Open Government Project
A Government Watchdog Group
State of Texas
City of Galveston
Public Interest Groups
in the Room!
by David Stanowski
21 September 2011
One of the major reasons that Public Housing has never worked as intended or promised is due to an issue that no one wants to talk about: “deferred maintenance”.
This is something that every residential-rental property owner is all too familiar with, but it is an issue that is always ignored in the discussion on Public Housing. A successful residential-rental property owner must generate positive earnings from their rental income and make enough profit to put money in reserves for maintenance, or the property will deteriorate just as surely as the Sun rises in the east. When the decline of the property gets bad enough, without the needed maintenance, it becomes BLIGHTED!
This is one of the major reasons that each new program that “discovers how to make Public Housing successful this time” is doomed to fail; there is never enough money set aside for maintenance, so sooner or later it will become bighted; it is just a matter of time. The rental income collected by local housing authorities doesn’t even come close to covering operating expenses, let alone accumulate reserves for maintenance, so the operation must be subsidized every year by HUD.
This problem has plagued this program since its inception, but to make matters worse, the latest data show that HUD is currently $26 billion behind in “deferred maintenance” needs, and Congress plans to cut its capital budget 25% in 2012! Reducing their capital budget will help to drive Public Housing projects into blight even faster!
This certainly includes the mixed-income scheme being touted by GHA. Even if the tax-credit and market-rate units generate large enough profits to fund adequate on-going maintenance, the Public Housing component will rely on the under funded HUD subsidy for its maintenance! In addition, if the rents from the tax-credit and market-rate units fail to generate sufficient income to fund their adequate on-going maintenance, due to the outrageous anticipated costs, blight will take over much more quickly!
Therefore, the promise that this project is not going to end up like all other previous projects depends on having sufficient reserves to maintain it properly. A promise that will be much more difficult to keep than GHA understands in its current state of self-righteousness.
"Two main federal funding streams support public housing developments: the public housing operating fund, which covers the gap between an agency's day-to-day operating costs and the rent that low-income residents can afford (generally residents are expected to pay 30 percent of income for rent), and the public housing capital fund, which covers substantial repairs and needed renovations."
"On September 8, the House Transportation and Housing and Urban Development Appropriations Subcommittee approved a fiscal year 2012 appropriations bill that would reduce the capital fund appropriation by $510 million, or 25 percent, compared to the nominal 2011 level, and the operating fund by $760 million, or 16 percent."
"As the chart shows, (see above) the capital fund cut follows a $440 million reduction in 2011 and a decade of steady funding erosion. If enacted, the House subcommittee bill would reduce funding to just 40 percent of the 2001 level in inflation-adjusted terms. This amount would cover less than half of the $3.4 billion in new repair and renovation needs that accumulate in public housing each year, according to a recent HUD-sponsored assessment. It also would fail entirely to address the program's estimated $26 billion backlog of unmet repair and renovation needs."
House Bill’s Deep Cuts in Public Housing Would Raise Future Federal Costs and Harm Vulnerable Low-Income Families