Capital Ideas: Rebuilding Public Housing, Under Pressure

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Public housing's recognizable red dots the Panorama of the City of New York at the Queens Museum of Art. NYCHA's scale is both a strength and a challenge.

Photo by: Jarrett Murphy

Public housing's recognizable red dots the Panorama of the City of New York at the Queens Museum of Art. NYCHA's scale is both a strength and a challenge.

As the federal government has shortchanged NYCHA on operating funds, so has it reduced capital outlays—19 percent since 2001—costing NYCHA a cumulative half-billion dollars. This falloff couldn’t have come at a worse time: 81 of NYCHA’s developments are at least 50 years old. NYCHA is in the midst of a $2 billion capital-improvement process, but a consultant recently told the authority that it has $6 billion in backlogged capital needs. Nationwide, estimates are that the public housing stock needs $22 billion to $32 billion in capital work.

The good news is that despite NYCHA’s dire financial situation, its bond rating remains sound—which makes it cheaper for the authority to borrow money to fund capital projects. In addition, while the city has cut operating subsidies, it has been somewhat more generous with capital funding to NYCHA.

But getting the money is only one problem facing NYCHA’s capital program: Another is spending that money wisely, and indications are that the authority has had severe problems doing that.

In 2003, NYCHA launched a program called CM/Build that put private construction management firms in charge of contracting out about half of the authority’s capital program—about $780 million to date. The hope was that by streamlining cumbersome procurement process, NYCHA could get construction projects done faster and for less money. Unions for the authority’s in-house construction management personnel saw flaws in the plan, but through last fall NYCHA—while refusing to reveal specifics about how much it was saving or what fees it had paid to the private firms—claimed CM/Build was going well. “We think we’re actually squeezing efficiency out of our capital program. We’re getting quality work,” says Doug Apple, the general manager. “There’s always going to be naysayers that say that isn’t true.”

Apparently those naysayers include NYCHA’s inspector general, Robert McSweeney, and its chairman until late 2008, Tino Hernandez. City Limits obtained internal memos penned by both men in the fall of 2008 that indicated the CM/Build program had been beset by management lapses and cost overruns since at least 2005. There were large discrepancies between cost estimates and what price projects actually came in for. Oversight was lax when contractors sought more money than their contract allowed. A number of contracts for more than $55 million were awarded without competitive bids. Some employees testified there had been shoddy work.

The inspector general reported that management had failed to react fully to the problem, waiting months or years to implement fixes, some of which were still pending at the time memos were sent. One former NYCHA manager, on advice of his lawyer, refused to talk to the inspector general.

NYCHA’s new chairman, Ricardo Elías Morales, told City Limits in December that he was working to fix the problem. But the damage might already be done: According to the inspector general, the number of capital improvement projects—like new roofing, repaired bricks, better elevators or new kitchens at developments around the city—that NYCHA will be able to afford has plummeted. NYCHA planned on 154 projects and publicly promised at least 100, but the IG says the authority has the dough to finish a mere 39. According to the Mayor’s Management Report, the percentage of NYCHA’s active capital projects that were on schedule dropped from 39 percent to 22 percent from fiscal 2007 to 2008.

But there are a few good signs, too. A plan to get more residents working on NYCHA construction projects is, according to the unions involved, a success: 300 tenants have passed through union apprenticeship programs since 2005. “It’s transformed not only their lives but their families’ lives,” says Oona Adams, a Laborers’ union official. Union officials also contend that the cost increases under CM/Build partly reflect the impact of giving more capital work to union workers who are paid decent wages.

And there’s always the hope for money. Late in 2008, NYCHA was hoping to get $650 million for capital projects under an economic stimulus bill that was taking shape in Washington.