Public Housing at the Crossroads: Bricks, Mortar, and Public Policy
at the New York City Housing Authority

February 11, 1999

H. Carl McCall

State Comptroller

Office of the State Deputy Comptroller for the City of New York

Report 8-99

Contents

I. Executive Summary

II. Background

III. Condition of Major Building Components

IV. Capital Needs and Capital Resources

Appendix A: Methodology

Appendix B: Assessment of Major Building Components

Appendix C: Capital Need in the Federal Housing Projects

I. Executive Summary

New York City, which has long suffered from a lack of affordable housing, has a vast and irreplaceable resource in the public housing projects operated by the New York City Housing Authority (NYCHA). NYCHA is among the best-managed public housing authorities in the nation and provides housing to 536,000 tenants. Yet public policy choices and reduced funding levels at the national level have left this important asset without a sound long-term financial plan to manage its physical plant.

In general, NYCHA's strategy is to allocate its limited resources to building components in the greatest need for repair. Indeed, our review found that the number of building components needing urgent repair has declined by more than half over the last eighteen months, but during the same period the number of components in fair or poor condition has grown significantly. Thus, despite the investment of hundreds of millions of dollars annually NYCHA has been unable to prevent the deterioration of its housing assets.

NYCHA estimates that it would cost about $5.2 billion to bring the projects in our sample, which comprise about 75 percent of the units contained in the 325 Federally funded projects operated by NYCHA, up to a state of good repair. NYCHA also estimates that it will be able to address only 13 percent of this capital need by the end of 2001, assuming no further reduction in Federal funding (capital funding has been reduced by 21 percent since 1994). Even allowing for overestimation, the capital need is great and cannot be adequately addressed under the current Federal system.

The condition of New York's public housing is not strictly a local issue. A broader policy debate is evolving at the national level regarding the future of public housing. Administration officials and Congress are in general agreement that the current system requires significant retooling. Among the issues being debated are whether public housing should be reserved for the poorest tenants or for a broad mix of income levels; whether new public housing should be created, and if so, should it take the form of high-rises or smaller, more manageable structures; whether public housing should be privatized or sold to its tenants; and, of course, how the new policy choices will be funded.

As the current Federal debate has evolved, the issue of a fiscally sound system to preserve and upgrade public housing has gone largely unaddressed. Currently, the Federal government does not provide a revenue stream that is sufficient for this purpose. Despite the investment of about $1.5 billion in Federal funds over the past five years, NYCHA estimated in May 1997 that it would cost virtually the same amount as it estimated in 1992 to bring all of its Federal projects up to a state of good repair. In other major cities a combination of mismanagement and inadequate funding has led to decreased habitability, increased vacancy rates and, eventually, to demolition. In recognition of this problem, the President has proposed a 20 percent increase in the amount of Federal resources available for capital rehabilitation, but the actual appropriation will be subject to congressional approval.

As the City, State and Federal governments better articulate the changes under consideration in Washington, the issue of providing adequate resources to ensure the long-term viability of existing public housing cannot continue to be overlooked. Doing so will force a series of public policy choices that could place at risk an important portion of New York City's affordable housing stock.

II. Background

For many years, it has been acknowledged that the New York City Housing Authority (NYCHA) is one of the nation's best-managed public housing agencies. This standing was recently confirmed in a review of management quality at all the nation's public housing authorities as conducted by the Federal government's Public Housing Management Assessment Program. Such key indicators as financial management, vacancy rates, uncollected rent, modernization work, inspections, resident services, and security were evaluated. While some other big-City authorities have been taken over by the U. S. Department of Housing and Urban Development (HUD) or are in judicial receivership, NYCHA received a near perfect rating.

NYCHA operates 346 housing projects, consisting of 182,000 apartments, in over 2,800 residential buildings that shelter an estimated population of 536,000 (431,000 legal tenants plus an estimated 105,000 tenants who live "doubled-up" with family or friends).⁽¹⁾ All of NYCHA's 346 housing projects are substantially supported by government subsidies. The vast majority of these, 325 projects with 162,000 apartments, are the responsibility of the Federal government ("the Federal Program"); the remaining 21 projects with 20,000 units are the responsibility of either the City and State jointly ("the State Program") or the City alone. Were the population of the NYCHA projects to constitute a city, it would be the twenty-third largest in the United States, exceeding the populations of Cleveland, Denver, New Orleans or Seattle.

