What Happened to New York City Public Housing, and How Can We Fix It?
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What Happened to New York City Public Housing, and How Can We Fix It?

The U.S. has a long tradition of republicanism and laissez-faire capitalism that has not favored strong federal housing policy or intervention in the housing market. Policymakers have believed that private enterprise could best provide sufficient housing and that, as with healthcare and education,[1] government involvement would bring in “socialism” and undesirable control of the free market. There are two major exceptions to this tradition: the 1937 National Housing Act, a result of the devastation of the Great Depression, and the “war on poverty,” initiated by the Johnson administration in the mid-1960s.[2] Successful as these programs were, subsequent federal housing policy has mostly been aimed at undermining them, through either malice or neglect. Instead, federal policy has mainly sought to promote home ownership, the American dream, but that approach was eviscerated by the collapse of financing due to the subprime loan crisis and its aftermath. The result is that there is currently virtually no cogent federal housing policy. Thirty-five million Americans live in substandard housing; a much larger number devote 50% of their income to a roof over their heads. Housing construction is at a historic low, and construction costs have risen so high that they are well beyond the means of the average citizen. 

The New York City Housing Authority (NYCHA) has always been an exception to this picture. Galvanized by Jacob Riis’ reporting on unsanitary and congested conditions in the city’s tenements as well as pressure from social reformers, New York City created NYCHA in 1934. Using funds from the Public Works Administration, at least in part, NYCHA produced several iconic developments: First Houses in 1934 (the selective demolition and renovation of tenement buildings), Williamsburg Houses in 1935, and Harlem River Houses in 1937. Between 1934 and the end of the century, NYCHA grew to manage more than 180,000 units, becoming by far the largest housing authority in the nation. 

But NYCHA’s portfolio was not the result of a single, consistent program; instead, it worked within several different programs motivated by changing policies over the decades. After the Depression and the end of the Public Works Administration program, NYCHA would have struggled to finance more construction. But World War II intervened, and the housing authority undertook several developments to house workers engaged in the war effort.[3] In the postwar years, the federal government continued to provide funds to public housing authorities (PHAs) as the demand for housing for returning veterans became a priority. Ironically, this period of renewed government support sowed the seeds for NYCHA’s eventual demise. 

The U.S. Congress saw public housing primarily as a program to address poverty. Officials declared that taxpayer dollars were to be spent sparingly and only to serve those who could not afford housing. Public housing was not to compete with the private-sector housing market. NYCHA was not allowed to build anything but the minimum. So gone were the retail stores, daycare centers, health centers, and branch libraries that were included in its early developments.[4]

The distinction between early and later subsidized developments can be felt viscerally on the Lower East Side of Manhattan. At Peter Cooper Village and Stuyvesant Town, ground-floor retail enlivens the street; Wald and Baruch Houses, on the other hand, provide only bare-bones apartments with none of the commercial activity that could enhance streets and sidewalks. To make matters worse, influence from Europe, advocating the modernist “tower in the park” typology, resulted in buildings that were set back from the street wall, breaking the Manhattan grid with anonymous towers of plain, minimal design. And worse still, Congress decided in 1969 to restrict eligibility for public housing to families earning less than 30% of the area median income. Despite fierce resistance from housing advocates and professionals, the Brooke Amendment to the Housing and Urban Development Act of 1969 succeeded in concentrating large numbers of very poor families in public housing at the expense of working families. The resulting rise in social problems and crime in public housing is widely known and often erroneously blamed on its architecture.[5] But it was the Brooke Amendment that precipitated the social problems that came to plague public housing in the decades that followed.

As disenchantment with the housing program increased in Congress—the fact that the problems were of their own making seemed to escape the legislators—the federal government slowly abandoned it. When the Nixon administration terminated the capital construction program, new public housing across the nation was effectively ended.[6] This policy continued during all subsequent presidential administrations. Even when Democrats controlled Congress, they saw no future for public housing. Neoliberal economic policies held the private sector to be the solution to housing production, and whatever taxpayer dollars were allocated to the matter were funneled through programs such as the Low-Income Housing Tax Credit or the Section 8 Housing Choice Voucher program.

NYCHA became the largest recipient of Section 8 program assistance,[7] which allowed many families access to private-sector rental apartments. However, the Section 8 program worked only when private-sector apartments were available. It was never a catalyst for housing production, and in New York City’s tight rental market, many Section 8 vouchers went unused.

Meanwhile, the federal government continued a quiet war of attrition on public housing programs. The HOPE VI program offered capital grants to PHAs to renovate, but preferably demolish, their public housing. Many cities participated, for the most part choosing to demolish, although NYCHA used the program only sparingly.[8] The federal operating subsidy that bridged the gap between rent receipts and the cost of operations was slowly reduced until it was below the actual cost of maintenance and operations. Unable to raise rents, and with a high proportion of welfare families and low proportion of working families (a result of the Brooke Amendment), public housing authorities fell further into financial difficulty. Neither states nor cities, which had largely ended their support for public housing once the federal government stepped in, were willing or able to fill the gap. At NYCHA, these circumstances resulted in staffing cuts and a backlog of preventive maintenance. One initiative—the Comprehensive Grant program, which allocated capital funds to PHAs for renovation of existing housing stock (but could not be used for new housing construction)—did continue after the Nixon administration. NYCHA received significant Comp Grant funds in the 1980s and 1990s that allowed it to rehabilitate several of its older developments. The terms of the funding also allowed NYCHA to renovate or build community centers and senior centers to serve the youth and senior populations in NYCHA housing, making up, to some extent, for the lack of such provisions in the postwar development program. But eventually, even the Comp Grant program was cut back.

