1.Housing Is Hell
By Alyssa Katz

It’s a crime stat that defines the Giuliani years: The number of New Yorkers who were victims of felonies has been outstripped by the number who feel like they get mugged on the first of every month. More than 525,000 households pay more than half their incomes for a place to live. An estimated 150,000 live doubled up. This March, the homeless shelter population hit 26,000, the highest since 1988. Is it any wonder that in a fiercely competitive mayor’s race, housing is hot.

Mark Green calls his five-year plan to build 50,000 units of affordable housing “Apollo-like.” Peter Vallone would create at least 20,000. Not to be outdone, Fernando Ferrer wants 150,000 apartments over 10 years. All would spend a billion dollars or more, using city money to aggressively secure bond and private dollars. Alan Hevesi is reportedly regretting his assertion last fall that housing is not one of his top issues; now, he’s talking about leveraging pension dollars and World Trade Center taxes.

But what do all those promises mean? As the city teeters on a hill of debt, where are the big bucks going to come from, and where would they go? When the cheapest new apartment costs about $135,000 to construct and $2,100 (unsubsidized) to rent, according to the New York City Partnership, what exactly constitutes “affordable,” anyway?

These are all questions the city’s community development industry is eager to clarify. With nearly a half-million dollars supplied by foundations and Citigroup, JPMorganChase, Independence, Deutsche Bank, HSBC, and Fannie Mae, a coalition of banks, housing finance corporations, for-profit builders, community development groups, and tenant advocates is mounting a novel cross between a grassroots mobilization and a trade lobbying initiative.

“Housing First” is the campaign’s name and its agenda: To make housing as bread-and-butter an issue as schools, cops and taxes in this year’s City Hall races and next year’s governor’s election. The objective is commitments from government for significantly expanded public support of new housing. They’re proposing a $10 billion city investment over 10 years to create 100,000 new housing units, and preserve lots more; homeownership and rentals, for low-, moderate- and middle-income New Yorkers, as well as expanding supportive housing for the mentally ill and others who could benefit from access to social services. This would effectively double what the city now spends on housing. Among new sources of money suggested are property tax lien sales, loan repayments for city housing programs and real estate taxes.

The people who build subsidized housing are trying to craft a unified agenda–leaving behind, publicly at least, their history of competing for government support. “In the past, when groups advocating for middle-income housing or the homeless or community development corporations got together, they would argue over whose agenda was more important, rather than looking at the totality,” says Naomi Bayer, director of Fannie Mae’s New York Partnership Office and one of the instigators behind Housing First.

Those agendas are many, and Housing First isn’t pretending otherwise. The nonprofit Association of Neighborhood and Housing Developers is emphasizing the need for rental apartments and construction targeted at the neediest. The Coalition for the Homeless, too, wants a large commitment to the very poor; the Supportive Housing Network, to people with special needs.

But Housing First’s tent is big enough to also include the for-profit New York State Association for Affordable Housing and Real Estate Board of New York. They see vast potential for a middle-income building boom–with the right kinds of incentives to make it profitable. Banks, too, gain from those deals, because they can tap into conventional financing. Pretty much the only thing Housing First’s members have in common is a desire to bring in more money to build more housing, and to alter the city’s Dantesque regulatory environment to make it possible to turn those dollars into budget bricks and mortar.

The anger of middle-class voters who can no longer afford to live in their own neighborhoods presents a precious political opportunity. “We’ve been trying to put our finger on why housing is such an issue now,” says Patrick Markee of the Coalition for the Homeless. Unlike in the 1980s, he observes, “it’s not just a crisis afflicting low-income people, not just a rising level of homelessness. Now it’s affecting higher-income New Yorkers, too.”

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By any measure, New York’s poorest are suffering from a housing meltdown. Among the very poor, spending two-thirds of income on housing is the norm. There are about 779,000 households in the city making less than $20,000, and about 416,000 apartments affordable to them, assuming they spend one-third of their income on rent. The Citizens Housing and Planning Council estimates an additional 250,000 illegal units, mostly dangerous basement apartments. One in five Asian and Latino immigrant homes are officially overcrowded, probably an undercount.

