May 20, 2010
NEWARK, N.J. -- The John W. Hyatt Court public housing project is an unlikely refuge for a mother and two young children. Jets roar overhead en route to the nearby airport, while traffic on New Jersey’s Route 1/9 zooms alongside the cluster of three-story brick buildings. Drug gangs roost here in between police sweeps, and just last month, a former resident was shot and killed in the asphalt courtyard.
Seven years ago preschool teacher Nancy Mincey and her sons were on the verge of homelessness. Had it not been for Hyatt Court, Mincey said, “we would have had to pray we could find a shelter.” The security that Mincey and the other residents have may not last. Four years ago, soon after spending more than $1 million to upgrade Hyatt Court’s boilers, the city’s housing authority determined that the Hyatt Court and seven other aging complexes had “outlived their useful life expectancy.” Two of the eight complexes, with 1,005 apartments between them, would need $91 million worth of repairs just to be brought up to minimum standards. The city resolved to tear most of them down (including five buildings in Hyatt Court). Newark Housing Authority director Keith Kinard recently testified before Congress that he doesn’t even have enough funds in his budget to complete the four demolitions approved so far.
For many long-time residents, the plagues of public housing are outweighed by the benefits. Senior citizens playing cards in the Hyatt Court community room say they cherish the security of fixed low rents and a network of familiar neighbors. “I know the people right here,” explained Esther Harris, who has lived in Hyatt Court since 1955. “You go outside [the complex], you don’t know your neighbors.” Tenants spend no more than 30 percent of their monthly income on rent; the rest is subsidized by the federal government.
But public housing in New Jersey and a host of other states is about to face the brutal reality of massive budget cuts as the Great Recession targets the most vulnerable among us. The city housing authority, unable to come up with the nearly $500 million needed for repairs and improvements, has received federal approval to tear down Hyatt Court and three other dilapidated complexes that were built in the 1940s. Since 1995, local housing authorities across the country have eliminated about 165,000 decrepit apartments in the face of a repair backlog totaling an estimated $22 billion.
The Obama administration is arguing that there is another way. Seeking to stop the demolition and improve living conditions for more than 1.1 million households, the Department of Housing and Urban Development (HUD) is pressing to fundamentally change the strategy for low-income housing. The idea: Get local public housing authorities to operate like private landlords.
A New Kind of Home Improvement Loan
Since the 1930s, public housing has been funded almost exclusively by the federal government. Last year that totaled $7.4 billion, not counting $4 billion in stimulus funds. HUD’s plan, Transforming Rental Assistance, encourages housing authorities to borrow from private financial institutions using the buildings as collateral. It is, essentially, a home improvement loan writ large.
The agency is requesting $350 million in federal funds to make the buildings “loan worthy” so housing authorities can secure some $7.5 billion from private sources. “You can take [the real estate] to the bank like any other property owner would do, and get a mortgage to improve your property,” said Sandra Henriquez, Assistant Secretary for Public and Indian Housing and former CEO of the Boston Housing Authority.
Henriquez hopes that making local housing authorities accountable to lenders as well as HUD will lead to fiscal discipline for agencies that for the last seven decades have received government subsidies no matter how well or badly they manage their properties. “There was no incentive to do better,” Henriquez said. “It wasn’t thought of as a business.”
The initiative would also give residents the option of leaving public housing after two years, by providing relocation vouchers valued at their current rent for private apartments. For HUD, it’s the latest bid to move public housing and its residents away from their historic isolation and integrate them into larger communities. Affordable housing experts say the move is urgently needed. “Right now the status quo is not maintainable,” says Mary Cunningham, senior researcher with the Urban Institute. “This really brings HUD into the 21st century.” Opposition to the plan includes public housing officials who don’t like the voucher option and who object to the 18 percent budget cuts requested by HUD — a reduction of nearly $41 million from the 2009 level of $2.45 billion.
There are, of course, risks to the HUD plan. Property improvement loans on a large scale assume that the money will be spent wisely; that contractors will be vetted and compete for jobs; that none of the money will be squandered. The management track record for many of these housing projects is as depressing as the peeling paint and filthy hallways in some of the buildings. Ultimately bad management can lead to foreclosure. And one other problem, notes David Randler of the National Housing Law Project: After housing authorities' 30-year agreements with HUD expire, many buildings could become unaffordable to low-income people. “HUD hasn’t fleshed this out sufficiently,” he said.
Hyatt Court, built in 1942, was once a vibrant, 402-unit housing complex, but neglect, vandalism and crime have taken a toll. Five of John W. Hyatt Court’s 12 buildings are now boarded up. The remaining Hyatt structures have been fixed and painted inside and out, after Mincey and her neighbors organized and demanded to stay. “We were living in grimy conditions. I hated going into my building,” Mincey said. “People couldn’t take baths. There were holes in the walls.”
Sitting in their bare-bones community room, the Hyatt Court card players say they’d rather stick it out in the place they know than take their chances with vouchers and private landlords. Meanwhile, Mincey has found another way to improve her living situation. After fighting to rescue Hyatt Court, she’s getting married this year and plans to move into the home her fiancé owns. “I’m looking forward to getting out of public housing,” she says, “and never coming back.”
Correction, May 20, 2010: This story was updated at 11:10 a.m. to correct 2009-2010 capital improvement figures.