The Latest News On New York's Socialist-Model Public Housing Provider, NYCHA

July 15, 2023 Francis Menton @ Manhattan Contrarian 

There’s always something new to report on New York’s housing follies. The accepted housing paradigm here in blue-model New York is that elite public policy geniuses with access to infinite taxpayer funds will create housing solutions to provide perfect housing fairness and justice to all. Somehow, they keep falling short.

Nowhere is this more evident that with the New York City Housing Authority, or NYCHA. NYCHA is the ultimate socialist-model low income housing provider, by far the largest such housing authority in the country. It owns and manages about 180,000 apartments in what are known as The Projects, home to something in the range of 400,000-500,000 people, or about 5-6% of New York City’s population. (In most other American cities, HUD-supported projects house about 1-2% of the population.) For decades, as housing authorities in places like Chicago and St. Louis were forced to dynamite many of their failed low-income projects, NYCHA was held up as the great success story of the genre. But was the apparent success real, or was NYCHA just more artful than its compatriots in covering up its failures?

I last reported on NYCHA in a post in May that covered a new Report out from the Citizens Budget Commission. The CBC Report had one piece after another of disastrous financial news about NYCHA. During Covid, many NYCHA tenants just stopped paying rent, and when essentially nobody got evicted, many more followed suit. By February 2023, NYCHA was down to collecting only about 63% of (already deeply subsidized) rents on a monthly basis. Rent collections for 2022 were estimated to cover barely 25% of operating costs, with nothing for needed capital upgrades, let alone other things that normal citizens have to pay for, like property taxes.

NYCHA’s gigantic hole of needed capital improvements started to come to public attention in 2015, when Bill de Blasio was the Mayor. The City issued a big Report titled “Next Generation NYCHA,” supposedly outlining the strategy to take NYCHA forward for the next several decades. You only had to get to page 5 to find out that NYCHA was facing a looming financial crisis:

[T]he promise of NYCHA as decent, affordable housing is under serious threat as the Authority confronts the worst financial crisis in its history. Billions in underfunding by all levels of government, outdated and inefficient management models, and rapidly deteriorating buildings have severely weakened NYCHA as an organization and diminished the quality of its life of residents. Today, tenants shoulder the burden of nearly $17 billion in unmet capital needs across the Authority’s aging building stock, living with leaky roofs, mold, unreliable heating systems, broken elevators, and a host of other problems at any given time.

$17 billion in “unmet capital needs” for about 180,000 apartments is almost $100,000 per apartment — an enormous sum for apartments that rent for an average of only about $600 per month.

But the $17 billion was only the start. In February 2018, the Wall Street Journal reported on a City Council hearing where NYCHA officials testified that the amount of unmet capital needs had then reached $25 billion. And then things really got going:

• Just a few months later, the figure had jumped to $32 billion. From the Gothamist, July 3, 2018: “A new capital assessment report from the City shows that the authority [NYCHA] requires $32 billion in repairs and replacements over the next five years.”
• By January 2020, the figure had become $40 billion. From The Real Deal, January 14, 2020: “Two years ago, the New York City Housing Authority said it needed $32 billion to repair its housing stock. That estimate has soared to $40 billion.”
• On December 30, 2021, NYCHA issued another new “Capital Plan,” now giving a range for its capital needs of $42.7 to 68.6 billion: “The capital needs are projected to grow anywhere from $42.7 billion to $68.6 billion over the next ten years depending on the estimated rate of deterioration. Of NYCHA’s 2,351 residential buildings, 77% are more than 40 years old.”

Which brings us to the New York Times on July 12, 2023, headline “Almost $80 Billion Needed for Repairs to New York City’s Public Housing.” Excerpt:

New York City’s public housing agency now needs more than $78 billion to repair or renovate aging kitchens, leaky pipes, faulty elevators and other problems over the next 20 years, officials revealed on Wednesday. . . . The new estimate . . . underscores the staggering challenge facing city officials and the New York City Housing Authority, which runs the system of more than 2,100 buildings.

$78 billion for NYCHA is a truly staggering sum — well over $400,000 per apartment, which is more than the median price of a single family home in the U.S. This is a hole so deep that it can probably never be dug out of. The answer of our elected leadership seems to be to go forward with business as usual, as if nothing were wrong. On July 6 Mayor Adams held a news conference appointing new leadership for NYCHA (the prior leadership having accomplished nothing other than putting out larger and larger numbers for capital needs). Key quote:

"We have been clear since day one that NYCHA residents deserve the same quality of life as every New Yorker, and this administration has embraced the responsibility and the opportunity to deliver that," said Mayor Adams.

OK, but is there any real plan to get out of this mess? I have repeatedly proposed that the best answer would be to give the projects to the residents, free of charge and without debt, with the proviso that property taxes start to kick in after a few years of grace period. Likely, most residents put in this position would quickly figure out that their best option would be to sell the buildings to the highest bidder, take the money, and move somewhere else that is cheaper. Many residents of the best-located projects could become millionaires in this process, and the City would get a large new source of revenue from the prospective property taxes on long-exempt land. Of course, this option is not under consideration as far as I can tell.

In late June we got an idea of where the City may be going, when NYCHA announced a plan to demolish and re-build two large public housing complexes in the Chelsea neighborhood of Manhattan. A post about the plan appeared on June 26 on a website called New York YIMBY (“yes in my back yard”). The two projects in question are called Robert Fulton Houses and Chelsea-Elliott Houses. Here is a picture of Chelsea-Elliott from the YIMBY post:

Lovely. According to YIMBY, NYCHA has partnered with two private developers, Related Companies and Essence, for the redevelopment. The number of apartments on the sites will be vastly increased, with most of the new apartments market-rate, but a large percentage of income-restricted units, for which the existing tenants will be given priority.

The YIMBY post does not contain financial details of the deal done with Related and Essence. Likely, they are getting a lengthy real estate tax abatement to compensate them for the large number of income-restricted units they will be providing. If they think they can make money on this, then I say I wish them the best. However, this type of deal can only work at a handful of NYCHA sites located in the best neighborhoods, of which Chelsea is one today. The number of units in Fulton and Chelsea-Elliott houses is about 2000, or barely more than 1% of the NYCHA inventory. The remaining 99% of the NYCHA units have no solution in sight at the moment.