NYCHA was created in 1934 to provide decent and affordable housing for low-income City residents. Over the next thirty years, almost all of the projects were built and occupied. Then the changing realities of housing economics and new public policy priorities brought construction to a virtual halt. Relatively little construction -- some ten thousand units -- has been undertaken by NYCHA since 1968.

During the years when public housing was rapidly expanding, the commitment of the City and the State often rivaled that of the Federal government. Not satisfied with the pace of housing production, both the State and City financed and constructed projects on their own initiative, creating substantial City and State programs. By the late 1960s, however, much of the low - and middle-income housing market, public as well as private, became subject to new dynamics. Operating costs began to rise precipitously, while rents, often controlled or regulated, increased less rapidly. In the private sector, this led to housing abandonment; in public housing, it led to higher government subsidies and the deferral of maintenance. The cost of the higher subsidies were less easily borne by the City and State than by the Federal government, especially after the onset of the City's fiscal crisis in the mid-1970s.

At that time, demographic changes were also taking place in the NYCHA projects. Historically, a substantial majority of project tenants were low-income working families; those on public assistance constituted a distinct minority. However, a combination of Federal policy, which lowered income ceilings for most new tenants; City policy, which gave priority to the homeless; and increased crime and decreased maintenance which negatively impacted the quality of project life, contributed to a sustained reduction in the tenancy of working families. Little more than a decade ago, as many as half of NYCHA's tenants were fully employed; the fraction has now dropped to one-third.

To ease the financial burden on the City and State, the Federal government instituted the Authority Transfer Program and, between 1977 and 1980, assumed responsibility for the mortgage debt and operating subsidies for 53 City and State projects. After a hiatus of almost two decades, an additional five projects were transferred in the past year. As these projects were, by and large, those in the poorest condition, they benefitted substantially from the application of Federal modernization funds.⁽²⁾ The situation would have been far worse for the remaining City and State projects had the Federal government not authorized NYCHA in 1996 to retain $230 million in unspent Federal funds which it was obliged to return. This afforded NYCHA a one-time opportunity to address some of the modernization needs of those projects.

In 1989 we reported on the physical condition and the modernization needs of the City and State projects. We found that many building systems and components had fallen into serious disrepair due to the lack of adequate operating and capital resources. We plan to report shortly on the current status of these projects.

III. Condition of Major Building Components

NYCHA's technical staff conducts inspections of key building components for each of its projects at least once every two years and compiles the results in detailed project data books. NYCHA ranks its building components on a scale of one through five. A score of one represents excellent condition, while two, three and four represent good, fair, and poor respectively; a score of five suggests that immediate attention is necessary.

Out of the 325 Federal Program projects, we selected a sample consisting of the 104 projects that contained 500 or more housing units, for a total of 120,000 housing units out of the 162,000 units in the Federal Program.

We analyzed NYCHA's assessment of ten major building systems and components: heating, plumbing, bathrooms, kitchens, elevators, brickwork, windows, roofs, garbage disposal, and grounds. The results of our review, which are summarized in Table 1 and shown in detail in Appendix B, indicate that by NYCHA's own estimate:

• at least one major building component in two-thirds of the projects requires urgent remedial action; eleven projects have three or more.

• at least one major building component in virtually all of the projects is in poor or worse condition; 30 projects have five or more.

• the plumbing systems, bathrooms and grounds in half of the projects we reviewed are in poor or worse condition;

• the heating systems, roofs, elevators, kitchens, and garbage disposals in about one-third of the projects we reviewed are in poor or worse condition;

• three major components in two-thirds of the project we reviewed were in either poor or worse condition;
  
  

Table 1

Condition of Building Components

in NYCHA Federal Projects

(number of projects)

Data Source: New York City Housing Authority.

In general, NYCHA's strategy is to allocate its limited resources first to restore those building components in the most serious state of disrepair. Our review has found that since May 1997, when project data was last submitted to HUD, there has been substantial improvement in building components needing urgent repair. For example, 27 percent of the building components in our sample were in need of immediate attention in 1997, compared with only 11 percent currently. Unfortunately, NYCHA's limited resources do not permit it to arrest the overall deterioration in its buildings. For example, nearly two-thirds of the building components in our sample are in either fair or poor condition, compared with 55 percent in 1997. Thus, while NYCHA is able to address its most urgent needs, it cannot prevent the inexorable deterioration of the housing assets under its control.