Where does all of this leave us in 2024? With more than 170,000 units, NYCHA is still by far the largest PHA in the nation. Vacancy rates remain extremely low, and the waiting list for NYCHA housing is decades long. Among its strengths, NYCHA counts a population of active residents, many of whom remain in public housing for decades, often for life. For the most part, NYCHA did not site its housing in poor neighborhoods far from the city center, and many NYCHA developments stand cheek-by-jowl with market-rate housing in desirable neighborhoods. 

But the underlying financial crisis continues, and it’s probably reasonable to assume that no federal supply-side housing program is likely in the foreseeable future. Federal policy is reluctant to launch into any form of housing production—a position that seems to be true regardless of political affiliation. The only extant federal subsidy is the Low-Income Housing Tax Credits (LIHTC)[9]: notoriously inefficient in terms of return on the dollar, the program nevertheless remains popular with both political parties. Direct government involvement in housing production is even less likely at the city or state level. Efforts in New York City to incentivize private developers to build “affordable” housing—the current Mandatory Inclusionary Housing requirements—have had limited success, but also unforeseen adverse consequences.[10] Equally improbable is the provision of sufficient demand-side subsidy, such as the Section 8 voucher system, which would allow all Americans to participate in the free market for housing, regardless of income. Even if adequate subsidy was provided, there would not be enough available stock to satisfy demand.

In the mid-1990s, the Department of Housing and Urban Development (HUD)—the federal oversight agency for all public housing authorities—relaxed the Brooke Amendment to allow PHAs to set aside up to 50% of vacancies for families earning up to 50% of median income. This welcome change will go some way toward restoring the economic balance among public housing residents so that it more accurately reflects the demographics of the wider community. It would also, theoretically, increase the rental income to PHAs, with higher-income tenants coming back to public housing. However, the very low turnover rate for NYCHA housing means that it will take many decades to produce any significant change.

So there appear to be two main problems facing NYCHA: how to stimulate (i.e., subsidize) production of housing at a level affordable for the thousands of families on its waiting list, and how to sustain the current public housing program and steer it out of its current fiscal crisis. Since any solution to either of these problems will involve significant capital investment, finding the source of that capital presents the first challenge.

A third problem, perhaps shorter in duration than the first two, is that NYCHA’s aging housing stock has suffered from years of underfunding and, as a consequence, delayed maintenance. Estimates of current needs to bring the portfolio into a state of good repair have grown to around $35–$40 billion. Policymakers seem to be ignoring this predicament. If NYCHA housing ultimately fails, then the problem will become one of housing 400,000 families—a crisis far more serious than the current one.

It is tempting to point out that if the U.S. did not devote a substantial part of its budget to massive defense spending and even more to tax breaks for the wealthy, all funded by deficit financing, there would be ample capital for housing subsidies. But it’s probably more realistic to look at redistributing the federal funds already allocated to housing and also at other regulatory changes that might support low-income housing production and subsidize NYCHA operations. 

Other than the LIHTC, federal support for housing currently comes in the form of mortgage tax relief. Mortgage tax relief cost the treasury $70–$100 billion in 2019, and the estimated cost of the LITC was $8 billion in fiscal year 2019. In the mid-2000s, a presidential advisory panel, headed by former Senator Connie Mack, recommended limiting the mortgage tax deduction to loans of up to $313,000 instead of the then-ceiling of $1 million, which benefits wealthy homeowners far more than low-income ones. The limit was subsequently reduced to $500,000. 

The panel also recommended eliminating any tax deduction for local property taxes. Some redistribution of the current mortgage tax relief, combined with a more efficient use of LIHTC funds, would be progressive and could free up significant capital for other subsidies. Most European countries (the U.K. included) have eliminated any mortgage tax credit for homeowners. While it’s politically unrealistic to expect the U.S. to follow suit, it may be possible to free up as much as $30 billion annually simply by restricting the mortgage tax credit to those most in need and/or to first-time home buyers. With redistributed mortgage tax relief and LIHTC funds, it would be possible to use supply-side subsidies more effectively. Rather than providing tax cuts for the wealthy, the federal government could repurpose that money for housing production. Funds from the subsidy could be allocated to the states instead of continuing with the inefficient LIHTC program. For developer-led housing, the government could avoid or mitigate three costs: the cost of land (in cases where municipalities can contribute the land, as in NYCHA giving up unused parking lots for new development); the cost of borrowing (the government can borrow at much lower rates than private developers); and the cost of developer profit. When people say, “Government can’t build efficiently,” I simply point to NYCHA and the 180,000-plus units of housing it has developed—more than any private developer in New York City.