Yet even the best-intentioned plan has to reconcile the poor’s crushing needs with the basic math of development: The more affordable the housing, the bigger the subsidy must be to get it built. The amount of public cash it would take to produce one apartment for the very poorest could just as easily create five middle-income units. Those middle-income residents will pay taxes, teach in schools, patrol the streets, staff companies and spend their money at local businesses–in the city’s economy, they’re in the asset column. Middle-class New Yorkers are also dedicated voters and will be courted accordingly by candidates.

Housing First is following a similar course. Nearly half its proposed 100,000 new apartments would be priced for working- and middle-class families. The other half would go to households making less than $20,000 a year. Supportive housing accounts for 16,000 of those low-income units; senior housing, 2,500. There will be a call for new homes for other extremely low-income households, making less than about $16,000 a year. They represent one-third of city households. Yet on the Housing First agenda, these would add up to 30,000 units at most, simply part of what Bayer calls “a range of needs and a range of solutions that meet those needs.” As much as anything, Housing First is a proposition for bringing prosperous residents back to battered communities, with a platform that stresses “programs that create not only housing, but also safe, sustainable, mixed-income neighborhoods.”

Strictly by the numbers, middle-class renters are not facing a crisis. At the city’s median income of $33,000, affordable apartments actually slightly outnumber people, 1.16 million to 1.06 million, according to the Census Bureau’s 1999 Housing and Vacancy Survey. “It’s not to say you don’t need middle-income housing production,” says CHPC’s Frank Braconi, who has been advising Housing First. “But I wouldn’t do it on the basis that the middle class is stressed on income burdens.”

That is to say that people live in a city, not a spreadsheet, and make life decisions based on much more than the price of rent. Finding a livable space in a neighborhood that’s safe and accessible, with decent shopping, schools and other resources, is just as important. A report commissioned by Vallone and written by private builders lays out the bottom line: “As the city’s new economy generates highly paid jobs for well-educated workers, many of whom prefer an urban residential environment, the quality of the City’s neighborhoods is exacerbating the problem of housing cost inflation. Rents in the few neighborhoods that offer the housing quality and amenities those workers seek are being bid up to levels that threaten the City’s ability to attract talented and ambitious newcomers. It is necessary to promote the development of the City’s neighborhoods in a manner that raises the quality of urban life so as to relieve market pressure on Manhattan and the most desirable communities of the outer boroughs.”

As for the low-income people who now live in those amenity-deprived zones–assuming they aren’t displaced by a stampede of talented and ambitious newcomers–some could benefit from moderate- and middle-income construction. Builders of Nehemiah and Partnership homes found that buyers tended to come from the neighborhood and often upgraded from regulated or public housing, opening up units for other occupants.

But does large-scale building produce trickle-down vacancies? “It frees up some, but how much?” asks Braconi. “I don’t know, and I haven’t seen research.” There are some inescapable barriers. Many landlords, especially those who bought their buildings at speculative prices, can’t afford to charge significantly lower rents. And Braconi observes that in the last wave of city-sponsored development, under Mayor Koch’s 10-year plan, the construction of middle- and moderate-income housing appeared to oversaturate some neighborhoods: The city saw a sudden spike in vacancies among older apartments in the same price brackets.

In the end, what to build is the easy stuff. The biggest questions remain where to put it all and how to get it built, reforming everything from building codes to zoning regulations. Some developers want to see less of the low-rise sprawl synonymous with the Partnership, which has enjoyed privileged access to city-owned land, but what’s left to build on isn’t pretty: Much of it is brownfields, and New York still lacks a law that would make their cleanup cost-effective. Rezoning manufacturing areas is possible but would have to be done carefully to avoid displacing jobs.

The dipping economy threatens another precious resource: private-sector cash. The federal Low-Income Housing Tax Credit pumps $14 million annually into local construction for families making up to about $35,000 a year. But major investors are pulling out of the program, because real-world losses have eclipsed their need for tax write-offs. In response, says William Traylor of the Richman Group, which funnels credits to builders, some brokers are trying to sweeten deals with higher percentage returns for investors, which in the end means less cash for building. While the market in the city is strong for now, he predicts that “you’ll feel the impact in New York.”

