Your Taxpayer Dollars at Work: Stuffing Poor People into Hideous Housing

Mosby Court, one of Richmond’s infamous public housing projects. Photo credit: Richmond Times-Dispatch.

The Richmond Redevelopment and Housing Authority, which provides public housing to about 10,000 Richmond residents, faces a $150 million backlog in repairs for its 4,000 housing units, reports the Richmond Times-Dispatch. “At some point you’re going to have very serious health and safety problems,” agency CEO T.K. Somanath told the authority’s board last week.

The authority is considering converting its six public housing projects from traditional federally funded public housing into the Section 8 housing choice voucher program, which would net the agency $7.5 million a year to apply toward property maintenance and large-scale redevelopment.

The authority has about $750 per unit annually for repairs and upkeep, reports the Times-Dispatch. A May 2016 physical needs assessment found the agency needed nearly $19,000 per unit to make all necessary fixes.

One obvious question is, why did the RRHA short-change maintenance so severely over the years? Were administrative costs bloated? Were other costs out of control? Did the department of Housing and Urban Development (HUD) cut financial support? Could RRHA have charged tenants more rent? The reasons are not clear, either from the T-D‘s reporting or from RDHA documents.

But there’s an even more fundamental question. The entire justification of having the government build and administer public housing is that government can do the job more inexpensively than the private sector. But can it?

RRHA’s budget is about $65 million a year, and it operates 4,000 housing units per year — housing units built decades ago, the original cost of which is almost fully amortized. That averages out to $16,250 per unit per year — $1,350 per month.

Think about that: You can rent new, two-bedroom apartments between 900 and 1,000 square feet in the Manchester neighborhood south of the James River for between $1,100 and $1,300 a month. They come equipped with hardwood floors, microwaves, washer-dryers, and some look like the photo at right:

Here’s the really amazing thing: The private-sector rental units are not fully amortized. Landlords have to pay the financing costs! Yet somehow they can provide quality apartments for less than it costs RRHA just to operate and maintain its disastrous public housing projects.

I’m sure I’m leaving stuff out — the RRHA pays utilities, and I expect that Manchester landlords do not — and I’m sure a fair comparison wouldn’t be as devastatingly bad as the numbers I have presented. This is a back-of-the-envelope calculation, and I would need to vet the figures with RRHA officials before drawing authoritative conclusions. But I suspect that no tweaking of the numbers would change the fact that public housing is a catastrophically failed financial model — and that doesn’t even include the social cost of packing poor people together in isolated, crime-ridden communities.

Surely it would be far better, as the RRHA requests, to convert all public housing to Section 8 vouchers. Going one step further, it likewise would be better to empty the projects, tear them down, let the private sector redevelop them, and get government out of the rental housing business altogether.

Update: Somaneth informs me that only $30 million of the RRHA’s $65 million budget goes to managing public housing. The rest goes to real-estate and community development programs. Thirty million dollars translate into an average expenditure of $625 per unit, which paints a very different picture than the one I describe above. I will have more to say about this in a future post.

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15 responses to “Your Taxpayer Dollars at Work: Stuffing Poor People into Hideous Housing

  1. Happy 4th to all!

    I think we’re comparing apples to oranges.

    calculate the housing “turnkey” that includes water,sewer, heat, cool, electricity, etc…

    the “projects” was an attempt to keep costs low… with some serious unintended consequences of concentrating poverty.

    and don’t forget that the private sector is involved.. they do build and maintain… and operate the infrastructure… the govt does not have it’s own builders or repair people or electricity providers, etc.

    but I’m quite sure if Congress adequately funded HUD. that they could provide better voucher housing… but like other programs.. the funding often is niggardly … and reluctant… and getting enough votes to pass requires keeping barebones funding… I’d bet Mr. Brat probably opposes the HUD program to start with… and votes against it.

    One last thing.. HUD is providing housing not just in inner cities… you can see HUD housing in very rural areas also.

