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Affordable Housing is in Crisis. Is Public Housing the Solution?

Democrats on the left have proposed a huge expansion of public housing, but policy experts say it isn’t the answer. An excellent article on housing from 2020.

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Housing policy has lurched into the national spotlight for the first time in decades in the past year, as most major Democratic presidential candidates have released formal plans for responding to the affordable housing crisis.

And while those plans have tackled everything from local zoning issues to homelessness, the left flank of the Democratic party is proposing one solution that hasn’t undergone a major legislative overhaul in 20 years: public housing.

In November, Rep. Ilhan Omar introduced the Homes For All Act, which calls for 8.5 million new public housing units to go with the 1,002,114 that currently exist. A week later, Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez introduced Green New Deal for public housing legislation—cosponsored by Sen. Elizabeth Warren along with 23 other Congressional Democrats—that calls for a $172 billion investment in existing public housing units to retrofit them to be carbon neutral and energy efficient.

“Housing is a fundamental human right,” Omar told Curbed in a statement. “It’s time we as a nation act like it and end the housing crisis once and for all.”

Both bills also include a repeal of the Faircloth Amendment, a 22-year-old add-on to the Housing Act of 1937 that prohibits any net increase in public housing units, and which has returned to the debate around housing affordability in recent months after being largely forgotten since its passage in 1998.

But is public housing the best way to help low-income households with their shelter needs? Or could other measures—such as expanding Section 8 vouchers for private housing rentals—be more effective at creating affordable housing in integrated neighborhoods?

Why public housing fell into blight

Public housing tends to conjure images of dilapidated high rises and high concentrations of poverty, crime, and racial segregation. While it wasn’t always this way, the program’s problems can be traced back to its inception during the Depression.

The first permanent public housing program in the United States was created by the Housing Act of 1937. In order to get the bill passed over opposition from a real estate industry that feared public housing would compete with its offerings, Congress limited eligible tenants to only the poorest Americans.

This led to high concentrations of poverty in public housing developments, a problem that was exacerbated after World War II when FHA mortgage insurance drew potential tenants away from public housing and into homeownership, and it got worse as time went on. In 1950, public housing residents made 57 percent of the national media income, according to Housing Policy in the United States, a book by New School professor Alex Schwartz. By the mid-1990s, that number had fallen to less than 20 percent.

After a 1935 court ruling prohibited the federal government from using eminent domain to seize land for building public housing on its own, Washington instead gave municipalities the option—but not the obligation—to create public housing authorities (PHAs) to manage public housing units and decide where they would be built. Under the control of locals, PHAs often built public housing in minority neighborhoods with high levels of poverty, as affluent residents fought economic and racial integration.

Rent from tenants funded the operations of public housing, but as the income mix of tenants got poorer and the aging housing stock got more expensive to run, public housing ceased to be self-sufficient in the late 1960s and began to require subsidies from the federal government not just to maintain operations, but to make needed capital improvements to the units themselves.

While new public housing production continued well into the 1980s, the creation of Section 8, as part of the Housing and Community Development Act of 1974, marked the beginning of a policy shift away from public housing and toward rent vouchers for private rentals, first among Republicans and gradually Democrats as well. Rental vouchers became seen as a more cost-effective way to subsidize housing than the construction and operation of public housing. And once the Reagan administration’s drastic cuts to HUD virtually bought an end to new public housing projects, Section 8 became the cornerstone of federal affordable housing policy.

How the Clinton administration transformed public housing

In 1989, Congress established the National Commission on Severely Distressed Public Housing to draw up a plan of action for dealing with the public housing projects that suffered most from poverty, violence, and dilapidated conditions. Two years later, journalist Alex Kotlowitz published There Are No Children Here, a heart-wrenching look at the lives of two young boys growing up in a public housing complex in Chicago, adding urgency to the search for a solution.

The commission’s recommended plan—what came to be known as HOPE VI—called for the demolition of distressed public housing and its redevelopment into lower-density, mixed-income residences. The Quality Housing and Work Responsibility Act (QHWRA) of 1998 included a key change that allowed HOPE VI to achieve its goal of downsizing public housing: It repealed a rule that had required replacing any demolished public housing on a one-for-one basis, which had essentially prevented any decrease in the total number of public housing units.

According to data compiled for Curbed by Schwartz, HOPE VI funded the demolition of more than 150,000 public housing units between 1993 and 2007, in addition to investing $6.1 billion into the redevelopment of 247 public housing complexes. As a result, the number of public housing units operating in the United States peaked in 1994 at 1.41 million. By the time the HOPE VI program ended in 2008, only 1.14 million public housing units remained. Today the number sits at 1,002,114 according to HUD.

The units redeveloped by HOPE VI offered better amenities to attract higher-income residents, and management of the new complexes was often contracted out to a third-party property manager. But it’s an open question whether HOPE VI improved the lives of residents of the demolished buildings. According to Schwartz, only 24 percent of the original residents of public housing units redeveloped by HOPE VI had been relocated to the new units as of 2008. The rest have had to find other housing on their own.

