Making Rent

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Anthony Labaschi wasn’t going anywhere. Seven months behind in rent and about to lose his Queens apartment, the retired Army vet barricaded himself inside and fired three shots through the door at a city marshal who had come to evict him. Eventually Labaschi was taken from the house, and he’s now awaiting trial. “He’s a good guy, just down on his luck,” neighbor Tom Damato told reporters.

If Labaschi’s case is extreme, his situation is remarkably common. The city’s housing courts are clogged with tenants who, for one reason or another, can’t keep up with their rent.

Now City Hall wants to help. Over the past year, the Bloomberg administration’s welfare, housing and homeless agencies, along with the Office of Management and Budget, have been meeting to plan New York City’s own homegrown rental assistance system for people in imminent danger of losing their homes. If fully realized, the initiative could distribute tens of millions of dollars in aid each year.

This used to be the feds’ job. In 1974, Congress created Section 8, a program that caps a household’s rent at one-third of income and pays its landlord the difference. But the program, once a bipartisan favorite, has become a thorn in the side of Republicans in Washington, who deem it too expensive. In February, the administration proposed a jaw-dropping $1.6 billion budget cut to Section 8, and at press time city agencies stood to lose $49 million under a recent change in how the U.S. Department of Housing and Urban Development (HUD) calculates payments.

New York State is also scaling back. It recently challenged a court mandate stemming from a 1987 lawsuit, Jiggetts v. Dowling, that forces it to pay extra rent costs for families on welfare facing eviction. In its latest appeal, it argues that the current shelter allowance already built into welfare grants–$400 for a family of three–should be enough.

Both of these retreats hold major consequences for New York City, where 18 percent of families live in poverty and 130,000 households now rely on one of these two kinds of rental assistance. Vic Bach, director of housing policy and research for the Community Service Society, says there is no way the city could get by with less Section 8. “It’s a little like being deprived of oxygen,” he says.

City officials don’t disagree, but they are hard at work on their own lifesaving measure. The Department of Homeless Services (DHS) plans to divert money from its $600-million-a-year emergency shelter system and use it, along with additional state and federal dollars, to help keep families housed. The emphasis will be on neighborhood-based prevention efforts, including counseling, family mediation and legal defense–and rent subsidies.

Filling the rental gap won’t be easy. More than 800,000 New York City households earn so little that they qualify for Section 8. But the waiting list–now at 129,551 families–has been closed for nearly a decade. Meanwhile, the history of rental assistance programs, including Section 8, suggests a slew of potential pitfalls.

Some tenants have trouble finding apartments. Others get stuck in subsidized housing and can’t afford to move. As critics of Section 8 point out, tenants have a disincentive to earn more, because any additional income will result in a rent hike or even ineligibility. Landlords are leaving the program in droves, citing slow payments and strict rules.

On a broader scale, some studies have found that rental assistance actually increases demand for housing. Vouchers are critical, they argue. But ensuring a sufficient supply of reasonably priced places to live may hold a more lasting benefit. Without a boost in affordable construction, the housing crisis is here to stay.

It’s nearly noon at the Harlem Section 8 office, and everyone looks pissed. In the seventh-floor application room, a digital sign invites applicant #554 to the clerk’s desk. In an adjacent area, dozens of mostly young, black and brown women with children sit waiting for their eligibility interviews. Sudan Irving and Shadonna Andino, who traveled here together from a downtown shelter, are among them.

At 24, Irving already has the quiet, steady presence of someone who expects bad luck. Her clothes are sporty and plain, except for her large cubic zirconia earrings. Andino, 20, is smaller and angrier. She’s five months pregnant and has the papers to prove it.

Other than that, the women are a lot alike: Both are refugees from overcrowded apartments, both have toddler daughters, and both spent months in and out of the Emergency Assistance Unit (EAU), the city’s intake center for homeless families. Now they’re finally eligible for Section 8. “I’m fortunate to be in shelter,” says Irving. “Whatever they want me to do, I’ll do.”

This isn’t how the system is supposed to work. Rather than reward families that survive the shelter system, the city’s Department of Homeless Services (DHS) wants to find ways to keep them from ever ending up there. The agency’s sweeping new homelessness plan is all about shifting emergency dollars toward prevention. It will soon dole out $12 million to have community-based organizations assist squeezed-out New Yorkers like Irving and Andino establish themselves in workable housing situations. Those groups will be in communities that send the most people to homeless shelters: the South Bronx, East Tremont, Bedford-Stuyvesant, Bushwick, East Harlem and Jamaica.