For NYCHA’s immediate problem of declining operating subsidy, the European example once again proves helpful. The countries that ran large government housing programs after World War II—Great Britain and the Netherlands—have since ended those programs and worked to privatize the housing stock.[11] In the United Kingdom and Holland, the main responsibility for low-income rental housing was given over to housing associations that could both manage an existing portfolio and develop new housing. They were given access to very low-interest loans, the main constraint being that the units be rented to income-qualified tenants. Housing agencies, particularly in Holland, were given broad authority in managing the government housing stock they inherited. They were allowed to sell part of the portfolio and use those funds to develop new housing and also to develop mixed-income projects that would generate higher income levels. As a result, many housing agencies were able to significantly expand their portfolios at a time when government programs were being phased out.

So it may be possible in the U.S. to convert PHAs to not-for-profit housing associations freed from the constraints of HUD and thus operating more freely in the marketplace. With access to low-interest loans or direct grants (making more efficient use of LIHTC funds), PHAs would be free to act as the housing authorities in Europe have done. Mixed-income developments would move new development away from the current “warehousing” of poor families and toward a model with a broader range of incomes that would more closely reflect the demographics of the community. The current dearth of affordable rental housing would be addressed, and capital would be available to improve and preserve the existing public housing stock. These revisions might just become a cogent and successful federal housing program.

At the local level, NYCHA has begun its own program to escape, Houdini-like, its current financial straitjacket. The Rental Assistance Demonstration (RAD) program invites property managers to take over the administration and operations—but not ownership—of selected NYCHA developments. Repairs are funded by project-based Section 8 funds. So far, NYCHA properties in the RAD program seem to be doing well, and residents are satisfied. In addition to the influx of funding for repairs, the RAD program divests NYCHA’s staff of some of the management burden. While there might be concerns that using Section 8 funds is simply robbing Peter to pay Paul, since presumably there are now fewer Section 8 dollars available for their original purpose, Congress may see fit to raise the Section 8 budget to compensate. As solutions are applied to NYCHA’s deep-seated crises, NYCHA may now be transitioning from the old era under HUD to a new model that more closely resembles the housing authorities prominent in Europe. It may be imperfect, but it may also be NYCHA’s only hope.

Featured image: Polo Grounds Towers, New York, NY, via Wikimedia Commons. 

This essay is an excerpt from Housing the Nation: Social Equity, Architecture, and the Future of Affordable Housing, edited by Alexander Gorlin and Victoria Newhouse. 

NOTES

  1.  In the aftermath of the Depression, and later after World War II, most European countries included in their reconstruction plans large government programs for healthcare, education, and housing. These social programs, requiring large capital outlays, could not be left to the free market. The U.S., having not suffered the devastation of the wars in Europe, developed no such policy.
  2. Other federal initiatives included housing for “war workers” engaged in production for World War II and postwar housing under the GI Bill.
  3. Ingersoll Houses close to the Brooklyn Navy Yard, Clason Point in the Bronx, and Markham Gardens (since demolished) on Staten Island were all built to accommodate war workers and later became part of the NYCHA portfolio.
  4. Harlem River Houses still includes a branch of the New York Public Library, giving working-class autodidacts access to knowledge.
  5. It is often claimed that high-rise apartment living is the cause of social problems in public housing. However, this assumption is contradicted on the one hand by the success of so much high-rise residential in, for example, New York City, and on the other hand by the desperate social conditions of much low-rise public housing in, for example, the notorious Taylor Homes in Chicago.
  6. NYCHA was able to retain some of its capital development funds but had difficulty finding sites on which to build. In the years between 1990 and 2000, NYCHA succeeded in building on a number of small “infill” properties, bringing public housing seamlessly into New York City in a way that housing professionals had long advocated.
  7. Section 8 vouchers were allocated to both NYCHA and the City Department of Housing Preservation and Development.
  8. Notably at HOPE Gardens in Brooklyn, where several towers were demolished on the spurious grounds of “poor foundations” and replaced by row houses.
  9. Created under the Tax Reform Act of 1986, the LIHTC gives incentives to use private equity in the development of affordable housing aimed at low-income Americans. The tax credits, which provide a dollar-for-dollar reduction in a taxpayer’s federal income tax, are more attractive than tax deductions, which provide only a reduction in taxable income. To qualify for the LIHTC program, at least 20% of the residential units in a development must be both rent-restricted and occupied by individuals whose income is 50% or less of the area median gross income. At least 40% of the residential units must be both rent-restricted and occupied by individuals whose income is 60% or less of the area median gross income.
  10. Neighborhoods that have been upzoned under the MIH program have seen real estate speculation that may lead to a net reduction in affordable units. Subsidized rents (tied to area median income rates) have not been low enough to meet the income levels of many residents of the neighborhoods in which the zoning tool has been used.
  11. By 1968, 41% of all housing built in the U.K. was public housing. It’s interesting to note that during the Thatcher administration, the U.K. sold much of its public housing stock (Council housing) to residents on preferential terms. Residents were encouraged to take out mortgage loans, but in a small mirror of the subprime loan crisis that swept the U.S., those loans saw a high rate of default.