Public housing high-rises, once a symbol of public housing dysfunction, have now all but vanished except in New York City. And after HOPE VI, some cities saw drops of 30 percent or more in their public housing unit totals.

Bipartisan efforts continue to convert public housing units into mixed-income residences and Section 8 units. In 2010, HOPE VI was replaced with Choice Neighborhoods, a competitive grant program launched by the Obama administration that retains many of HOPE VI’s core goals. In addition, the Rental Assistance Demonstration program, launched by Obama in 2012, gives PSAs access to private and public funds that allow them to make capital improvements to public housing units and convert them into mixed-income residencies, similar to HOPE VI. The units remain under public stewardship after conversion.

What stands in the way of new public housing construction

While Congress and HOPE VI allowed the reduction of public housing stock, the Faircloth Amendment, passed as part of QHWRA in 1998, went one step further and prevented any net increase in public housing stock. Under the amendment, HUD is barred from funding the construction or operation of new units with its Public Housing Capital Fund or Public Housing Operating Fund if the construction of those units would result in a net increase from the number of units as of October 1, 1999.

But because of HOPE VI’s reductions in the nation’s public housing stock, the Faircloth Amendment has had little tangible effect, since the number of public housing units now sits far below that 1999 cap. Will Fischer, a senior policy analyst for the Center on Budget and Policy Priorities, notes that although the number of remaining units varies from city to city, many PHAs could add to their public housing stock without exceeding the cap.

What’s holding back the construction of new public housing—and the maintenance and operations of current public housing—is that the Public Housing Capital Fund and the Public Housing Operating Fund are chronically underfunded, leading to a massive backlog of maintenance that many PHAs can’t afford to pay for.

Furthermore, the Trump administration has proposed dramatic cuts to both funds in each of its four annual budget requests, including a 38 percent cut to the operating fund and a complete defunding of the capital fund for fiscal year 2020. (None of the cuts were enacted by Congress.)

“Most [PHAs] are having a hard enough time maintaining existing units, unless Congress has a drastic change of heart and decides to throw a lot more money at HUD,” says Jenny Schuetz, a research fellow at the Brookings Institution.

But the Faircloth Amendment would clearly stand in the way of building 9.5 million new public housing units, as Omar’s bill proposes, an almost tenfold increase in the number of public housing units.

The bill represents one side of a debate about how to subsidize public housing most effectively. HUD studies have concluded that it’s cheaper to subsidize housing through vouchers than it is to operate and maintain public housing units. Vouchers also give recipients more choice in where to live, although landlords discriminating against voucher holders is a common drawback of the program.

Giving residents more opportunity to move also helps alleviate the issue of high concentrations of poverty that exist in public housing complexes. A Brookings study showed that the neighborhood poverty rate was lower for voucher holders than it is for public housing residents. It also allows voucher holders to move to areas with better employment and educational opportunities.

“Some of the candidates may be proposing a return to building public housing, which I find perplexing,” says Jill Khadduri, who served as director of HUD’s policy development division from 1983 to 2000 and wrote a book on the history of HUD. “Unless there’s an ideological belief in public ownership, which I can imagine some of the candidates find attractive, I don’t know what the impetus is or what the rationale is.”

Vouchers have their own funding problems, however. Currently, only about a quarter of those who qualify for vouchers receive one, and the waiting list to get one can be years long. Democratic candidates for president, including Sanders and Sen. Amy Klobuchar, have proposed turning the voucher program into an entitlement, where anyone who qualifies will receive one, although they propose different qualifications.

Democrats who propose additional investment in public housing tend to focus on eliminating the backlog of maintenance in existing public housing projects through additional funding of the Public Housing Capital Fund.

For additional affordable housing production, more Democrats propose expanding the Low Income Housing Tax Credit Program—which gives real estate developers tax benefits in exchange for pricing a percentage of their units below market rate—or the National Housing Trust Fund, which was created by the Obama administration in the aftermath of the financial crisis in 2008 for the rehabilitation, maintenance, and production of affordable housing.

Omar’s bill proposes $20 billion in annual funding to the National Housing Trust Fund, a steep upgrade over the $245 million the fund received in 2019, but less than the $40 billion or more floated by candidates like Klobuchar, Booker, and Buttigieg. And the figure pales in comparison to the $800 billion over 10 years that Omar would invest in public housing.

“We’re not going to solve the housing crisis with half-measures or free market ideology,” Omar told Curbed in a statement. “We need a solution that matches the scale of the problem.”

With a divided Congress and a president who wants to dramatically slash HUD’s budget, Omar’s bill was dead on arrival, but reintroducing public housing as a potential solution to the affordable housing crisis could gain momentum in the coming years, particularly with support from high-profile members of Congress like Sanders and Ocasio-Cortez.

But whether public housing production of this magnitude could pass Congress—even if Democrats took power—is an open question, as is whether it is the most effective way for the federal government to provide rent relief to low-income Americans.

“There’s more political support for expanding vouchers, Low Income Housing Tax Credits, or the National Housing Trust Fund than new development of traditional public housing, for good reasons,” Schuetz says.

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