The New York City Housing Authority has targeted 13 sites in eight developments for market-rate residential construction, part of Mayor Bill de Blasio’s plan to privatize public- housing assets to raise money for the massive repairs needed. The city would offer private developers 99-year ground leases of NYCHA-owned land, to raise money for the authority’s capital budget.
Two of the sites on the list are the Fulton Houses in Chelsea and Campos Plaza on the Lower East Side, both in neighborhoods where the land is valuable enough to net a profit that would fund the development’s capital needs. At the Fulton Houses, an 11-building development just north of the intensely gentrified Meatpacking District, the city is considering demolishing two six-story buildings and selling the land to a developer who would build a larger one. That new building would have 30 percent “affordable” apartments, based on the federal area-median-income standard and not on NYCHA residents’ income.
Real Estate Equities Corp. has been lobbying NYCHA since 2017 for the plan, the PincusCo real-estate site reported May 1, and has paid a lobbyist about $140,000 to present its case to city officials. Under the plan, tenants of the demolished buildings would be relocated to two new buildings constructed on a parking lot.
Tenants have been told very little, said Loretta, a woman who has lived in Fulton for 28 years and asked to have her last name withheld. “RAD is involved, and NYCHA is trying to have Section 8 tenants,” she said. RAD, Rental Assistance Demonstration, is an Obama-era federal program that turns over management of public-housing sites to private operators, and pays them by converting direct aid to local housing authorities to Section 8 rent-subsidy vouchers. Three dumpsters have already been removed to make space for a luxury high-rise building now near completion, she said.
“NYCHA plans to demolish the small buildings on the periphery to give the appearance of improving the development,” said another longtime Fulton resident, a woman who asked for her name to be withheld. “They do not want us here at all. Gradually, they will get rid of Hispanic and Black poor people.”
At Campos Plaza, Madison Realty Capital—the private-equity firm that lent slumlord Rafael Toledano money to buy 15 Lower East Side buildings and then repossessed them when he couldn’t pay off the loan—is seeking to buy air rights from NYCHA for a property at 644 East 14th Street, half a block north of the development. The Real Deal real-estate trade journal reported May 2 that Madison had hired Capalino & Company, the same lobbying firm as Real Estate Equities Corp., to push for the deal. Capalino has raised $100,000 for de Blasio’s political initiatives , the New York Post reported in April. Madison may also be seeking upzoning on NYCHA property, according to PincusCo.
As at Fulton Houses, tenants say NYCHA is not telling them very much. The authority “keeps us in the dark,” says Jean Sparrow, who has lived in Campos since its opening in 1979, but “there is a rumor that NYU may build.” She said it was agreed at a tenants’ association meeting that any new development cannot be higher than 10 stories, and a photo of a 10-story development with ground-floor retail was distributed— but work abruptly stopped a few months ago. Tenants believe that a Campos parking lot is going to be developed for a 40-story dormitory.
One Campos building was converted to a privately run project-based Section 8 development in 2015, with L&M Development and C&C Management given a 99-year lease. Despite tenants’ protests, NYCHA split the Campos tenants’ association to set up a separate one for the Section 8 tenants, explained a resident who gave her name as Ms. Reid. The same thing “is being done at Pitt Street projects, too,” she added.
The road to privatization
Mayor de Blasio announced plans to partly privatize NYCHA last November, using the RAD program to help private developers raise money for repairs, from removing lead paint to fixing broken boilers. NYCHA would work with those developers to repair and renovate 62,000 apartments, slightly more than one-third of its 176,000 total units. The administration estimated that private capital would cover $13 billion in repairs, more than half of the Mayor’s “$24 billion plan to bring NYCHA into a state of good repair in ten years.”
“We know from experience that RAD is a reliable, scalable strategy that resolves deferred maintenance while keeping rents affordable,” then-Deputy Mayor for Housing and Economic Development Alicia Glen said. But Ed Gramlich of the National Low Income Housing Coalition says that the federal Department of Housing and Urban Development “has failed miserably at monitoring and enforcing the RAD resident protections.”
In January 2019, de Blasio and HUD Secretary Ben Carson agreed to appoint a monitor to oversee NYCHA, although one has not yet been chosen. In March, NYCHA sent a “Significant Amendment” to HUD asking to expand use of Section 18 of the Housing Act of 1937. This request would blend RAD and Section 18 funding to make deals with private developers more viable. Section 18 allows local housing authorities to demolish or dispose of buildings with approval from HUD.
The initiative known as NYCHA 2.0 (also known as NextGen projects) would let developers build on currently vacant NYCHA-owned land and buy air rights from NYCHA to construct taller buildings. It revived a Bloomberg-era scheme for “infill” buildings in NYCHA developments with a mix of luxury and “affordable” apartments.
Public housing began with the New Deal vision that the government could replace slums with clean, spacious, and well-maintained housing for working people. As Congress would not directly fund it, President Franklin D. Roosevelt subsidized construction of First Houses on the Lower East Side—New York City’s first public housing, opened in 1935—and other early NYCHA developments through federal public-works programs.
That idealism began eroding almost immediately. The Housing Act of 1937, the Wagner-Steagall Act, which established federal aid for public housing, also diverted some of those funds to support the private mortgage market. This cut into maintenance and amenities; it’s one reason why most NYCHA units do not have doors on their closets.
The Housing Act of 1949 substituted the phrase “Title I” for “Slum Clearance Program,” which was part of the 1937 Housing Act. The Title I designation allowed federal housing funds to be used for “urban renewal” projects such as the New York Coliseum and Lincoln Center, Peter K. Hawley wrote in Housing in the Public Domain: The Only Solution.
Another loss in revenue came in the early 1970s, when Congress set rents at 25 percent of tenant income (later raised to 30 percent). “This change brought about an increase in rent to those with good incomes and a decrease in rent to those on assistance,” Wendell Pritchett wrote in Brownsville, Brooklyn. “Those who could find better housing at the same price, moved…. Maintenance suffered accordingly.”
New York City first privatized public housing in 1960. NYCHA agreed to sell the under-construction Benjamin Franklin Houses in East Harlem, designated as a middle-income development, to a private “co-operation” of Union Settlement, local clergy, and businesspeople.
During the 1960s, “turnkey” programs began. Private developers could build housing projects on land they owned and turn over the keys to the Federal Housing Administration when construction was complete. By the 1980s, the federal government was using tax credits as incentives to leverage private capital into “affordable housing,” the model for almost all publicly subsidized housing built since then.
Public-housing funds were drastically cut in the Reagan era. The HOPE VI program, which began in 1992, sought to replace what were considered the worst public housing projects with mixed-income developments. Over 15 years, 96,200 public housing units were demolished and 107,800 mixed-income units were developed. Less than 12 percent of the residents displaced moved into the replacement housing.
Privatization might also be a way to get rid of unions representing public- housing workers. Secretary Carson terminated the Laborers Union’s contract with the housing authority in the small town of Cairo, Illinois, in June 2017, on the grounds that its “extremely favorable” terms impeded the bankrupt authority’s financial recovery. Lynne Patton, HUD’s New York/New Jersey administrator, threatened on Twitter in February that Carson would similarly abrogate union contracts for public-housing workers in New York City, who are primarily represented by Teamsters Local 237.
“I’m very excited about what we have agreed to here because I think it sets a great precedent for what could be done around the country,” Carson said after his January meeting with de Blasio.