One of their most valuable tools will be rental assistance, but it’s not yet clear where the dollars for these subsidies might come from. Jim Anderson, spokesperson for DHS, acknowledges that the city has been talking about “streamlining” rental assistance but declined to provide further details. The other agencies involved in the discussions–the Human Resources Administration, Department of Housing Preservation & Development, New York City Housing Authority and Office of Management and Budget–also would not comment on the effort.

Patrick Markee, senior policy analyst at the Coalition for the Homeless, who has long advocated for city-run rental assistance, says a modest program could be funded largely with dollars now being spent on emergency housing for the homeless. DHS reports it costs an average of $92 a night to house a family in shelter; the average stay is just shy of one year. That $2,614 per month could help pay for an apartment instead, and probably two. But wouldn’t the city be overwhelmed with applicants? Not necessarily, says Markee. “You can say you don’t want to open the floodgates,” he says, “but there’s already a flood.”

A city-run subsidy program would also have to meet the needs of its customers–something previous, smaller attempts have failed to do. In 1998, at the urging of the Citizen’s Committee for Children, DHS created a rental assistance program serving families and single adults. But the initiative, which offered $400 a month in aid for a maximum of two years, couldn’t compete with Section 8; many potential recipients opted to wait for the federal voucher rather than accept time-limited assistance. Others were turned away because they couldn’t show how they would meet their rent once the aid ended. Ultimately, DHS subcontractors made only 116 placements in five years.

Vince Castellano, a real estate broker who specializes in Section 8, says it isn’t easy to find landlords willing to accept the voucher. In fact, he’s only able to find housing for roughly one in every 10 clients he serves. Many landlords, he explains, are reluctant to deal with the government paperwork or take a risk on a tenant with a history of nonpayment. Castellano, a Section 8 landlord himself, tries to reassure them. “It’s like Baskin-Robbins ice cream–31 flavors,” he says. “Some you love, some you hate, most flavors are in the middle. I tell owners, ‘Listen, if you can get more than Section 8 from the market, go get it.'”

As city officials grapple with rental assistance, they are asking hard questions: What is the city’s obligation when it comes to providing housing subsidies? Who needs them most? And how will they impact the neighborhoods where they are used? These are the exact questions the federal government was asking back in 1974.

When Congress first authorized Section 8, during Nixon’s second term, public housing already had a bad name. Notorious projects like Chicago’s Cabrini Green and Robert Taylor Homes became glaring examples of government intervention gone awry. Amid this dismal scene, rental assistance emerged as a bright alternative, a way to give poor people a choice about where to live and simultaneously bolster the private rental market. To some extent, that’s what happened. One 1999 study found that the presence of Section 8 households actually improved surrounding property values.

New York City has been especially good at making use of its Section 8. Not only has it assisted hundreds of thousands of renters over the years, but through that helped finance the redevelopment of abandoned apartment buildings.

The New York City Housing Authority distributes the vast majority of Section 8 vouchers–90,000 last year. “We’re very aggressive in getting landlords to participate in the program,” explains spokesperson Howard Marder. NYCHA’s program has grown by 15,000 vouchers over the past three years.

Another 15,000 are used by the Department of Housing Preservation & Development via dozens of different affordable housing and homelessness-prevention programs. By pairing the vouchers with other types of housing subsidies, New York has lowered its average voucher cost to $7,344 per year, compared to roughly $10,000 nationwide.

During the Clinton presidency, HUD con-_______

sidered Section 8 a roaring success. “Section 8 has proven to be both effective and cost-efficient,” stated the agency’s 2000 report on the program. “HUD is confident that the Section 8 program is fundamentally sound.”

Under Bush, HUD’s tone changed dramatically. In a white paper issued this May, entitled “The Flexible Voucher Program: Why a New Approach to Housing Subsidy is Needed,” the agency cited grave concerns about the program’s cost, which had grown in step with housing prices nationwide and now amounts to more than half HUD’s budget. It called for a new model that would fund fixed block grants rather than existing vouchers. According to HUD, this would give housing authorities more flexibility in finding ways to control costs. They could, for example, elect to serve higher-income tenants, demand more than one-third of income in rent, or institute time limits–a central goal of reformers. “It is likely that many [public housing agencies] think it inappropriate for families with no obvious impairments from working to create a permanent claim on assistance,” the paper states, “causing longer waits for needy families on the waiting lists.”