The data for the ten selected building components indicate the following:

Heating: the heating plants in 38 percent of the projects in our sample were rated excellent or good by NYCHA's inspectors; 31 percent were rated fair; and 31 percent were rated poor or in immediate need of repair (see Graph 1).

The heating plant consists primarily of the boilers, but also includes burners, pumps, valves, compressors, controls, timers, switches, tanks, and water and steam lines. Since the useful life of a boiler is rated at between 25 and 40 years and most have reached or are approaching that age, NYCHA faces the prospect of major replacement costs within the short term. Many of the projects have more than one boiler -- some have as many as five -- that would cost as much as $450,000 each to replace.

Plumbing: the plumbing systems in 9 percent of the projects were rated excellent or good; 45 percent were rated fair; and 46 percent were rated poor or in urgent need of attention (see Graph 2). The plumbing systems consist primarily of pumps, tanks, pipes and drains.

Bathrooms: the bathrooms in 16 percent of the projects were rated excellent or good; 34 percent were rated fair; and 50 percent were rated poor or in immediate need of attention (see Graph 3). Among the bathroom fixtures evaluated were tubs, basins, faucets, shower walls, tanks and bowls, medicine cabinets, and tile floors.

Kitchens: the kitchens in 23 percent of the projects were rated excellent or good; 47 percent were rated fair; and 30 percent were rated poor or in need of immediate attention (see Graph 4). Among the kitchen fixtures evaluated were sinks, faucets, cabinets, and counter tops.

Elevators: the elevators in 48 percent of the projects for which we have data were rated excellent or good; 16 percent were rated fair; and 36 percent were rated poor or in immediate need of attention (see Graph 5). Elevators include cabs, hoist mechanisms, doors and hatches, and controllers, selectors and governors. Elevators, more than any other essential building component, are subject to a tremendous amount of additional wear and tear because of the great number of extra tenants living in "doubled up" circumstances.

Brickwork: the brickwork facing in 13 percent of the projects was rated excellent or good; in 69 percent fair; and in 18 percent poor or in need of immediate attention (see Graph 6). In evaluating brickwork, the inspectors considered waterproofing, pointing, and general state of repair.

Windows: the windows in 43 percent of the projects were rated excellent or good; in 46 percent fair; and in 11 percent poor or in immediate need of attention (see Graph 7). Included were both apartment windows and those in basements and other common areas.

Roofs: the roofs in 25 percent of the projects were rated excellent or good; in 41 percent were rated fair; and in 34 percent were rated poor or in need of immediate attention (see Graph 8). The roof components evaluated included roofing, parapets, roof fans, flashing, canopies and drains.

Garbage Disposal: the garbage disposal systems in 22 percent of the projects were rated excellent or good; in 39 percent were rated fair; and in 39 percent were rated poor or in need of immediate attention (see Graph 9). The systems include compactors, hoppers, motors and fans, sprinklers and alarms.

Grounds: the grounds in 12 percent of the projects were rated excellent or good; in 39 percent were rated fair; and in 49 percent were rated poor or in need of immediate attention (see Graph 10). The components that were evaluated included fencing, playground equipment, benches, and asphalt and concrete surfaces. NYCHA officials informed us that the overhaul of major systems had taken priority over grounds renovations, but that they were now turning their attention toward improving grounds.

IV. Capital Needs and Capital Resources

In its 1997 application for HUD's Comprehensive Grant funding, NYCHA estimated that it would take $7 billion in capital improvements to raise the 325 projects in the Federal Program to a state of "good repair." These are the so-called "hard costs," the costs of bricks and mortar. When such "soft costs" as management, administration and planning are included the estimate increases to $7.4 billion. Despite having received almost $2 billion -- including $1.5 billion for hard costs -- in Comprehensive Grant funding between 1992 and 1997, NYCHA estimates that the Federal Program's capital need is virtually the same as last estimated in 1992.

Using the NYCHA Needs Assessment for 1997 and NYCHA's projection of capital funding and proposed expenditures through 2001, we constructed a data base for the 104 Federal Program projects containing 500 housing units or more, for a total of 120,000 units (see Appendix C).

For each of the projects, we noted the year that its construction was completed and the number of housing units it contains; we then calculated the total hard cost need and the per unit hard cost need in NYCHA's Needs Assessment; planned expenditures for the 1998-through-2001 period; and the percentage of the total need addressed by the projected spending plan.