Private-sector malaise makes public investment that much more critical. The feeling at Housing First is that getting a commitment of any kind is an improvement over a City Hall that won’t even obey existing legal mandates to fund affordable housing. A running start is as much as anyone is hoping for. “A billion dollars over 10 years doesn’t come close to solving the housing problem,” says Brad Lander, executive director of the Fifth Avenue Committee and ANHD board member. “It probably should be double that. But this is definitely what’s possible.”

2.Money Isn’t Everything
By Annia Ciezadlo

While mayoral candidates agonize over which cash commitments to make, the two men running for comptroller face a more exacting decision: What do you do with 90 billion bucks? In April, candidate Bill Thompson suggested increasing the amount of money that the city’s five municipal pension funds put into “economically targeted investments,” or ETIs, specifically economic development and affordable housing. Thompson’s proposed increase was tiny: about one half of a percentage point from each of the five funds. But even a single extra point from pension coffers could mean $900 million more dollars to invest in the city’s economy. Since 1982, the city has committed only $741 million to such investments.

For former Board of Ed president Thompson, planning creative ways to target pension money is a priceless campaign op. He can pledge to invest the money in grocery stores and apartment buildings, or promise to strong-arm big businesses. But while civic investing holds endless possibilities for fiscal baby-kissing, it’s hardly ever done. The obvious reason, as one pension trustee points out, is that “it’s important that we keep the funds very flush, so that the workers, who are essentially lower-income, have something to retire on.”

For the trustees who control the pension funds, accepting a lower rate of return would be a violation of their fiduciary duty to get the highest rate of return possible on members’ money. “If something has a collateral benefit, great!” says one union trustee. “But you can’t say, ‘Here’s the collateral benefit, and I’m going to take a lower rate of return.’” For that reason, most municipal funds tend to invest most of their money in blue-chip stocks. “If you looked at the holdings of all these big pension funds, you would see that by and large, they hold very similar things,” says union researcher John Abraham.

Pension fund managers shun local economic development in particular because it’s been used, time and again, as a ruse for doling out pork to politically-connected businesspeople. “What if there’s fraud? What if there’s mismanagement?” asks a union consultant. “Policy-makers tend to shy away from this stuff because they’ve had so much experience of money being spent in goofy ways.

Investments that claim to be both profitable and socially responsible open themselves to attacks on either front, as Comptroller Alan Hevesi recently learned when a well-meaning effort to force Wall Street high rollers to spread money in the local market earned some scorching press. Economic development faces a double liability: Returns can be quite low, even over the long term, and the risk is much higher. In the 1990s, with stock market returns in the Himalayas, investing in anything that wasn’t bringing in supernaturally high dividends seemed not just unadventurous but downright sinful.

Ah, but times were different then. These days, consistent returns in the low double digits don’t sound so bad after all. As the job market withers while the housing market remains tight, investing in apartments and jobs presents a stirring opportunity for civic rescue. It may not be as sexy as guerrilla biotech investing, but in the dowdy world of municipal pension fund management, affordable housing loans are…well, hot.

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The unions that pay into pensions love the idea of using their own dollars to seed housing and jobs. But it’s not just up to the unions. The city has a huge stake in the funds’ performance, too. Nobody, not even the mayor, can take money from pension funds. But if the funds are flush, the city’s share of the contribution goes down. The smaller the funds, the more the city must kick in. So the city naturally takes a keen interest in how the pension money is faring.

Municipal pensions helped bail the city out of its 1970s fiscal crisis. And just last year, New York’s municipal unions agreed to plow $800 million back into the city budget in exchange for increased benefits and perks. This “pension restart” set the stage for last year’s budget surplus, but the city will eventually have to pay the unions back.

Funky things like this can happen because the comptroller’s vote is just one of several. The resulting clash of interests makes for endless intrigue–as fund managers learned when they tried to impose geographic restrictions on a high-flying new class of investments. In the wildfire market of 1997, low-risk, low-return investments seemed like a loser’s game. So the New York City Employee Retirement System (NYCERS), the biggest pension pool, issued a call for fund managers interested in new, high-risk “alternative investments,” in the form of a private equity fund.

