Breaking Ground

Public housing units

YAKIMA, WASHINGTON - Like a pinch on the cheek some ideas grab hold and won't let go of you from the first moment you hear them. An idea, for example, like seeking private funds to help maintain and upgrade housing units owned and operated by publicly-supported and funded housing authorities.

In cities big and small there are hundreds of thousands of public housing units across the country. In Alaska, Idaho, Oregon and Washington state they offer affordable home to more than 22,000 households. Only households earning 80 percent or less of area median income are eligible to live in them and they must contribute 30 percent of their monthly income to rent. The balance of the rent - as well as maintenance and upkeep costs - is borne by the local housing authority with, in the Northwest, almost $125 million a year in operating and capital funds from HUD.

For most of the history of public housing in the United States, housing authorities have been barred from seeking private capital to help them maintain and upgrade public housing properties. Essentially, that's been funded entirely by resources from HUD and whatever local public resources the housing authorities can tap.

There is a logic to the prohibition. Public housing units are owned by and, thus, the assets of the public housing authority and the public body - usually a city or county government - that created them. Inviting private investors to help fund their operation might create a sense among some investors that they are part owners of the properties or that they should be entitled to a say in the day-to-day management of them. That's a sure-fire recipe for confusion, chaos, competing claims and confrontation.

On the other hand, the prohibitions against private investment in public housing have left housing authorities in a bit of a jam. Simply put, the backlog of capital needs - elevators to fix, units to make accessible, buildings to retro-fit to energy efficiency - has grown way beyond the means of housing authorities to meet them. Indeed, HUD's most recent estimate is that, nationally, public housing authorities have a capital backlog of some $46 billion in unmet maintenance and upgrade needs. And as much as HUD might like to provide that $46 billion to housing authorities, Secretary Donovan has, on more than a few occasions, said that, in the current Federal fiscal climate, those funds won't be forthcoming.

HUD, however, has proposed and, in 2012, President Obama and the Congress approved at least the beginnings of a solution. It's called the Rental Assistance Demonstration (RAD) pilot project. It permits the conversion of 60,000 public housing units into Section 8 project-based units, a conversion which, effectively, gives public housing authorities the same access to private capital that owners of privately-owned, HUD-assisted rental properties have enjoyed. Thanks to RAD, private investors will earn a return on their investments while housing authorities will have the capital funds needed to repair, renovate or, even, replace their units. The units will remain the property of the public housing authorities and be covered by a long-term agreement that keeps them affordable to tenants eligible for public housing for 15 or more years.

The response to HUD's initiative has been remarkable. As of November, more than 600 housing authorities had submitted applications seeking conversion of almost 110,000 housing units under RAD, some 50,000 over the number authorized by Congress. We need, HUD Secretary Donovan told Apartment Finance Today, "to increase the cap to 150,000."

The Yakima Housing Authority was among the first to seek RAD designation, proposing to convert 150 public housing units and, thereby, secure the private capital to upgrade them. Yakima's application was among the first 68 conversions approved by HUD. Shortly afterwards, the Washington State Housing Finance Commission awarded $14 million in Low Income Housing Tax Credits to the Authority to generate the private capital.

"It isn't that we haven't maintained them well with the funds we've had. We've done pretty good on that," Lowel Krueger, its executive director, told KNDO-TV when the application was approved. "But, after a while things, no matter how well you maintain them just wear out. And that's what we're trying to take care of."

And what better way to celebrate the Authority's participation in a groundbreaking HUD pilot than a RAD groundbreaking or project launch. On December 9th, reports KIMA-TV, the Authority began the restoration of the 150 units began. The work, it adds, should be completed by the end of 2014. It was the first RAD groundbreaking in the Northwest. Almost certainly it won't be the last.

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