Testimony Housing

Testimony On New York City Housing Authority’s Blueprint for Change

New York State Assembly Standing Committee on Housing

December 08, 2020

Good morning and thank you for the opportunity to testify on the New York City Housing Authority’s (NYCHA’s) Blueprint for Change and the proposed legislation to create the New York City Public Housing Preservation Trust (Trust). I am Sean Campion, Senior Research Associate at the Citizens Budget Commission (CBC), a nonpartisan, nonprofit think tank and watchdog devoted to constructive change in the finances and services of New York City and New York State. CBC has conducted a number of in depth studies of NYCHA’s capital needs and operations in recent years, and I invite you to read the work listed at the end of our written testimony.

NYCHA’s capital needs are immense, and addressing them requires employing multiple innovative strategies. The Trust, if structured well, makes sense as one component of NYCHA’s broader Blueprint. The Trust is not a substitute for other solutions, including the Permanent Affordability Commitment Together (PACT) pipeline, for which NYCHA has secured federal commitments through the Rental Assistance Demonstration program (RAD). Both solutions are necessary so that NYCHA can maximize the number of units that can be renovated and improve quality of life for as many residents as possible.

The Trust would allow of a portion of NYCHA’s portfolio to be transferred from the conventional public housing funding stream to more lucrative Tenant Protection Vouchers (TPVs). This would allow NYCHA to raise funds needed to preserve 110,000 units of deeply affordable housing. Currently, there are not sufficient funds available to repair these units, and they are at high risk of deteriorating to the point at which they are no longer habitable in the very near future.

To become operational, the Preservation Trust requires both new funding sources and a viable plan for improving NYCHA’s operations. The prospects for both are uncertain. Funding depends on federal actions, including approval of the disposition plan from the United States Department of Housing and Urban Development (HUD) and appropriation of funding for additional TPVs from Congress. However, the effectiveness of the Trust also depends on how it is established and implemented. If NYCHA’s current operating practices and policies are imported wholesale to the Trust without changes, its effectiveness will be severely limited.

We will be evaluating the Trust proposal more closely in coming months, but we have identified preliminarily three important questions that should be addressed during this public consideration.

  1. Do the alternative project delivery mechanisms help NYCHA deliver projects in a timely and cost-effective manner? The bill allows the Trust to use design-build and other alternative procurement methods, which may reduce costs, improve the quality of capital work, and accelerate project delivery. This authority is welcome; however, other provisions of the bill might offset potential savings and efficiencies. All capital work would be subject to Wicks Law and the Scaffold Law, which have been demonstrated to increase the cost and complexity of public projects. The bill also requires NYCHA to retain staff in their current roles and prohibits NYCHA from transferring maintenance and operations of renovated buildings to contractors, even if more cost effective or efficient. Another requirement is that all workers, including subcontractors, comply with NYCHA’s project labor agreement, which to date has not been evaluated and has not demonstrated clear savings or efficiencies. Collectively, these provisions limit flexibility and chip away at the benefits of the new powers.
  2. Is the Trust structured to allow for efficient and effective management of the properties? NYCHA has higher operating costs than comparable rent-regulated rental properties, and costs have been increasing at a faster rate than revenues, requiring increased City subsidies. The Transformation Plan calls for important changes to make NYCHA a better landlord—including implementing property-based budgeting, installing quality controls and accountability measures, and reducing operating expenses through a combination of labor savings, productivity enhancements, and reduced energy costs—but success is far from assured. The legislation places counterproductive restrictions on the Trust, including mandates that current NYCHA staff continue to operate the properties, provisions that could make it difficult to retrain staff at newly overhauled properties or to modify work rules or job descriptions, and restrictions against engaging private management. The Trust legislation should be structured with enough flexibility so that the most cost-effective approaches and tools are available.
  3. Is there adequate financial transparency and accountability? The legislation requires the Trust to issue an annual report with audited financial statements and reporting on the effectiveness of its capital program. While helpful, these reports will not provide enough information on the Trust’s impact on NYCHA’s fiscal outlook, particularly given that the legislation authorizes the Trust to take on debt backed solely by rental income and federal subsidies. This debt would not be guaranteed by the City or State, but the City may well be called on to backstop the debt in a worst-case scenario. Ensuring that the Trust publishes detailed, timely data on both its past financial performance and its budget outlook, perhaps modelled after the City’s four-year financial plan and updates, would help both the public and lawmakers evaluate whether it can live up to expectations.

Thank you again for the opportunity to testify, and we look forward discussing the proposal in the months to come.  I welcome your questions.

CITIZENS BUDGET COMMMISSION REPORTS ON NYCHA

Capital

Operations