NYCERS came up with a bold notion. If no amount of fiscal magic could make local investments highly profitable, they reasoned, why not force highly profitable investments to go local? Whoever they chose to manage the fund was supposed to “seek, to the greatest extent possible, to make investments which enhance the quality of life and promote economic activity in the five boroughs of New York City.”

But they found that venture capital doesn’t take kindly to being told where or how to perform its wonders. Since NYCERS was asking for Wall Street-level returns, the idea of restrictions did not go over well with prospective fund managers. One high-profile venture capitalist withdrew his bid–after a shouting match with one of the trustees–because he was told he couldn’t invest in any firm that might privatize local public-sector jobs. Another bidder, the one the city eventually selected, made no bones about his feelings for the do-good requirement: When one of the trustees asked him, hypothetically, what he would do if the fund had to invest exclusively in local businesses, he responded: “I’d walk away.”

In the end, only six of the 48 alternative investments ended up being in the city. Clearly, imposing conditions on high-return investors was not going to be easy, even with enormous amounts of money. “Listen: we’re huge. Aren’t we huge? We turn to each other and say ‘Yes, we are,’” rues NYCERS trustee Mike Musuraca. “We thought we would have more control…[we thought] we should be able to do it, and people would just dance.”

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But if dancing with financiers didn’t make for much local investment, these misadventures had an unexpected benefit: they made low-risk, low-return investments look that much more reliable. This March, Hevesi’s office issued a call for intermediaries to make loans to development projects, backed by city pension funds. Those brokers would seed money into building or rehabbing apartments, mortgages for union members, supporting businesses and stores, even building senior and day care centers.

It’s not an entirely new scheme. Since 1982, the pension funds have underwritten more than a half-billion dollars in local housing redevelopment, mostly through the nonprofit Community Preservation Corporation. The funds created a mortgage market–and they were making money, an 11 percent rate of return. Better yet, those loans were all backed by government insurance, through programs like Fannie Mae. Now, however, banks are increasingly crowding out pension funds in competition for those insured loans, so the funds are starting to consider making loans that are less than 100 percent government-backed.

Local economic development will be a lot tougher for investors to get excited about. Such projects have always been a tough nut for investors to crack, as the Bronx Community Paper Company discovered when it found that a recycling plant employing 400 would have cost up to $700 million; it abandoned its plans. Even the New York City Investment Fund, founded by financier Henry Kravis and run by New York City Partnership chief Kathryn Wylde, has a hard time finding local businesses that meet its standards. Thompson wants to bring Wylde in to help manage his investments.

Mark Jahr of the Local Inititatives Support Corporation, which backs inner-city retail outlets, applauds unions for trying but cautions that if there’s an economic development project that can bring double-digit returns, it hasn’t yet been discovered. LISC’s return on its new Bronx mall is “about 6 percent,” says Jahr. “Those aren’t the types of rates of return pension funds are looking for.”

3.Welfare Needs Work
By Matt Pacenza

On a May night many of them would usually spend feeding their kids, nearly a thousand spectators rose to their feet at a mayoral candidate forum. Standing everywhere were public assistance recipients who have toiled in the city’s Work Experience Program, cleaning parks and picking up cigarette butts. They cheered loudly as each candidate promised them training, education and jobs.

But perhaps the most striking thing was that the candidates were talking about those matters at all. The question of what will happen to the nearly quarter-million city families still on public assistance has been virtually missing from stump speeches. When they do talk about it, the candidates vaguely pledge to turn public dependents into wage earners and to run a welfare program that will be kinder than the current mayor’s.

Even those promises would require an overhaul of the current system. Rudy Giuliani and Human Resources Administration Commissioner Jason Turner have assembled a huge apparatus. That includes a 40,000-strong WEP labor force and up to $400 million in job training contracts with private companies. There’s also the matter of the Giuliani administration’s aggressive diversion policies at the city’s job centers, which have deterred untold numbers of New Yorkers from applying for or receiving benefits in the first place. “The city of New York has made it so onerous for people who are trying to access welfare benefits,” says Helen Lee of the Legal Aid Society. “From constant appointments to prying investigations, it’s been a policy that successfully keeps the number of recipients down.”

