A Small Insight Into Why New York Public Housing Is So Costly

February 12, 2024 Francis Menton  @ Manhattan Contrarian 

The Mann v. Steyn trial has ended, for now. Post-trial motions and appeals will likely play out over months and years, with little to report on a daily basis. It’s time to return to some of my other obsessions.

Like the New York City Housing Authority (NYCHA). Over the years, I’ve had more than twenty posts on this utterly failed agency, which is probably the best large-scale example of a pure socialist-model economic enterprise in the United States. A few of my prior posts on NYCHA can be found here, here and here.

After starting out with great optimism and hope in the 1940s and 50s, NYCHA began to decline in the 80s and 90s. By 2000 it had entered full socialist death spiral mode. Each year since then, it only gets worse.

One of the ongoing mysteries of NYCHA has long been why it costs the Authority so much more to operate and maintain an apartment than it costs a private landlord. After all, the biggest selling point of socialism (public ownership) has always been that it can save oodles of money for the taxpayers by eliminating the need for a margin of profit to go to a private owner. 

And yet, in a Report issued in May 2023, an independent oversight group called the Citizens Budget Commission published statistics indicating that as of 2022 NYCHA’s annual operation and maintenance costs per apartment exceeded those of private landlords by over 70%. Moreover, the cost gap for apartment O&M costs between private and NYCHA ownership had exploded during the prior seven years, rising from a 39% NYCHA premium in 2015 to a 71% premium in 2022. Here is the chart from the CBC Report, as reproduced in my May 23, 2023 post:

On top of which, after regularly spending all this extra money on annual O&M, the NYCHA units on average are in far worse condition than the privately-owned units. NYCHA is claiming a need for tens of billions of dollars of new taxpayer money to fund capital improvements needed to keep the buildings from crumbling. Naturally, NYCHA’s biggest supporter is none other than Senate Majority Leader Chuck Schumer, who regularly goes back to draw on the infinite pile of federal money for another and yet another bailout for NYCHA. Here is a transcript of a press conference given by Schumer and then-Mayor Bill de Blasio back in 2015 announcing a special $3 billion handout from the feds to NYCHA; and here is an NBC News report on another Schumer press conference about another massive bailout for NYCHA, this one from 2021.

How is it even possible to spend so much more than the private sector to provide so much less?

Actually, it’s not really that big a mystery. After all, this is socialism. Socialism everywhere is afflicted by a lack of incentives to control costs, plus a pervasive culture of corruption. Where all the money comes from the huge central source of infinite funds, what’s to stop everyone involved from trying to get their hands on as much of the loot as possible?

But even though we had a good sense what was going on from just applying our innate intelligence to the nature of socialism, it has been difficult to get any hard evidence of the pervasive corruption. That ended a few days ago (February 6) when the prosecutors from the Southern District of New York announced indictments and arrests of some 70 NYCHA employees for demanding and taking bribes to award repair contracts to various vendors.

The headline from the DOJ press release is “70 Current And Former NYCHA Employees Charged With Bribery And Extortion Offenses.” Excerpt:

U.S. Attorney Damian Williams said: “Instead of acting in the interests of NYCHA residents, the City of New York, or taxpayers, the 70 defendants charged today allegedly used their jobs at NYCHA to line their own pockets.  This action is the largest single-day bribery takedown in the history of the Justice Department.  NYCHA residents deserve better.  My Office is firmly committed to cleaning up the corruption that has plagued NYCHA for far too long so that its residents can be served with integrity and have the high-quality affordable homes that they deserve.  The culture of corruption at NYCHA ends today."

Multiple local news outlets have covered the story — which I suppose is to their credit, although one has to ask where they have been for years while everyone who thinks about it has known this has been going on. The New York Post has a few choice quotes of communications from indicted individuals. Example:

Joseph Fuller, an assistant supervisor at Seth Low Houses in Brooklyn, told a contractor in 2021 that the standard 10% kickback of the contract value would no longer suffice and that he would be raising the rates up to to 20% — telling him “there were other contractors willing to pay that higher amount,” court papers say.

Mr. Williams, I hate to tell you, but your statement that “The culture of corruption at NYCHA ends today” is woefully naive. The 70 people you just indicted are the tip of the iceberg. There are at least hundreds, and more likely thousands, at NYCHA involved in one form of corruption or another. (NYCHA has approximately 13,000 employees.). As just one example, my May 2023 post on NYCHA included statistics as to NYCHA rent collections, indicating that the Authority was collecting only about 63% of rents on a monthly basis (down from almost 90% pre-pandemic), with almost half of tenants in arrears to one degree or another. Almost nobody gets evicted. This situation continues with the active assistance and connivance of the NYCHA staff.

Don’t look for NYCHA to exit from its death spiral any time soon.