It’s easy to see why Mayor Bloomberg and New York City Housing Authority head John Rhea were pleased, and relieved, to announce an ostensible public-private partnership to rescue 21 deteriorating housing projects. But in the long term, the deal is bad news for the city.
The buildings, which hadn’t previously qualified for the federal funds used to maintain public housing, were an obvious headache: Originally built by the state, they were sucking limited maintenance funds from the rest of the system. Any official who has to worry about an accident in a broken public-housing elevator would do whatever it takes to avoid such problems.
So Bloomberg and Rhea were surely relieved to announce a deal to “federalize” the projects and tap $200-plus million from Citibank (which gets federal tax credits in exchange). And this may work as creative public financing — but it’s bad policy for the city and an ominous sign for those concerned that a “corporatist” Washington will increasingly call the shots on the use of private capital.
Bloomberg himself most clearly revealed the essential problem of the plan — though he clearly saw it as a key selling point. To reassure tenants worried that a nonprofit entity infused with cash from an arm of Citibank will nominally own the properties, he said: “The land these developments occupy must always be used for public housing and nothing else.”
This is mystifyingly ill-advised land-use policy — especially from a mayor who has farsightedly rezoned much of the city to make sure land will have a better chance to generate jobs and prosperity. What if a major biotech manufacturer wanted to build a plant on the site of any one of the five saved projects in The Bronx — the borough with the highest poverty rate? (What if Forest City Development had wanted to build a new sports arena there, for that matter?)
New York City public housing includes some 178,000 apartments in 340 projects made up of 2,600 buildings. It comprises 2,500 acres of real estate, a city within the city. The city itself has valued it at a staggering $4.3 billion. It is foolish to adopt an ironclad policy freezing all that real estate in place — especially when much of the city’s public housing stock is under-occupied (more bedrooms than tenants who need them) and many of its sites stand on valuable real estate, to which private commercial developers might be drawn.
Some will say that the deal announced Monday has done just that — drawing Citi cash to help maintain affordable housing. But this can hardly be considered a true private investment. Citi wasn’t drawn into the deal by the scent of profit: The mayor has made clear the buildings can’t be sold and the tenants are guaranteed the same rent deal (30 percent of income).
The banking giant was drawn to purchase the bonds whose proceeds will help fix up the projects because doing so qualifies for federal tax write-offs (through the low-income housing tax credit). This will also help it fulfill its Community Reinvestment Act requirements. And it may well have felt some pressure to join the deal — after all, Citi is only alive thanks to federal TARP bailout funds. This is corporatism — private industry as a de facto arm of government.
A Bloomberg legacy to be proud of would work toward gradually consolidating public housing, without disrupting tenants — thereby reducing costs and freeing land for productive, tax-generating uses.
“Let me just remind you: Other cities, you see on television, they’re blowing up public housing. Here, we’re investing in public housing,” Bloomberg said. Well, yes. But which is wiser?
Atlanta, for example, has demolished virtually all its public housing — replacing it with new mixed-income and commercial development that has helped increase the city’s tax base by an estimated $2.4 billion.
By contrast, New York’s latest (short-term) plan to rescue public housing just perpetuates a long-term problem — and precludes long-term benefits.
Howard Husock is vice president of pol icy research at the Manhattan Institute and author of “America’s Trillion Dollar Housing Mistake.”