    • “The “projects” was an attempt to keep costs low… ”

      Yes, that was the intention. But it’s far from clear that the idea succeeded. I’ll admit, my numbers are impressionistic. I would love to see a detailed breakout of the figures. I think there’s a lot of administrative overhead.

  2. Some more figures to provide perspective….

    Real Estate Investment Trusts (REITs) in the private sector are comparable to RHDA in that they develop and administer large real estate portfolios. Some REITs specialize in residential real estate.

    According to RHDA’s 2015 annual report, administrative costs consumed 19.8% of the authority’s $65 million budget in 2015.

    According to this (admittedly dated) Forbes column, the administrative-costs benchmark for residential REITs was 1.3%. Even the REIT with the most bloated administrative overhead was only 8.3% — less than half RDHA’s!

    Again, I’m aware that I might be comparing apples and oranges, but I think these warrants more investigation.

  3. The “projects” were not built to provide decent housing. They were built to warehouse people that the Powers That Be in Henrico and City of Richmond and the GA wanted out of the way of their new highways through Jackson Ward and Byrd Park and Oregon Hill and the rest. Find the full account of the politics of that era in Ben Campbell’s book, here: http://www.goodreads.com/book/show/13054862-richmond-s-unhealed-history

    That said, today they are what they are: “low cost” even when built, and now, downright appalling. And as LG says, they brought about “some serious unintended consequences of concentrating poverty.”

    In concept, I’m all for conversion to vouchers and dispersal of this population throughout the urban area, where the private housing is and the jobs are, if in fact that were allowed to be the result. In practice, if closing the projects means throwing 10,000 people suddenly onto inadequate private low-income-housing markets, restricted solely to units within the Richmond City limits, without preparation and careful screening, without mental health and jobs training nearby and included in the transition, without public transportation to where the jobs are, the cure could be worse than the disease.

  4. So why is the United States importing more poor people who need expensive services by not enforcing the immigration and employment laws? It doesn’t make any sense to me. Oh, Trump is starting to enforce the laws. And the left is up in arms. Their goal is to create more poverty; raise taxes; and create government and government contract jobs for people who will vote for Democrats. Dependency is created for political gain.

    My grandmother raised four sons on my grandfather’s World War 1 widow’s pension of $68 a month, plus whatever they could scrape together by working. She did this from 1931 through mid-1950 when her youngest son turned 21. The goal during the Depression was to get people back to being independent, not maintain dependency so that people with advanced degrees can have well-paying jobs.

  5. @TMT – do you think that undocumented get housing vouchers?

    Hey – aren’t you the one who complains about Hispanics crowding into residential rentals?

    I’d say the undocumented have a more cost-effective approach to “low-income” housing, eh? I wonder if that’s what the govt should do with their housing vouchers?

    or how about this – let the retired on fixed income – rent out their basements and upstairs or other attendant structures… provides income to them and true affordable housing to low-income folks.

  6. “The entire justification of having the government build and administer public housing is that government can do the job more inexpensively than the private sector.”

    I am not following this argument. Admittedly, I am not an expert on public housing policy, but my impression is that at least in part, the justification for public housing is to provide housing for people who are not being served by the private sector, for a myriad of reasons. Isn’t public housing part of the social services safety net? Doesn’t the government subsidize the housing costs to keep rents lower than market rate? This would mean that the government is “inefficient” in terms of delivering housing vs. the private sector, but isn’t that the point – that the government is not trying to replicate the private market?

    Maybe I am missing something here…

    • Perhaps I should have written “original” justification, not “entire” justification.

      The original justification for public housing in the 1930s was that there was a “market failure” and that government could step in and provide public housing for the poor and working class less expensively than the private sector could.

      • Interesting – I have not heard that before. So, in the context of the Great Depression (1930’s), was the “market failure” due to the private sector not being able to provide housing that the market could afford (i.e. the projects could not be built for a cost that was supported by market rate rents) and that the government needed to step in to provide housing with a lower cost of construction? How did the government manage to build housing for less cost than the private sector?

