," says Renée Glover, AHA's president and CEO. "We are intentionally creating a market-rate community with a seamless affordable component. We work with private-sector development partners who have expertise and access to financial capital. Our projects are driven, owned and managed by the private sector." Forty percent of the residents are market-rate tenants and homeowners, 40 percent are former public housing tenants who meet stringent new qualifications, and 20 percent are low-income tenants.

To the naked eye, AHA's developments are indistinguishable from the adjoining communities. They are, as Glover says, "thriving communities that any of us would be proud to come home to." Glover partnered with private developers, leveraging small amounts of government money with far larger sums of private investment. She demolished the downtown Techwood/Clark Howell Homes, two of the country's first public-housing projects, and built Centennial Place with $42.5 million in federal Hope VI revitalization funds and about $2 billion in private investment.

Similarly, she demolished the Perry Homes, three miles northwest of downtown Atlanta, and replaced them with what will be the AHA's largest development, the West Highlands project, which combines 570 apartments with an 18-hole, PGA-level golf course designed by Jack Nicklaus. She used $25 million in federal revitalization and demolition funds and $444 million in private investment.

AHA requires all tenants between the ages of 18 and 65 (except for the disabled) to be either employed or enrolled in job training or school. "Residents must engage in an activity that will grow them out of the need for subsidy," says Glover. The result: Employment is way up (from 13 percent of residents in 1994 to over 80 percent today), and crime is way down. Crime overall in Atlanta’s public housing developments has decreased 76 percent, according to a Brookings Institution study.

What's more, all the private development springing up around the former AHA projects shows that private investment will readily enter once what Glover calls "residential brownfields" are removed. Centennial's neighborhood, which includes the Georgia Institute of Technology, the headquarters of Bell South, All Saints Church and should never have become a brownfield, is "on fire" today, says a developer. Retail and commercial services are appearing in an area that long had none. While Atlanta, like New York, has endured ever decreasing federal operating subsidies, the profits from AHA's market-rate developments, Glover says, have more than replaced the missing federal aid.

WHAT’S NEXT
Even if Americans elect both a Democratic president and a Democratic Congress in the fall, the federal government will almost surely continue its decades-old hostility to public housing. It will not fund new construction, or even provide adequate operating subsidies. No new subsidies will be coming from the Bloomberg administration, which is cutting back essential services, including the police.

Is this so bad? Not necessarily, because NYCHA's resources and leadership are impressive. NYCHA has within itself what it needs to make the leap to the next stage of self-reliance and growth. It's never again going to build the old, unloved, federally mandated projects. But it is going to have to decide how to integrate the projects it owns into neighborhoods that are undergoing substantial investment and rapid improvement.

Atlanta-style solutions, by which profits from market-rate developments replace vanished federal aid, could solve many problems for NYCHA, its residents, and its neighborhoods.