Should Baltimore Privatize Its Public Housing?
Housing advocate Jeffrey Singer and Councilman Bill Henry debate whether Baltimore should privatize 40% of its public housing stock
JAISAL NOOR, TRNN PRODUCER: Welcome to The Real News Network. I’m Jaisal Noor in Baltimore.
Baltimore’s Housing Authority recently announced plans to privatize 4,000 public housing units, more than 40 percent of the city’s total public housing stock. The city is reportedly among the national leaders in adopting this approach through a federal program, which would allow it to raise $300 million in funding for badly needed repairs. According to the Urban Institute, the city has only 43 affordable rental units available for every 100 extremely low rental households in the city, with neighboring Baltimore and Howard counties faring even worse.
We reached the Baltimore Housing Authority for a comment, and they told us the best way to preserve the city’s housing stock is this plan, because it only has a $4 million annual budget and they lack the funds to preserve the buildings in a way that’s healthy for tenants. Low-income people will still be able to maintain housing at the same affordable rate they currently pay.
Now joining us to discuss this are two guests.
We’re joined by Jeff Singer. He’s an instructor at the University of Maryland School of Social Work, as well as a member of Housing Our Neighbors and CASH (City Advocates in Solidarity with the Homeless). He worked at the Baltimore City Department of Social Services and Health Care for the Homeless for 40 years.
We’re also joined by Bill Henry, second-term councilman for Baltimore City’s 4th District. He chairs the City Council’s Housing and Community Development Committee and represents the council on the city’s Commission for Historical and Architectural Preservation.
Thank you both for joining us.
BILL HENRY, BALTIMORE CITY COUNCILMAN, 4TH DISTRICT: Thank you.
NOOR: So, Bill, let’s start with you. Why is the city doing this? And how–the companies that are going to buy this public housing stock, how are they going to make money off of this? That’s the whole point for them. That’s their incentive.
HENRY: Well, this is what has been explained to some of the council people in individual briefings, and it’s one of the reasons why I made a point of asking for a larger public hearing on the matter, which we’ll be having on Wednesday, March 12, at 5 p.m. in the City Council chambers.
The Housing Authority’s general approach to this is that they only get a little bit of money each year to do capital repairs. It’s not enough to do the wholesale replacement of some of the units which have really fallen into disrepair over the years. By leveraging the regular stream of capital dollars that they have with the money available through the existing federal low-income housing tax credit, which is available when private operators own the buildings, they can put together a big pot of capital money up front and do major repairs to–I believe they’ve cleared 11 buildings in the first round and a second package of 11 buildings or sets of buildings in the second round.
NOOR: And what’s your response?
JEFFREY SINGER, CITY ADVOCATES IN SOLIDARITY WITH THE HOMELESS : Privatizing those things that are held in common, the public, is almost always a bad idea. We have a long history of this. We privatize prisons, and now there are law suits at most of those private prisons. We’ve privatized pension funds, and now half of American workers have no pensions. It’s usually not to the advantage of ordinary people. It’s certainly to the advantage of private investors. Public housing shouldn’t be a means for private investors to make profits. Any money that could be derived from them ought to go back to the tenants and to the 82,000 Baltimore families who can’t afford their housing.
HENRY: I have to admit that if this was a Baltimore City plan and it was something that required the cooperation of City Council, this would be a tough sell. The City Council has not been a big fan of privatizaton historically. And there have been a number of us on the council who have held the line when these types of issues come before us. I think it’s important to remember in this case that we’re talking about the Housing Authority, which is not actually a city agency. It’s a federal agency. Its catchment area of responsibility is Baltimore City, but they don’t report to us. They are not subject to us in terms of legislative authority. We can ask them questions, and we can try to shine a light on things, but what’s going to be required if there’s going to be a change to this program, it would be because citizens across the city converged on the one elected official who does have some sway with the Housing Authority, and that’s the mayor.
NOOR: And do you support this plan? Do you think it’s the best way to–?
HENRY: I support finding out a lot more about it. That’s one of the reasons why we’re having the hearing. I’ll admit, some aspects of it, to me, seem to make financial sense in the basic idea of leveraging a pathetic stream of annual dollars into one big lump of cash up front so that you can do a significant amount of rehab work. That’s essentially what we’ve already said we’re going to do with our public school dollars. We’ve–by leveraging the amount of capital money we normally put in them on an annual basis.
