Editorial>New York’s privatization crisis

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This has not been a good month for New York housing. Phipps Houses, a nonprofit dedicated to affordable housing, announced it was putting its 900-unit Kips Bay Court up for sale. Then the city announced it was selling land in public housing complexes to private developers. Both portend a further privatization of the city’s affordable housing and fewer options for a city with a negligible housing vacancy rate. Why, in the midst of a housing crises, is this happening?

The 1975 Kips Bay Complex does not have the architectural sophistication of I.M. Pei’s nearby 1965 Kips Bay Plaza, but it has provided decent middle class housing for 41 years. The complex was constructed under the Mitchell-Lama Housing program, which caps profits and rents. Developments can exit the subsidy after 20 years and that is what Phipps did, though it consented to keep qualifying tenants using Section 8 vouchers. However, The Real Deal reported that 520 out of 894 units are already rented by “free market tenants” paying as much as $6,426 per month. So why is Phipps selling the project now?

Well the complex will bring $600 to $700 million and this might be hard to turn down. One hopes that given the organization’s nonprofit status, it would use the money to build new affordable housing elsewhere,  but Phipps Houses president, Adam Weinstein, has declined to comment, so that remains unclear.

With this sale, Manhattan will lose valuable middle-class housing—hinting at Mayor Ed Koch’s well-known comment, “If you can’t afford to live here, move!” In fact, when Battery Park City was being developed in the 1980s, state and city officials decided that since the site was so valuable, its high rents and sales should be used to maximize state funds. It was also decided that the state would take money from the developers who built on the site and set it aside to rehabilitate and build new housing in less expensive neighborhoods.

This is what the Battery Park Authority did until the state raided the fund for the state’s general budget and the new housing was never built. Battery Park City is now an upper-middle class community sitting on state land.

Equally troubling is that New York City is quietly selling off land in New York City Housing Authority (NYCHA) complexes to private developers. The Daily News reports that “since 2013, the agency has sold off 54 plots totaling 441,000 square feet of public land to private developers.” NYCHA claims this is to help a huge budget deficit facing the agency, including nearly $17 billion in unmet major infrastructure repairs. It maintains it is only selling vacant or “underutilized land to developers so it can build more affordable or senior housing.” But this is not guaranteed and these sites could become yet more high-end apartments for the wealthy, slowly shutting out those for whom NYCHA housing is a lifeline.

NYCHA chair and CEO Shola Olatoye said in NextGeneration NYCHA, the Housing Authority’s 10-year strategic plan for New York City’s public housing: “Without meaningful changes to the way NYCHA does business, our residents will continue to feel left behind and the future of public housing will remain in jeopardy… NextGen aims to transform NYCHA into a modern landlord with sound finances. Key strategies, such as cutting expenses, raising sustainable revenues, leveraging our strengths and taking a more thoughtful approach to resident engagement, means we can make real progress in improved quality of life for residents.”

But so far public housing privatization in the U.S. has been a disaster. The history of affordable housing in the U.S. goes back to the 19th century, if one counts philanthropic projects. In the 1930s housing advocates created construction support programs through Congress to help the struggling depression-era country, but the real estate industry was bitterly opposed. Since that time—despite significant improvements to how poor Americans live—the industry has fought any government attempts to solve the issue. These moves are an excuse to move private developers into a marketplace they can control.

A visit to any western European country proves that affordable public housing can exist in a capitalist market. New York’s private market alone cannot solve the problem of creating more housing options. It’s a shame that Phipps and the city want to move in this troubling direction.

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