Does this scenario sound familiar? A federal program creates a vital housing resource. New York City sees hundreds of buildings constructed under it. Thousands of low-income people make those apartments their homes. Decades pass. Buildings get older. Federal resources fail to adequately fund the major capital work that the aging structures inevitably need.
That roughly describes the experience of public housing in New York City. But it also tells the story of the 109 buildings in the Section 202 program, a federal funding stream created in 1959 to pay for the construction and operation of housing for low-income seniors.
Section 202 buildings are not in crisis like NYCHA’s are: There aren’t systemic problems with lead paint, mold, elevators, heat or front doors. But the nonprofits that operate Section 202 buildings could start to see serious problems if they can’t afford to make comprehensive repairs.
“The challenge with HUD 202s is a lot of these projects have been built decades ago and a lot of them need significant capital repairs, like new roofs and brickwork,” says Eva Alligood, the interim executive director of the Local Initiatives Support Corporation’s New York City office (LISC NYC), a long-time facilitator of affordable housing. While Section 202 providers were able to receive annual budget increases from Washington, Alligood says, “One of the problems in the program is that, to date, there has not been a reliable way to keep up with major capital repairs.”
That’s the situation facing the Metropolitan Council on Jewish Poverty, which has seven buildings in the Section 202 program spread across The Bronx, Brooklyn and Queens—three newer ones, and four older structures built between 1995 and 2000. “Right now the buildings are in good shape,” says the organization’s housing director, Jeff Nearby. “We’re looking to keep them that way.
Thanks to a recent change in federal law, Nearby and his counterparts at 2,600 Section 202 buildings around the country will now have a shot to do just that. After legislative changes by Congress in 2018 and under rules recently promulgated by the U.S. Department of Housing Preservation and Development, Section 202 providers will be able to apply to the Rental Assistance Demonstration project, or RAD.
RAD might sound familiar, too—it’s one of the mechanisms NYCHA hopes to use to address its $32 billion capital backlog. NYCHA hopes to move 62,000 units (more than a third of its portfolio) from traditional public-housing funding, which has lagged expenses for years, to Section 8 funding via RAD.
Now Section 202 buildings can do the same thing. The allure is the same as it was for NYCHA: Not only is Section 8 a more politically robust program than public housing, and therefore more reliable in any year, RAD also offers long-term funding contracts. With 20-year funding streams to show off to lenders, housing agencies that use RAD will have more luck borrowing money to pay for big repairs.
“They’ll be able to access Low Income Housing Tax Credits, bond financing,” says Grace Chung, who manages a LISC NYC program providing technical assistance to New York 202 providers who want to apply for RAD. “They’re now eligible to apply for these new sources of financing.”
According to Nearby, RAD offers other advantages, too. Currently, any money his organization saves during a budget year must be returned to HUD. “We can’t carry it over,” he says. “It sort of eliminates any incentive to do cost-savings improvement.” Under RAD, those “residual receipts” can be retained.
LISC NYC’s New York Land Opportunity Program (or NYLOP) will help six organizations—representing a combined dozen buildings with 1,038 units—to secure RAD financing, which can require a degree of technical work that smaller housing organization might be strained to generate. (NYLOP previously assisted religious organizations that provide affordable housing, and will in its next phase lend a hand to veterans’ organizations in the housing business.)
Besides the Metropolitan Council on Jewish Poverty, the participating organizations are Belmont Arthur Local Development Corporation in the Bronx; Bethany Housing Development Fund Corporation(HDFC), Casa Victoria HDFC and West Harlem Group Assistance in Manhattan, and Wartburg HDFC in Brooklyn.
“We don’t want to paint the picture that these nonprofits have buildings that are falling apart. The challenge is that they are barely hanging on,” Alligood says. A building operated by one of their clients lacks a working cooling system in common areas. That doesn’t immediately threaten the survival of the structure, but it does mean seniors can’t use the community room over the summer, and that fans have to be use to cool the elevator system.
Nearby says boilers need replacing at his agency’s older buildings. Some windows are drafty, the door locks could use an upgrade and security cameras are needed. He says 40 percent of current residents are the original ones and, “We want to be able to preserve that.” Section 202 houses primarily very low income seniors; nationwide, the average tenant household income is $13,300 a year. Seniors in the program pay 30 percent of their income toward rent.
While Section 202 buildings in the city will be relying on the same program that NYCHA is treating as a lifeline, the two are not in competition: Section 202 draws from a different RAD funding stream—and unlike the public housing side, it is not capped.
One thing RAD will probably not do is create much new senior housing, which is desperately needed as New York City grows grayer. But there are other imaginative efforts underway to come up with new resources for new construction, especially land.
Because they were built in earlier eras, many Section 202 buildings were forced to construct large parking lots that are often empty and could be used to create new housing. Activating that resource could require zoning changes, lot separations and more, but it is one of the few large pools of buildable land held outside the private market in today’s New York—and it’s a move that would shift the city away from car-centric land use.