Understanding NYCHA’s New Rescue Plan

With 62,000 units already effectively moving off the authority’s books under NYCHA 2.0, this new ‘Blueprint for Change’ addresses NYCHA’s other 110,000 apartments—which together need a $25 billion repair job.

On July 28, the New York City Housing Authority announced a sweeping reorganization to address the gaping repair needs and service gaps affecting hundreds of thousands of tenants at hundreds of developments around the city.

It’s at least the fourth major NYCHA rescue plan since Bill de Blasio became mayor, and it involves a complex set of big changes. Here are some of the basics:

What’s the problem NYCHA is facing?

According to Chairman Gregory Russ, NYCHA needs an estimated $18 billion to satisfy an agreement with the U.S. Department of Housing and Urban Development and achieve basic housing quality standards for 110,000 apartment units. The $18 billion includes $9.5 billion to address mold including the replacement of pipes, full kitchens, baths and ventilation; $1 billion for lead abatement; $4.1 billion to improve heat delivery; $1.6 billion to reduce elevator outages; $370 million towards pest control and waste management and another $1.4 billion towards improving public safety through installing closed circuit television and strengthening main door security. Yet another $7 billion is needed to address a full rehabilitation of community centers and grounds as well as the exterior cladding of residential buildings. That mean’s NYCHA needs about $25 billion. This is a result of aging buildings, reduced support from the federal, state and city governments for a number of years, and management failures within NYCHA.

Hasn’t the city already launched a NYCHA rescue plan?

More than one. Early in his mayoralty, Mayor de Blasio launched NextGen NYCHA, a plan to revamp management practices and generate revenue by building mixed-income and affordable housing on what the city deemed underused NYCHA land, and by using new federal programs to shift NYCHA apartments over to Section 8, a more stable source of federal funding. Those efforts were largely eclipsed by the lead paint scandal of 2018.

After threats of a federal takeover, last January the U.S. Department of Housing and Urban Development agreed to a federal monitor for NYCHA, and the city promised to spend billions to correct maintenance failures. Meanwhile, the de Blasio administration issued NYCHA 2.0, which again called for developing land. It also called for selling air rights over NYCHA property to raise more money, and converting a third of the authority’s apartments—some 62,000—to Section 8 via the Permanent Affordability Commitment Together (PACT), which also puts those units under private management.

OK, so what does this new plan do?

With 62,000 units already effectively moving off the authority’s books under NYCHA 2.0, this new ‘Blueprint for Change’ addresses NYCHA’s other 110,000 apartments—which together need a $25 billion repair job. It basically involves creating a new entity, called a preservation trust, to control NYCHA’s buildings, tapping into a different federal funding source to generate a revenue stream, and using that revenue stream as collateral to borrow money to pay for the repairs.

What’s a preservation trust and why is it useful?

The Public Housing Preservation Trust would have a similar structure to the city’s School Construction Authority model. NYCHA Chair and CEO Gregory Russ said the trust’s procurement structure would give NYCHA some flexibility to craft construction-management deals appropriate to the scale of work that needs to be done.

“What we’re trying to do is say, when we compete, we want the flexibility to compete for a design-build. We want the flexibility to compete in an alternative way for construction manager at risk. These are construction or design techniques that are pretty powerful in terms of expediting and managing these large construction projects, Russ said. “It’s not trying to diminish competition, it’s trying to make the competition that occurs more valuable as a product when it comes to construction and construction management,” said Russ. Design-build and “construction manager at risk” are methods of project management.

Under the plan, NYCHA would enter into a long-term ground lease with the trust. In return, the trust would have oversight on construction, infrastructure improvements and NYCHA staff who would continue to maintain and manage the properties. The plan is for the trust to be controlled by a board with nine members, five appointed by NYCHA, four by City Hall, and with four resident leaders among them.

Russ said procurement would be bound by the Davis-Bacon Act of 1931 which requires contractors and subcontractors to pay laborers and mechanics employed under the contract no less than the local prevailing wages and fringe benefits, according to the U.S Department of Labor. 

Will NYCHA still exist?

Yes. While the trust would have a long-term lease on the buildings and focus on bigger repairs, NYCHA would still own the buildings and land, and would handle management and day-to-day maintenance.

Where will the money come from?

