The Rental Assistance Demonstration program has been making news nationwide as a source of money for revitalization of public housing stock for months, but there is rarely any information about its mechanics. Here’s what hides behind its opaque title.
To put it simply RAD is a program to privatize public housing. Before the college liberal scoffs to death or the chamber of commerce president jumps too high for joy, lets examine what this really means and what the consequences could be.
The basics of RAD
Faced with relentless budget cuts, the Department of Housing and Urban Development is finding itself severely short on cash. This bodes poorly for housing authorities in cities, towns and counties all over the country who rely on HUD to provide the lion’s share of funds to operate and maintain their public housing units.
Small housing authorities have been hit very hard. The modernization required for aging housing stock is far too expensive to undertake on a dwindling HUD budget if you are, say, Bessemer, Alabama. Larger cities have the advantage of more funds from state and local governments though they also deal with much larger numbers of units.
All of this is happening as the need for affordable housing and the number of extremely low-income households grows at unprecedented rates (depending on the area, “extremely low-income” means a household of four making $7,450 – $33,300 per year). Check out this neat map that shows you how many affordable housing units there are per 100 extremely low-income households county-by-county. The national average is 29, which laves a shortage of over 8 million affordable housing units for these families in the United States.
Of the affordable housing that does exists, mostly in the form of standard public housing, HUD estimates that there is a $20-$30 billion shortfall for capital repairs and maintenance. It’s not hard to understand what this means. Just look at the recent scandal in Richmond, Calif., where severe budgetary shortfalls, exacerbated by bad management, have left people in slum conditions.
Last year HUD decided that it’s time to stimulate the situation with private funds by allowing housing authorities to transfer their public housing units into the hands of non-profits and developers. These entities compete to purchase the units from the authorities and are then supposed to use their own money to renovate, redevelop and manage the properties. It has been pointed out, however, that much of the funding for this would still come from the government in the form of tax credits to the developers.
What is the mechanism for maintaining affordability in the RAD properties? Tenants living in these now-privately-owned units would receive Housing Choice (Section 8) Vouchers to subsidize their rent and the option to leave the RAD development after one to two years to use the voucher elsewhere in the private housing market.
So far, HUD has allowed up to 60,000 public housing units to enter RAD and competition for these slots has been stiff. Housing authorities large and small were invited to apply for participation with however many units of family or senior housing they choose. This yielded applications for a total of over 176,000 units so far.
In this first cycle, Chicago had by far the largest application. Here’s the top 10 list of RAD applicants, by number of units as of December 31, 2013:
- Chicago, Ill. – 10,935 units
- El Paso, Texas – 6,100 units
- Nashville, Tenn. – 5,384 units
- Birmingham, Ala. – 5,015 units
- Baltimore, Md. – 4,583 units
- San Francisco, Calif. – 4,575 units
- Charlotte, N.C. – 3,424 units
- Mobile, Ala. – 3,410 units
- Tampa, Fla. – 3,065 units
- Greensboro, N.C. – 2,195 units
A strange application
It’s worth noting that Chicago’s application is quite odd. Despite the fact that there are plenty of family public housing units in need of maintenance and repairs most of the 10,935 units the Chicago Housing Authority listed on its application are in senior properties (half of the total number of senior units in the city). This was confirmed by CHA spokesman Matthew Aguilar last month.
The agency plans to throw the other half of the senior units in the second application cycle. However, all of the senior public housing properties in Chicago were modernized and rehabilitated in the past 10 years as part of the authority’s Plan for Transformation. In other words, these units are in pretty good shape. This has residents and advocates wondering why the CHA would want to convert them through RAD, especially when so many family public housing are in sore need of updating.
HUD has not yet approved the CHA’s first application but the fact that the agency wants all senior units to eventually go into RAD “has the senior nervous,” said Robert Whitfield, the attorney who represents the Central Advisory Council, an organization of elected tenants leaders.
Month after month, CHA seniors have been coming to the agency’s board meetings to express concerns. They fear that their rent would increase but they would not be able to choose housing units outside of RAD. Whitfield points out that the option to take a voucher elsewhere would be a “meaningless choice” for seniors if all senior properties were in the program.
Whitfield thinks that it would benefit HUD to approve an application like Chicago’s. “I think you take over a building that has minimal issues and therefore you can go to Congress and say ‘Look this has been a successful program, there are no issues, look how it’s working.'” He figures it would be a win-win situation for both agencies. “Sometimes it’s hard to say where CHA ends and HUD begins, because this is Chicago.”
The pros and cons
RAD has been hailed as a saving grace for many tiny and mid-size housing authorities with no possibility to secure money to modernize and maintain their units otherwise. Some reports have downplayed the fundamental shift of housing units from public to private ownership by describing RAD as simply a way to cut out red tape and allow housing projects to receive money from private investors through Section 8 of the National Housing Act rather than from the federal government through Section 9.
However, there are several causes for concern, especially in bigger cities where a loss of hard public housing units creates an unpredictable future for long-term, affordable housing.
Some residents and advocates fear that RAD would result in a further reduction of affordable housing units, if for example a developer buys a dilapidated housing project and then redevelops it with fewer units. Though HUD has specified that units in any development cannot be reduced by more than 5%, there may be exceptions. Switching to project-based Section 8 vouchers is also a precarious way of maintaining affordability because, for landlords, the hassle of complying with government regulations has to balance against the financial benefit of having long-term government contracts and guaranteed tenants.
Another concern is the that residents could see their rents increased.
It is also quite possible that private developers will leverage new eligibility requirements on their units, which, as the mixed-income experiment in some cities has shown, will mean that the most vulnerable population in need of affordable housing is likely to slide into more troubling conditions.
The effects of RAD conversions will not be apparent soon, but already 57,000 units of public housing nationwide have been approved for the program. This is still a drop in the bucket given the overall shortfall of both new housing and renovation funds, but it is a peek into what could potentially be the future of public housing in the U.S.
If Chicago is any indication, the transition from hard public housing units to Section 8 vouchers as a primary means of delivering affordable housing will only accelerate in the years to come. Here is a handy chart created by Ingrid Gould Ellen of the Furman Center for Real Estate and Urban Policy at NYU and presented by Jessica Schieder of the Center for Effective Government on their blog.
I’ll let Jessica do the honors of explaining:
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.