Our analysis found that NYCHA estimates that it would cost $5.2 billion to bring the units in our sample up to a state of good repair. Disturbingly, NYCHA has resources at its disposal through 2001 to address only 13.4 percent of this need.

The Federal Fiscal Year 1997 budget appropriated approximately $2.1 billion nationally for the Comprehensive Grant,⁽³⁾ of which NYCHA received $345 million. HUD has requested and expects to receive a similar level of funding for FFY 1998 (see Graph 11). HUD officials have informed us that authorities are authorized to supplement these grants by drawing down surplus operating reserves, but NYCHA has found it necessary to use its accumulated operating reserves to fund current operating deficits, in part because HUD's operating subsidies are also declining.

It is not the purpose of this report to call for huge funding increases -- from any level of government -- although ultimately those responsible may decide on a course of action which, in part, includes additional funding. Rather, our object is to highlight the failure of the current system of Federal funding to address the capital needs of these projects, and to warn against the dire consequences of deferred maintenance.

In our view, it is critically important that the system of funding capital investments and operating subsidies be considered by Federal and local policy makers who are now struggling to redefine the purpose and forms of public housing. Should public housing be reserved for the poorest tenants or should there be a broader mix of income levels? What level of government subsidy can be expected in the current political climate? Are these resources sufficient to maintain current assets? Should new public housing be created, and if so, should it take the form of high-rises or smaller, more manageable structures? We strongly believe that the current policy debate provides a context and a useful window of opportunity for airing the plight of public housing in New York City and for devising and adopting a workable long-term plan.

What is essential is that the policy makers provide a reasonable framework for NYCHA, one of the best managed public housing authorities in the nation, to devise and implement a plan that will raise the assets to a state of good repair, and, once that is achieved, to set in place a system of scheduled maintenance that will preserve them.

Appendix A

Methodology

Nine years ago, we reported on the physical condition and the modernization needs of NYCHA's State- and City- subsidized projects. For that report, we analyzed the inspections performed by NYCHA and found that "a large number of electrical, structural, plumbing and heating components are in poor or worse condition; appliances and fixtures need replacement; and fencing, grounds, vehicles, security systems and garbage disposal systems have fallen into disrepair" (see our Report 27-89, Public Housing at Risk: Modernization Needs in New York City Housing Projects, issued April 13, 1989). NYCHA estimated that it would take $200 million to raise its 25 State- and City-subsidized projects, containing twelve percent of the Authority's housing units, to a state of good repair.

We adopted a similar methodology for this report on the physical condition and the modernization needs of NYCHA's 325 Federally subsidized projects, which currently contain 90 percent of the Authority's housing units. We selected, as our sample, the 104 Federal projects that contained 500 housing units or more. The data base we constructed represented 119,694 units out of a total of about 162,000 units in the Federal program (see Appendix C).

For inspection data we used the evaluations of major systems and building components by NYCHA's technical staff contained in the Authority's Project Data Books. We selected for our analysis the ten systems and components that we judged to be most significant and representative: heating plant, plumbing system, kitchens, bathrooms, elevators, brickface, windows, roofs, grounds, and garbage disposal. For this report, we did not review security, appliances, vehicles, doors, electrical systems and some structural components. We then weighed the scores assigned by NYCHA staff to the several assets in each category and arrived at an overall grade for that category (see Appendix B).

The financial data was provided to us by NYCHA. Using these data, we calculated the total hard cost need and the per unit hard cost need for each project, the targeted expenditures through 2001, and the percentage of the total need that is addressed by the projected spending plan.

APPENDIX B

ASSESSMENT OF MAJOR BUILDING COMPONENTS
1=Excellent, 2=Good, 3=Fair, 4=Poor, 5=Immediate Attention, NA=Not Applicable

1. New York City Housing Authority. Return

2. The funds available for capital improvement in the Federal Program are substantially greater and more predictable than in the City and State programs. Return

3. HUD's Comprehensive Grant is subject to annual Congressional appropriation. NYCHA's share of the appropriation grew gradually from $226 million in FFY 1988 to a peak of $435 million in FFY 1994. It has declined in each subsequent year to $345 million in both FFYs 1997 and 1998, a total decrease of 21 percent (see Graph 11). Before FFY 1992, when the grant was called the Comprehensive Improvement Assistance Program, the allocation was based on a competition among public housing authorities; in the current program it is largely based on the number and type of an authority's housing units. Return

4. Represents total average per unit need. Return