Could NYCHA really fall into private hands?

Last month, the state Legislature passed a bill that would allow the New York City Housing Authority, which runs the city’s roughly 170,000 public housing apartments, to lease up to 25,000 of those units to a newly created public benefit corporation. That entity, the Public Housing Preservation Trust, could then borrow billions in private dollars for repairs throughout NYCHA’s more than 300 sites citywide, most of which date back to the 1950s and are badly in need of refurbishment. NYCHA has estimated that it needs $40 billion for the task.

First proposed two years ago, the plan would let residents of each NYCHA campus vote on whether they wanted to participate in the trust – and, if they did, would move that site from Section 9, the traditional federal public housing program, to Section 8, which provides tenants with rent vouchers to provide a revenue stream that would be used as backing to borrow private money for repairs. The land and buildings would still be owned by NYCHA. 

Officials have hailed the plan as the only way to modernize NYCHA units, whose federal funding has plunged in the past few decades. President Joe Biden’s Build Back Better plan would’ve infused NYCHA with billions in repairs funding but died in the Democratic-led Congress, leading champions of the trust to point out that Congress simply can’t be counted on to come through for NYCHA.

“For decades, NYCHA residents have been promised repair after repair that never materialized,” said New York City Mayor Eric Adams in a news release about the trust. “We will finally deliver on those promises and offer NYCHA residents the dignity and safe, high-quality, affordable homes they deserve.”

NYCHA Chair and CEO Greg Russ called the passage of the trust “a momentous event in the history of public housing (that) gives NYCHA the ability to raise billions of dollars in capital funds to invest in its properties and residents a true voice in the future of their homes.”

So widespread is the idea that private money is the only hope for massive NYCHA upgrades that the bill behind the trust was backed by anti-corporate progressive state Sen. Julia Salazar, whose district contains many NYCHA sites and who stepped in as a last-minute sponsor for the bill after state Sen. Brian Kavanagh dropped his sponsorship, citing tenant opposition. Another supporter was the Bronx Rep. Ritchie Torres, who has said the trust “has the benefits of renovation without the cost of privatization” and that “NYCHA has no (other) good options.”

That sentiment was echoed by others. “It would be nice if there were big pots of public money out there,” said Nicholas Dagen Bloom, a Hunter College urban planning professor, “but the federal government has basically gotten out of the public housing business – and there is a real risk that … NYCHA projects become unlivable in the next few years.”

Tenant pushback despite bill’s passage

But if officials and policy wonks cite the trust as NYCHA’s only survival option, some of the authority’s residents don’t want it to happen anyway. Just how many is hard to determine; it’s likely a great many NYCHA residents haven’t even heard about the trust. Trust promoters have said repeatedly that the law was created with tenant input – reflected in the clause that each campus must vote on whether to join the trust, and that the total number of units to go into the trust is 25,000, down from Russ’ original ask of 110,000 units.

Yet nine of the 10 members of the Citywide Council of Presidents, tenant leaders who represent all NYCHA residents, voted against the trust. Ramona Ferreyra, who lives in NYCHA’s Mitchel Houses in the South Bronx and leads the anti-privatization Save Section 9, canvassed Brooklyn’s Marcy Houses and Stuyvesant Gardens this spring and found that more than 75% of residents hadn’t heard of the trust.

Moreover, when they were explained what the trust was, she said, “No tenants liked it. Supporters will say that a whole campus supports it when in fact it’s only the tenant association presidents.” She believes the presidents were pressured to get behind it.

The opposition’s biggest point was the claim that the law did not guarantee that if a NYCHA campus defaulted on the trust, then the city or state would step in to make sure that it did not fall into private hands. Trust supporters denied this would happen. “The trust law prohibits pledging the fee ownership of the properties as collateral,” NYCHA said in a statement to City & State. “It is further codified in the trust law that low-income rights, protections and rents must remain in place on these properties. Under no scenario can the buildings be sold, become market rate or have the resident rights or protections changed.”

But Paula Segal, a lawyer for the tenant group Residents to Preserve Public Housing that’s opposed to the trust, said that “‘fee ownership’ are legal words that mean TOTAL ownership. The trust will never have fee ownership. It will only have a leasehold interest but a leasehold interest is a property right that can be pledged – such as how the Chrysler Building is owned.”

She said the law would have to be changed from “the fee ownership of” to “any ownership interest in.” It would also, she added, have to remove an entire section of the bill that said the trust will be able to pledge an “interest in ... housing facilities as a remedy to ... default” – and also remove language that neither the city or the state will have the obligation to cure that default.