      • Richmonds’s public housing was all built between 1950 and 1980, mostly in the 60s and early 70s:
        http://www.rrha.com/dep_pm_ph_pvc.shtml

        Perhaps that WAS the original justification back in the 1930s, but in Richmond, in the 1960s, it was an excuse for targeted removal of people, not a reaction to market failure. Again, read Ben Campbell’s book.

    • AM is dead on… The Govt gets involved when the market does not provide what the market “needs”.

      Then once it does that – the folks who don’t like govt all that much – suggest that the private sector can do it “better”.

      This is in large part – the same thinking that underlies many Conservatives view about health care and especially so – the security net like Medicaid and really Medicare… where else are older citizens going to find guaranteed health insurance at $138 a month – if the govt got out of the way – the “market” would provide it?

      Sometimes it seems that Conservatives are not only conflicted but confused!

  7. AM, you are right on target IMHO. The safety net is the point of public housing. But I also have to agree with JB, this public housing is being maintained very badly, and if it’s there as a safety net it is a cruel one.

    Should it be maintained poorly, deliberately, so as to make it so unattractive to residents that it “get[s] people back to being independent, not maintain[s] dependency”? THAT line of argument gets us right back to the question Moynihan and Murray and so many others raise: why are these particular Richmonders in need of public housing in the first place and, especially, why do they stay there; why is it that so many immigrants skip the “projects” and move on quickly to a productive, taxpaying life; what is missing with our domestic poor that our immigrant poor seem to have in abundance? Oops, sorry, that’s too PiC to discuss here . . . .

  8. Interesting threads here.

    LarrytheG and AcBar are right that comparing old-style public housing with free market or even semi-government Section Eight models is apples to oranges.

    They are right that Atrocities like Mosby court were called “Negro Removal” back in the day — that it is African-Americans who happened to live in thriving neighborhoods like Jackson Ward were herded into housing warehouses to make way for superhighways and other projects. The city and the housing authority have neglected them for years. No one cares.

    Throwing in a comparison between Gilpin, Mosby and other public housing and remodeled warehouses for Millennial Yuppies in Manchester is over-the-top. Throwing in an administrative cost comparison for both and find that (Ta TAAA!), the free market wins, is dishonest and nuts.Also, I’m not so sure the new apartment rents top out at $1,359 a month. Try a little higher.

    • Having recently experienced a child of mine’s view of public housing, rent control, and the cost and condition of private housing in Brooklyn, I think it was fair to give perspective — i.e., to note that RRHA rents (which sound cheap to someone in NoVa) are not that much of a bargain compared with market rentals in Richmond generally, even putting aside the deferred maintenance issue.

      The larger problem won’t go away. Regardless of why the Richmond projects were built, why can’t we now move this maltreated population out into the rest of the City and close these 60s pigpens down, rather than spend a dime on repairs? We know the projects are not the best way to address the need; the concentration of poverty there is, indeed, counterproductive. It’s all too reminiscent of the article in today’s WaPo over relocating Kimball Elementary anywhere near Simple City.

      • What we don’t seem to be able to do – enough of us , that is – is acknowledge that govt does not fix problems as well as we’d like but lessons are learned, changes made.. and we get to a better solution.

        That does not mean that Govt is a “failure” or even that Govt can’t “fix” it much less that the private sector can “fix” it. It just means that some problems of the human kind are hard.. not easy and we learn as we go along with the unfortunate setbacks that we forget lessons… and repeat .

        In this country’s early days – we had slums and tenements.. and they were, in fact, how the market “provided”. We had open sewers and open pits of sewage.. we had no potable water, no air conditioning.. no electricity.. no fire code.. garbage in the streets… that WAS the “market” .. “solution”.

        Those who say , “let the market do it”… either forget history or never knew it to start with and it seems to afflict those with particular political ideology than others…

        The “market” does not “fix’ these problems unless one believe that the Slums on hillsides in 3r world cities is how the market – and govt should work.

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