noted that when his firm cut a deal with NYCHA to build on public land at Hallets Point, Queens, under the Bloomberg administration, all the money was earmarked for improvements at the local housing project. If payments flow into NYCHA’s general fund, he argued, public housing residents are more likely to oppose a private development next door.
“Residents need to see that the money actually benefits them,” he said.
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Unlike with the Hallets Point deal, NYCHA now allots 50 percent of ground lease payments to that housing complex, and the other half to the agency’s general fund — which pays for the upkeep of its buildings across the city.
Deborah Goddard, NYCHA’s interim real estate head, said it would be unfair to spend all proceeds from a ground lease sale on the surrounding project, since that would leave other complexes that don’t have land suitable for development starved of funds.
Slow progress has been another issue. By next June, when the Holmes Towers deal with Fetner is expected to close, two and half years will have passed since the agency first began talking to residents about the site.
“I think the housing authority may have been a little bit unaware of the depth of the resident engagement that was necessary,” Goddard said, adding that she expects the program to pick up speed soon. “Once we get our first 50/50 [affordable and market-rate property] under our belt, things will get easier,” she said. The agency’s goal is to announce two new developments per year.
Ron Moelis, co-founder of the affordable housing developer L+M Development Partners, said taking things slow at the beginning may not be such a bad idea. “I think it’s important that they get it right with the first sites that they roll out,” he said. “If [NYCHA residents] start to see real benefits from the program, they may be more open to supporting it.”
Some observers, however, are fundamentally skeptical of NYCHA partnering with private developers. “The problem of public-private partnerships is that they create a system where risks get offloaded on the public,” said Elvin Wyly, a geographer at the University of British Columbia who has studied New York public housing. For example, if developers do a poor job managing NYCHA buildings under a lease deal, the agency would be left with the fallout, he noted.
NYCHA uses a chunk of land at Brooklyn’s Howard Houses for a small farm where residents can pick up produce in return for helping plant crops and drop off food scraps to compost. But some argue that land would be better used for a new public-private development. (Photo by Sasha Maslov)
And Stewart Sterk, director of the center for real estate law and policy at Cardozo School of Law, argued that raising money through private development is easier said than done. “I think it’s a great idea, but it’s a drop in the bucket,” he said. “I just don’t think that the funds they hope will be there will be there.”
The need to upgrade the 83-year-old agency’s housing stock is hardly new, but it has intensified over the years. Most project buildings in the city were constructed in the 1940s and ‘50s, and more than 75 percent of them are over 40 years old, according to the Center for an Urban Future. As those properties continue to age, their maintenance needs become greater.
Former Mayor Michael Bloomberg appointed Wall Street veteran John Rhea in 2009 to shake up the agency and prevent its properties from falling further into disrepair. Rhea launched an ambitious program to bring in private investors, signing a deal with Citigroup that gave the bank housing-tax credits in return for lining up $230 million in investments in city-built housing. But he resigned in December 2013 amid reports that he sat on $45 million in city funds to install security cameras for years and was slow to spend $1 billion in federal money.
De Blasio appointed Olatoye to head NYCHA in February 2014, a month after he took office. Olatoye joined the agency from the affordable housing nonprofit Enterprise Community Partners, where she had been working as a vice president and market leader for the organization’s New York office.
The mother of three — who grew up in the industrial Connecticut city of Waterbury and whose grandmother lived in Albany Houses in East New York — started her career working for education policy organizations. In 2001, she joined the real estate consulting firm HR A Advisors, where she worked for six years before joining’s HSBC’s community development group.
Olatoye and de Blasio unveiled their Next Generation plan in May 2015 with the city promising to spend more on public housing to help make up for federal funding shortfalls. At the same time, the agency said it would save $90 million a year by streamlining its operations and another $30 million by improving rent collection.
But just as the plan began making inroads in late 2016, NYCHA got a curveball: Donald Trump’s surprise election victory. In March, after Trump proposed a preliminary federal budget that would slash the agency’s operations funding by $75 million this year, Olatoye told City Council members that “we face the most uncertain times in public housing history.”
Bronx council member and Committee on Public Housing Chair Ritchie Torres was even more direct and said the Trump administration “poses the gravest threat to public housing” in NYCHA’s 83 years.
In May, the White House released a budget for the fiscal year 2018 that would cut NYCHA’s capital funding by more than $200 million and its operations budget by $165 million per year, according to the city comptroller Scott Stringer. The proposed cuts have yet to become law, as Congress was negotiating over a budget bill at the time of writing.
But NYCHA has been struggling with neglect and budget cuts for decades. The flow of money the agency receives from Washington has been drying up since the 1980s as budget hawks in Congress have slashed HUD’s funding time and time again. Between 2001 and 2014, the agency lost $1.16 billion in federal funding, according to a 2015 report by the City Council.