There is disagreement over the likelihood that the trust would ever default. “The chance is remote that Section 8 would stop paying out, or that the state or city would not step in to refinance these projects where so many people live,” Bloom said. “Would they really allow a public agency to default? Even when a lot of these big projects were faced with default in the 1970s, the state stepped in.”

Yet if that’s true, “Then why didn’t the city or state guarantee stepping in, in the event of a default?" asked Marquis Jenkins, a longtime resident of NYCHA’s Bracetti Plaza in the East Village and a founding member of Residents to Preserve Public Housing.

The other concern among opponents was that NYCHA, which should issue detailed guidelines for campus-by-campus opt-in voting in the fall, won’t set the quorum high enough to be truly reflective of a given site. Jenkins thought it should be 80%, and that the vote should be preceded by each campus conducting a fiscal needs assessment that looks at the current repair budget against the shortfall – and against how much the trust wants to borrow.

“If there’s only $100 million available for a development,” he said, “then residents should be armed with choices, such as, ‘We want to prioritize the roofs and deal with the grounds later.’” Yet, he said he was skeptical that NYCHA would be fully transparent.

Asked how high NYCHA would set the per-campus quorum, the agency replied via email: “The trust legislation states that within 60 days of the effective date of the signed bill, NYCHA will issue a set of proposed requirements related to the resident voting process, and that there will be a public comment period as well as a public hearing where NYCHA residents and all groups may provide their input before a final voting process is established. The legislation also states that the voting process shall require a minimum percentage of tenants of record at a housing development to participate in the voting process, in order for the voting process to be valid. These guidelines and regulations will be further developed through a collaborative and transparent stakeholder process. Fearmongering and spreading misinformation will obstruct residents’ lawful right to participate.”

Fears a possible precedent the event of a default

Opponents of the trust said they’re afraid of the worst-case scenario: If NYCHA campuses fall into private hands, then the trust’s promise that campuses will remain within NYCHA management will fall through – and private management could lead to evictions in the case of rent nonpayment. In the fall, NYCHA told The New York Times that 42% of its tenants, in the wake of COVID-19 unemployment, were behind on their rent.

Jenkins pointed to a Human Rights Watch report earlier this year that found at least two NYCHA campuses experienced an increase in evictions once they came under private management through a program called PACT. The program leases NYCHA buildings and land to private and nonprofit development partners, who then do repairs, provide site management as well as social and community services using federal Section 8 funding.

One thing the law was clear about: Should NYCHA properties fall into private hands, they will be obliged to maintain them as housing for low-income New Yorkers. “But they will still be the new owner," said Segal, and hence potentially could manage them how they wish.

For now, with the trust a done deal in Albany, opponents said they’re focused in the next legislative session on striking from the law language that left open the possibility of private seizure. Jenkins said he wondered if Salazar would urge lawmakers to do so. He also wondered aloud if Salazar would urge them to reduce the maximum bonds the trust could issue from $10 billion to $5 billion, or from $200,000 to $100,000 per unit – thereby reducing risk. (To this point, NYCHA said the average capital needed per unit was roughly $225,000.)

Staff for Salazar said she was unavailable to respond to those questions when City & State reached out.

Regardless of what happens with the trust – if all, some or none of the NYCHA campuses opt into it, if it manages to fund even a portion of NYCHA’s massive repairs, or if it defaults – one thing is clear: For tenants, it’s an uphill battle trying to keep their homes entirely in the public realm, maintained entirely with public money.

“It’s not a rational fear” that private investment will fell NYCHA, Bloom said. “It’s very remote as a possibility. The money will be borrowed against future Section 8 payments, not against the actual rents, and Section 8 is very politically popular.”

But perhaps the fear, even if inflated, is more visceral for those, like Ferreyra, who actually rely on NYCHA as their sole source of affordable housing in a very unaffordable city. She said she and her Save Section 9 peers went to Washington, D.C., in mid-June to meet with New York City representatives as politically diverse as Democratic Rep. Alexandria Ocasio-Cortez and Staten Island Republican Rep. Nicole Malliotakis. They asked both to put a moratorium on any sort of NYCHA privatization.

It may seem pie-in-the-sky at this point, but Ferreyra is determined. “We want to make sure our electeds in D.C. understand what the original promise of public housing was,” she said, “and what steps we need to get back on track.”