Keeping the rolls low, however, will be painfully tempting for the next mayor. The Independent Budget Office has predicted a $57 million welfare shortfall in the city budget in 2003, and that doesn’t even factor in the prospects of reduced federal aid and a weakening economy. The mayoral candidates’ pledges may be vague, but they’re also expensive: Encouraging recipients to learn English instead of cleaning parks. Outfitting a city network of community-based job trainers. Instructing caseworkers to help clients get all the benefits they are entitled to. All would cost the city far more than it currently funnels into public assistance.

They also don’t factor in the more than 20 percent of people who are on the rolls because they aren’t sick enough to qualify for disability benefits but are too infirm or disabled to enter the workforce. At the forum, City Comptroller Alan Hevesi, with optimism echoed by his opponents (and cheered by the crowd), said, “Ideally, we will have nobody on welfare.” Such hopes may not be backed up by the facts.

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The primary target of the Democratic leadership’s criticism of current welfare policy is WEP. Peter Vallone said recently that WEP “keeps people from learning job skills.” Along those lines, each candidate has promised to create a workforce policy that emphasizes practical job skills and reduces WEP’s physical labor and busywork.

But transforming WEP will not be without cost. Last year the Independent Budget Office revealed exactly how much the Parks Department now relies upon welfare’s incredibly cheap labor–an average of $1.80 per hour versus $8.65 for salaried Parks workers. Between 1991 and 1999, their WEP workforce grew from 170 to 2,389, while full-time employees dropped from 4,285 to 2,101.

If they want to reduce the number of WEP workers, the new mayor and City Council face dirty parks or huge increases in the Parks budget. The same calculation will determine the fate of WEP workers mopping courthouses, cleaning subway cars and sweeping the streets. The truth is that, if solely measured in dollars and cents, WEP is a great program for the city, providing not only cheap labor but an inexpensive way to involve welfare recipients in work activities, in line with federal law. This explains why the candidates are careful to avoid saying they will eliminate WEP, a priority of advocacy groups like ACORN and Community Voices Heard. In responses to questions from City Limits, Mark Green’s campaign cautiously wrote that the program shouldn’t be the city’s “primary employment strategy.”

Green is advocating a hybrid approach: Keep WEP, but add wages and benefits like health insurance. Other candidates have backed such improvements as a screening process that makes sure recipients are fit for work and a grievance procedure for workers with disputes.

That WEP may be here to stay is hard for some activists to swallow. But others argue that a well-run city work program could help the current class of recipients, who continue to need benefits despite a booming economy and an administration that tried to push them out the door. “Many can’t read or write,” notes David Jones, president of the Community Service Society. “They have disabilities that usually haven’t been adequately assessed. But even that bottom group should be engaged in some work activity. It’s to the public’s advantage.”

Whatever form WEP takes, the Democratic candidates agree that many of the program’s current workers would be better served in intensive training that prepares them for jobs. But experts in workforce development believe that revamping existing programs will be no easy task.

The Giuliani administration was a late convert to workforce development, after it became clear that WEP wasn’t enough to move people off the rolls. So last year, the city issued 11 contracts to private organizations and companies and created a vast, three-tiered job training system: Four “assessment centers” identify those who can immediately apply for jobs. Recipients who need job-seeking skills go to one of 11 “employment centers.” Those who need the most training are referred to dozens of community-based organizations (CBOs) for intensive skills building. This system has come under criticism for emphasizing quick job placement over substantial training [see “The Great Training Robbery,” May 2001].

Green and Hevesi have suggested they would enhance the current system by putting more resources into the CBOs, which they say are better equipped to offer personalized training. Green even joined former Labor Secretary Robert Reich on a tour of Williamsburg Works, a Brooklyn job training organization. Advocates for serious job training welcome these proposals, but they warn that they won’t be effective unless the city makes heavy-duty new commitments.

William Grinker is a former city welfare commissioner who now operates the Non-Profit Assistance Corporation, which runs one of the employment centers; NPAC relies on CBOs, including Williamsburg Works, to place clients into jobs. Grinker agrees that CBOs should do more job training but warns that they’ll need more than just a contract. “There’s a capacity issue that has to be faced if you’re going in that direction,” says Grinker. “Everyone visits Williamsburg Works, but there aren’t many groups out there who can do what they do. The next mayor would have to be willing to provide resources to make more of these small organizations viable.” NPAC proudly points to its own success–77 percent of its clients who found jobs kept them for at least 90 days–but Grinker notes that they couldn’t have done the work with just the city’s money; NPAC raised more than $3 million in outside funds.