The plan hinges on all 110,000 apartments being in bad enough shape that they qualify for a federal “tenant protection voucher.” According to NYCHA, tenant protection vouchers (TPVs) are one of HUD’s most valuable vouchers, worth more than two times more than other federal funding sources. And since vouchers are a reliable income stream, the preservation trust could float bonds against it, use the voucher payments to service that debt, and apply the bond proceeds to pay for repairs. NYCHA estimates that for every $1 in federal TPV subsidy, the authority could complete over $6 in capital repairs.

How will NYCHA decide what work to do where?

Also in the new strategy is a commitment to creating a comprehensive plan for every NYCHA property and every building.

What else does the plan include?

NYCHA says it will also be looking at the use of “green building technology for retrofits, which would drive down utility costs and decarbonize” NYCHA properties. And it says it will employ a “community-driven strategy” that would include investment in quality jobs to help with the city’s economic recovery. 

An ongoing theme in the Blueprint for Change is the need for a more robust “culture of service” to improve operations. For example, NYCHA is planning to realign property portfolios and management structure. In order to respond faster to conditions, the budget would shift towards property based budgeting and provide a central field office for support. NYCHA also plans on creating an efficient staffing and work schedule in order to respond better to residents. 

What rights will tenants have?

NYCHA says residents would maintain their rights and protections for perpetuity, including rent capped at 30 percent of household income. 

NYCHA says that the legislation creating the trust “will also include resident rights and protections as well as affordability standards, thus codifying them into state law.”

Does this plan need anyone’s approval?

In order for the plan to move forward, federal and state governments would have to be involved in the approval process which would include legislation. 

The Blueprint uses mechanisms contained in Section 18 of the U.S. Housing Act of 1937 which allows a public housing agency to demolish and/or dispose of public housing with HUD approval if the units meet the criteria such as poor physical condition (obsolescence) of the units or unsuitable location with health or safety risks to residents. NYCHA would have to submit an application for each development to HUD’s Special Applications Center based in Chicago, which would review the plan and, if it approved the move, authorize the TPV vouchers.

On the state level, since NYCHA is a state authority, the state would be required to pass legislation to create the preservation trust for NYCHA. 

Who likes this idea?

In a statement, the Community Service Society of New York cautiously embraced the plan, saying that if it works, it will “restore decent living conditions to all developments in the next decade … without resorting to privatization or the construction of market rentals on NYCHA campuses.”

“This is an ambitious plan, which may encounter many hurdles, but it merits our encouragement and cautious support. Bear in mind it is, in a sense, a ‘worst-case strategy’ should nothing else work,” the CSS statement continued. If Washington turns over in the upcoming national election, a number of federal initiatives may also come to NYCHA’s rescue.”

“This is a promising new strategy to preserve public housing and the first solution we have seen to finance all 175,000 units in desperate need of repairs,” said Rachel Fee, executive director of New York Housing Conference. “It is comprehensive, including financing solutions, energy savings and full rehabilitation to correct deficiencies. It is a vision that residents can build on and political leaders should support.” 

What are the risks?

“There are several hurdles,” says Victor Bach, senior housing policy analyst for Community Service Society of New York. One is the need for state legislative approval. Another lurks in Washington D.C. Right now, Bach says, there is a surplus of tenant protection vouchers; whether that continues is the question. 

Historically, tenant protection vouchers (TPV) have remained more stable than public housing subsidies. However, if there are fewer tenant protection vouchers (TPV) available from HUD than NYCHA needs under the Blueprint for Change, Russ said NYCHA would have to go back to Congress for additional appropriation for tenant protection vouchers: “Even if HUD could cut a deal inside existing appropriations for, say , phase one, if we’re going to succeed, we have to come back to appropriations and say, ‘Look, we’re saying this is a national investment.’”

Russ aid it could be a hard sell, but the selling point is the upside for both the federal government and NYCHA: “If you invest in this property, now we’re moving this property in so many ways off the federal books, so to speak, the operating subsidy would change. There’d be no more capital appropriations. And over time, we could refinance these properties in a way that the current model does not allow us to do so we can continue to raise capital.”

Which party controls Congress and who is in the White House could be crucial to whether that sales job succeeds.

“I think if there is a [White House] administration turnover, the prospects are good whether through a public initiative or a more Democratic Congress,” says Bach.  

What are the unknowns?

“We are concerned about the enabling legislation which contains the key protections of the ongoing affordability—carrying along resident rights and protection. State and city enabling legislation and advocates should stay on the watch,” said Bach. “We should have assurances for resident rights and it should be a smooth transition.”