What the Housing Authority has come back to us saying is that the amount of capital dollars that we regularly spend–or–I’m sorry–technically, they regularly spend, ’cause there’s no city money in this,–.
NOOR: Right. It’s all federal money.
HENRY: It’s all–yeah, the amount of federal money that they spend annually, if leveraged the same way we’re going to be doing the buildings for the schools, if we leverage the same way, they’re saying that it would only be–it would even be smaller than we thougt it would be when we were discussing this earlier this week, because there are federal regulations that limit the leverage to three-to-one. So they would only be allowed to borrow $12 million to do work, and that’s not going to make much more difference.
NOOR: And, Jeff, is this just passing the burden onto the residents?
SINGER: I don’t know about that. It remains to be seen how this will impact on current residents and future residents. Apparently, there are plans to change the admissions criteria, not necessarily in terms of income, but other factors, like credit history. The RFT, as currently exists, says that if a new tenant can’t prove that he or she doesn’t have arrearages in rent somewhere else, then they may not be accepted as a tenant now.
Well, heck, most ordinary Baltimorians have some history of arrears just ’cause they don’t make enough money–
NOOR: And what does that mean, exactly?
SINGER: –to afford their housing.
People can’t pay their rent. A hundred and fifty thousand times each year, private landlords in Baltimore go to court to file against a tenant who can’t pay rent. So there’s a whole pool of tenants who need subsidized housing who wouldn’t be eligible for it, perhaps, under this new plan. So that’s not a very good idea.
NOOR: And so the union representing the 200 workers that may get laid off, they’re raising an issue about this.
SINGER: And they’re going to be there at the hearing.
NOOR: They’re going to be there at the hearing, Wednesday at 5 o’clock. But is this where the cost reduction will come in, through the use of nonunion labor? And, you know, these workers were getting between $15 and $20 an hour, which some would say is a living wage, and not a whole lot of money, but they were able to support themselves and help contribute to their families.
HENRY: I would expect that one of the questions at the hearing would be a breakdown of the expected management costs as it moves into private ownership versus what the management costs are now. We know that there is expected to be a reduction. We have not been given, to date, the breakdown of what that reduction is. Is the reduction because they expect to spend less on the salaries of the employees that they have working in the buildings? If that’s the case, then I expect the reaction will be the same it has been in the past when the City Council has looked at privatization efforts. It’s, you know, saying that you can do something cheaper than the city can do it because you’re going to pay the people less doesn’t do us any good as a city, because most of these workers tend to live here in the city, and if they don’t have as much money, then they can’t spend as much on the other goods and services that the city provides and they’re more likely to need additional assistance from us as a city.
NOOR: So it’s going to end up costing the city more.
HENRY: So it would end up costing the city more if that’s where it’s coming from.
I think the thing we also need to not lose track of is that this is all because we are not getting enough federal money to do a job that really is the responsibility of the federal government.
NOOR: And the federal contribution to this has been drastically reduced over the past several [crosstalk]
HENRY: Drastically reduced over the years.
NOOR: And this is across the country.
HENRY: One of the reasons why–I mean, one of the reasons why this program exists is because it leverages the use of the low-income housing tax credit, which is an already existing program. And given the political makeup of Congress, it’s okay to provide money for affordable housing as long as the private sector is making a profit off of it.
NOOR: So you oppose privatization in this case. But then what’s the alternative?
SINGER: We believe there are some alternatives. The mayor’s often saying, don’t criticize, provide solutions. Well, we have some solutions. One of them would be that if the buildings are not going to be owned by the Housing Authority, then the tenants who live in them should own them. Let’s figure out a way that will permanently keep them out of the speculative housing sector–which, after all, is what has caused the crash in 2007, and who knows that it won’t happen again. It’s very dangerous to put these buildings under private ownership and to permit people to try to make profits from them. Let the tenants have co-ops and own the building, and let’s use creatively some of the revenues that already come to Baltimore to help the tenants manage the building. That’s part one of our four-point plan.