HRA claims to have put about 15,000 people in jobs so far. By all accounts, the first placed were the easiest to serve: they typically had employment experience and were suffering temporary setbacks. Much more will have to be done to help the chronically unemployed. They are likely to have children, lack a high school diploma, have a history of drug or alcohol problems and little, if any, formal work history. “We need to stop thinking of welfare reform as a program designed to save money,” says Amy Brown, a researcher with the Community Food Resource Center, “and recognize we need to invest in people to help them.”

4.Patients aren’t a Virtue
By Matt Pacenza

Not long ago diagnosed with terminal illness, health insurance for the poor has been revived by elected officials who are usually no fans of government social programs. Mayor Giuliani has shoveled publicity on his Health Stat initiative, with the goal of enrolling half of the city’s 1.8 million uninsured into Medicaid or the state initiatives that cover children and parents with slightly higher incomes, Child Health Plus and the brand new Family Health Plus.

When the mayor announced Health Stat last summer, it was a rare moment of consensus: He was joined by Public Advocate Mark Green, Comptroller Alan Hevesi and City Council Speaker Peter Vallone. All three have now made health care a campaign issue, with proposals essentially the same as Rudy’s: Sign up the uninsured. It makes sense to take full advantage of these insurance programs, because the city pays only about 25 percent of the cost, with the state and feds picking up the rest.

The city Health and Hospitals Corporation could certainly use the money. When he entered office, Giuliani began cutting the city’s $300 million subsidy of HHC and in 1996 eliminated it outright. To stay afloat, HHC aggressively cut costs, reducing its staff by about 25 percent. Facilities have been eliminated, including more than 40 clinics that are closed or soon could be [see “Failing Health,” page 6]. But all that still hasn’t put HHC in the black. The agency announced in May that it faces a $235 million deficit that will only grow in the future. The city will have to find that money somewhere.

Will increasing insurance enrollment help? Yes, and no. In some cases, health insurance guarantees money will flow in. But increasingly, it actually exacerbates the cash hemorrhage. First of all, many who rely on the public health system are not eligible for the insurance programs. Family Health Plus won’t help most single adults, and most noncitizens are also excluded–in all, almost 1 million of the current uninsured. Meanwhile, Medicaid has been failing to pay providers enough to cover their costs. Outpatient rates haven’t gone up in over 10 years, and the new regime of Medicaid managed care is even more of a money-losing business for health care providers. Managed care’s flat fees translate into “roughly a 25 percent reduction in revenue,” says Rhonda Kotelchuck of the Primary Care Development Corporation, which funds clinics.

When Medicaid reimbursement rates were higher, public clinics and hospitals, required by law to treat the uninsured, could use the extra cash to help pay for patients who weren’t covered. In 2000, according to HHC, the agency lost $421 million treating half a million uninsured patients. The losses will mount as managed care continues to be phased in.

Medicaid enrollment overall is growing, ironically, because of Health Stat. The federal government requires that the city shift Medicaid-eligible children out of Child Health Plus and into Medicaid. That growth spells trouble not just for the city, but for private facilities that treat poor patients. “Two clinics have approached me that think they’re going to go under,” said Andrea Ryan of the Urban Justice Center, who advises neighborhood clinics. “They can’t collect enough money.”

5.Cops Psych Out Recruits
By Annia Ciezadlo

If there’s one thing every freelance social reformer thinks he can fix, it’s the NYPD. Suggestions tend to fall along two lines: make white cops be nicer to black and Latino people (better training), or hire more black and Latino cops (minority recruitment). But what do black and Latino cops think? “That’s a bunch of baloney! This isn’t about training,” says Christopher Cooper. “The politicians can certainly pander to what the community says it wants and needs. But when you know something about policing, you know that one of the biggest problems is background investigations.”

Cooper, a muscular, cornrowed John Jay professor, is on a mission to reform the background investigation that every NYPD applicant must go through, consisting of a written exam, several standard psychological tests, and interviews with a background investiga