The proposal echoes the sentiments of Howard Husock, a conservative pundit and member of HUD’s new Negotiated Rulemaking Committee, an advisory body charged with helping the agency make funding decisions. Director of the Case Program at Harvard’s John F. Kennedy School of Government, Husock contends that Section 8 is destroying working class neighborhoods by importing “problem-ridden, very poor single-parent families.” A better solution, he suggests in a 2000 City Journal article, would be to warehouse these families in existing public housing projects that would serve as “institutional homes” where single moms would “get instruction in parenting, along with encouragement to marry the fathers of their children.”

Husock hasn’t backed off his message. The Summer 2004 issue of City Journal contains an essay on Section 8 in New York, called simply “The Housing Reform That Backfired.”

Husock isn’t the only analyst raising questions about rental assistance. As a grad student at NYU’s Furman Center for Real Estate and Urban Policy in the late 1990s, Scott Susin studied how vouchers affect the price of unsubsidized low-income housing. Looking at rents in 90 metropolitan areas over a period of two decades, he found that Section 8 actually increased rents by an average of 16 percent. The more Section 8 a city had, the higher its lowest-rung rents, and the more quickly they’d grown.

“Housing subsidy programs can only improve the housing conditions of the poor if they increase the supply of housing: inducing construction, reducing demolition, or perhaps increasing maintenance,” wrote Susin, now head of HUD’s Analysis Staff. “Otherwise, the stock of housing is simply redistributed from one group to another.” His findings were unpopular, Susin recalls, but he stands by them.

Here in New York, the housing stock for the very poor is small and getting smaller. In 2002, the vacancy rate for apartments under $700 was less than 2 percent, a shortage that may be influenced by the availability of subsidies allowing rents up to $1,073 a month. Meanwhile, thousands of units of housing constructed and operated with the help of Section 8 and Mitchell-Lama subsidies will soon be eligible to rent at market rates.

At the same time, the city’s subsidized construction efforts have focused largely on middle-income housing. In his New Marketplace plan, Mayor Bloomberg promises 65,000 units of new or rehabbed housing by 2008, with only 2,000 of those units reserved for very-low-income families (defined by HUD as $31,000 for a family of four). While that number was recently enlarged by the mayor’s pledge to build an impressive 12,000 units of supportive housing by 2014, that housing is geared toward families and individuals who need mental health and other services. Mayor Koch’s 10-year plan, by contrast, built or rehabbed 150,000 units of housing, with more than 60 percent geared toward low-income and homeless households.

Shaun Donovan, the city’s new housing commissioner, says it’s important to remember that the city needs a full range of affordable housing. Since the feds only help low-income households, he stresses, it’s up to the city to make sure that middle-income people have housing they, too, can afford. “The mayor’s plan is a complement to other resources–not the whole picture,” he says. As the city’s Independent Budget Office recently noted, targeting the middle class also helps the city housing agencies stretch dollars further, since each apartment requires relatively little subsidy.

Besides, Donovan adds, it’s hard to build low-income housing without enough rental assistance. As it is, developers are skittish about investing in affordable housing without the assurance that tenants will have the means to move in. “You can’t just have capital subsidies,” he says. “You need operating subsidies as well. Even if you spend all the money in the world on capital, you’d still need to subsidize those costs.”

A phalanx of housing advocates is pushing the city to dig a little deeper. This year, an unusual coalition of interests led by the New York ACORN Housing Company–including the nonprofit Association of Neighborhood and Housing Developers, and the New York State Association for Affordable Housing, a member group of for-profit builders–started working with the housing department on a program that would help target affordable housing to lower-income households. While this year’s funding is a paltry $12.5 million, Ismene Speliotis, ACORN’s director, is encouraged by the range of players involved. “These are not the folks that usually talk to each other,” she says.

There are also options under discussion that wouldn’t necessarily require the city to shell out big piles of subsidy money. ACORN helped the City Council draft a measure that would require affordable housing development on vacant city-owned lots. Donovan has said that his agency might acquire foreclosed HUD properties and support inclusionary zoning that could spur developers to build affordable apartments (though many advocates think mandates would be viable and more effective). The city’s housing and housing finance agencies have also gotten involved in efforts to ensure that HUD-subsidized projects and Mitchell-Lamas remain affordable over the long haul.

Even if they succeed, the city’s rents and incomes will likely continue to diverge. But with a healthy rental assistance program and more affordable housing, the city could help narrow that gap. Landlords would have an incentive to stay in the program. The Section 8 waiting list might start to shrink. And renters like Irving and Andino wouldn’t have to spend four months in a shelter in order to find a home.

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