And part two is the city, as the councilman mentioned, has never contributed financially to these buildings, but they could. So let’s look at the city’s bonding authority and begin to leverage some of that money to redevelop these buildings.
And number three, let’s have a plan for affordable housing for the entire city of Baltimore. As I mentioned earlier, 82,000 households, almost a third of all city residents, can’t pay their rent every month. What are we doing for them? Let’s figure that out instead of giving money to private developers who don’t need it, like Harbor Point.
And number four–.
NOOR: Which got $100 million in–.
SINGER: Oh, more than $100 million. Maybe as much as $600 million, depending on how you count.
NOOR: Okay. And so on that point of bonding, though–but critics would say, why make the city go further into debt? It’s going to cost millions of dollars every year.
SINGER: The city issues $100-$120 million worth of bonds every two years–has for many years, will probably continue to do so. Let’s devote a significant, a reasonable portion of that to these homes.
And number four, let’s join with the housing commissioner and the mayor and others to change the climate in Washington, D.C. There’s no good reason why we’re giving tax dollars to private developers to then take over public housing and make more of a profit. I don’t understand it.
NOOR: So, Bill, there was a few points raised there. What about–let’s just go through them. What about the possibility of the tenants owning these houses, this housing?
HENRY The possibility of the tenants owning–well–.
NOOR: Is it a political possibility?
HENRY: I guess it would depend on what you mean by ownership. If by ownership you mean have a percentage in some type of larger consortium of ownership, as is often the case with low-income housing tax credit deals, a lot of times they are set up originally by nonprofits, and the nonprofits maintain a small percentage of ownership, small enough that private investors can be considered to be the owners, so that the tax credits can work for them. But with a percentage of ownership, they can maintain control and they can actually be the managing partners in the deal. They can be the ones who hire the private management company. I think GEDCO’s operation at Stadium Place is probably a–I think that’s going to be a fair approximation of that, but maybe I shouldn’t offer it. I don’t know enough about the structure of their deal. But I do know that GEDCO hires the private management company that runs the complex on a day-to-day basis. It might be possible to set up ownership structures where some type of tenants association is the formal managing partner and is the entity that hires the private management company.
But at the end of the day, to say that it would be nice if the tenant to–why don’t we have the tenants own it, well, the tenants don’t have the resources on their own to put up the money to make the repairs, which is the whole point for the existing program is that the money to do the major renovation and rehabilition is coming from private investors. And so what they’re getting in return for that investment is the overwhelming share of the ownership in the project.
NOOR: And so we’re almost out of time, but what about the city contributing some money? I know, I know. It’s said Baltimore City is one of the highest taxed with property taxes in the area and maybe the country. But why not a proposal like taxing houses that are worth more than $500,000? Why can’t the rich help contribute?
HENRY: We actually have discussed on multiple occasions. We would need to go to the General Assembly and ask for state authority to charge a different tax rate on different properties.
That being said, many of us, myself included, have thought we should pursue that, actually going the other direction, to have a higher tax on vacant property, so that speculators who buy up a property and then leave it vacant and blighted should be charged a significantly higher price, rather than a lower tax burden, because they have devalued the property.
If we–it should definitely be a conversation for the city to put a significant amount of capital money of its own into public housing. Right now we have bonding authority to do, as Jeff said, about $120 million every two years. There is huge competition every year over what’s going to go in the capital budget in the bond program.
NOOR: It’s been going–a lot of it has been going to private developers.
HENRY: No, no. None of it goes to private developers. It all goes to public infrastructure. It all goes to streets and bridges and buildings that the city owns. The money that went to the Harbor Point project didn’t go to the developer; it went to building streets and roads and sidewalks and infrastructure that are going to be necessary for the developer to build the rest of the development.
NOOR: Okay. So we started with Bill. Jeff, final thought.
SINGER: There are creative and progressive ways, I think, that we ought to explore, as the councilman mentions, we ought to explore as an alternative to selling off something that all of us own in common. Once we sell it, we’ll probably never get it back.
NOOR: Jeff Singer, Bill Henry, thank you both for joining us.
HENRY: Thank you, Jaisal.
SINGER: Thank you.
NOOR: You can follow us @therealnews on Twitter. Tweet me questions and comments @jaisalnoor.
Thank you so much for joining us.
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