Olatoye said she does not know if Carson — who famously called poverty “a state of mind” — recognizes the challenges that NYCHA faces and whether he has a plan to address them. “We’ll have to wait and see,” she said. “Until then, there’s sort of a tabula rasa.”
But the news from Washington can’t be encouraging. The neurosurgeon-turned-author hesitated to take the job last year because he claimed to lack the necessary experience. Carson reportedly accepted out of a sense of duty to country and because he thinks an outsider can change the agency for the better.
And his failure to stop the White House from proposing $6 billion in cuts to HUD’s budget is telling: Carson has a conservative’s skepticism of entitlements, including public housing. In May, he told the New York Times that good social housing policy is making sure to not create “a comfortable setting that would make somebody want to say: ‘I’ll just stay here. They will take care of me.’”
HUD’s New York point person — who is tasked with overseeing the department’s operations in the country’s biggest city — is Lynne Patton, a former Trump Organization employee. Patton made a name for herself by helping organize Eric Trump’s wedding and sitting on the board of his namesake foundation.
Sources say that unlike Carson, she has taken steps to understand NYCHA’s mission. But while Patton has met with Olatoye and several of the agency’s stakeholders, her vision for public housing in New York remains unclear. A HUD spokesperson said Patton is still “acclimating to her new role” and declined to set up an interview. Carson was also not made available for an interview for this story.
The HUD secretary “cares deeply about people, and that’s refreshing and important,” Olatoye said. “But someone on that team needs to be able to talk about the physical and financial infrastructure that we’re managing. We haven’t seen that yet.”
Torres said he has little faith things will change for the better. “The irony is that you have two people who are ideologically hostile to the agency they lead,” he said about Carson and Patton. “Do I trust that a right-wing ideologue is going to protect the social safety net in New York City? No.”
No one expects NYCHA’s 10-year plan to solve all its funding problems — especially if federal budget cuts become a reality. This leaves the agency with two options for the time being: embark on a more radical plan to raise money and cut costs or soldier on in hopes that one day a more sympathetic Congress will grant the cash it needs.
Howard Husock, of the conservative think tank Manhattan Institute, advocates for the former. He said that while he supports the Section 8 conversion program, it “is not going to be a new spigot of federal funds that will bail out the system.”
Instead, Husock insisted that NYCHA should end the practice of tying rent to income and limit the time any household can spend in a public housing apartment to five years. He said the agency also needs to double down on raising money from the private sector.
Rather than just lease underused land to developers, Husock argued that NYCHA should sell off entire developments in pricey neighborhoods like Chelsea and use the proceeds to plug the hole in its budget.
NYCHA owns 25 properties in the Lower East Side and East Village, 15 on the Upper West Side and four in Chelsea. This year, the city assessed the agency’s Chelsea-Elliot Houses between 25th and 27th streets and Ninth and 10th avenues at $323.7 million, up from $244.9 million in 2014, property records show. The true market value is likely much higher.
But the complex is also home to more than 2,000 low-income New Yorkers, and housing advocates and politicians balk at Husock’s premise that NYCHA needs to shrink to survive.
“I philosophically object to the sale of public housing land,” Torres said. “The object of the city should not be to generate quick revenue, it should be to create a stock of permanently and deeply affordable housing that can be passed from one generation to the next.”
Some real estate players say the agency should stick with its current program but pick up the pace. “They should do more infill,” the Durst Organization’s Barowitz said, noting that dozens of NYCHA sites would be suitable for development. “A lack of density is one resource they have in abundance,” he added.
But Goddard cautioned that there’s a limit to how many public-private developments the agency can get into at any given time. Holding numerous meetings with residents, printing flyers, preparing requests for proposals and negotiating with developers is time-consuming, she said. And affordable housing developments on NYCHA land depend on state-backed tax-exempt bonds, which have an annual cap.
Several observers argue that while private capital helps, the agency’s salvation can only come from public coffers. “It’s not a broken model, it’s a broken funding promise from the federal government,” said Rachel Fee of the New York Housing Conference.
In the past, public housing advocates have struggled to get voters, and by extension politicians, on their side. The isolated designs of NYCHA’s projects, which look like small cities and are often removed from the street grid, don’t help. “For most city residents, public housing is out of sight and out of mind,” Husock said.
But this year’s proposed HUD cuts were so draconian they jolted even those who don’t normally think about public housing — a potential silver lining for the agency, according to Goddard and others. A growing number of politicians and advocates are now aware of what’s at stake for New York’s public housing stock and are willing to fight for it.
“NYCHA was teetering on the precipice well before the Trump presidency,” Torres said. “In 2017, the agency is in a struggle for survival.”
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