Just a couple of weeks ago (February 20), I asked that critically important question that is on everyone's mind, "Which Will Collapse First: North Korea Or The New York City Housing Authority?" The post noted that the new administration had not yet announced any plans for what to do about the debacle of HUD-backed low income housing, but that "if they focus on this a bit, it could all unravel very quickly."
The first indications that they may be focusing on this subject a bit have emerged in the past couple of days. Yesterday's Greater New York section of the Wall Street Journal has as its lead headline, "Housing Agency Sees $35 Million Cut in U.S. Aid." The "housing agency" referred to is the New York City Housing Authority -- NYCHA.
My only question is, why is the cut only $35 million? The annual HUD subsidy to NYCHA is running at around $2 billion. It should be zeroed out entirely, and the sooner the better. A cut of $35 million represents less than 2% of the current annual subsidy. What is the possible reason for pussyfooting around on this?
To be fair, new HUD officials (unnamed in the article) do seem to have indicated that bigger cuts are coming, perhaps as soon as the upcoming fiscal year. Bigger, but still ridiculously small -- less than 10% of the current subsidy level:
Citing conversations with federal housing officials, [NYCHA officials] said they were bracing for additional cuts that could be far greater, and total $150 million. Shola Olatoye, the agency’s chief executive officer, said a reduction of that size would be devastating. “The direction we’re moving in is one where public housing is drastically different or doesn’t exist,” she said. “The progress we have made over the course of the last three years—it’s not that it’s at risk. It evaporates.”
I have no idea what Ms. Olatoye is referring to as "progress" at NYCHA. There is no respect in which NYCHA is not an unmitigated disaster. A fair description of it is a socialist-model scheme whereby local New York politicians use billions of dollars of federal handouts to trap hundreds of thousands of people into lifetimes of poverty and dependency. Like all socialist-model economic schemes, it has been in a decreasing-productivity death spiral essentially ever since it started, and is kept alive only by subsidies from productive (capitalist) economic activities. The subsidies must constantly increase in order to keep the death spiral from playing out to its crash.
Have ever wondered how the wealthiest county in the United States, New York County (Manhattan), can have a reported "poverty" rate well above the national average (21% versus 13.5%, although the most recent Manhattan rate is from 2013)? NYCHA is the biggest piece of the explanation. In essence the business of NYCHA is to subsidize people with an irresistible offer of gigantically subsidized rent in return for their commitment to stay poor and dependent. The magnitude of the subsidies in Manhattan, if measured by the market values of apartments often next door or across the street, literally boggles the mind. In the most extreme of many extreme examples, a nearly three mile long stretch of the waterfront of the Lower East Side of Manhattan is lined, with very few breaks, with close to 100 NYCHA buildings. Directly across the island, on the Lower West Side, there is a highly comparable stretch of waterfront, but this stretch has a row of gleaming new condos. The Lower West Side waterfront condos sell for at least $3000 per square foot, or something like $3 - 5 million for a standard two bedroom apartment. To rent one of these waterfront apartments would cost you around $10,000 per month. On the Lower East Side, rent in the NYCHA projects averages about $500 per month. Thus the rent subsidy is in the range of $9000+ per month per family, well over $100,000 per year. And yet after this enormous taxpayer giveaway, the NYCHA residents have no spendable income to show for it, and the majority of them are classified as "poor." And the Lower East Side NYCHA projects are just one example among many now located in top-priced areas. Other such enormously valuable projects can be found in the Chelsea neighborhood, in West Midtown (right next to the "Trump Place" development!), and immediately adjacent to the Upper East Side.
And I've just begun to describe the magnitude of the NYCHA disaster. In a report that NYCHA put out in mid-2015, it declared that it had a backlog of some $17 billion of necessary capital maintenance projects, with no source of the funds anywhere on the horizon. Apparently, when they built these things 30 - 60 years ago, nobody thought that they might ever need major upgrades. NYCHA pays no property taxes on its projects, which house about 6% of New York City residents. The crime rate in NYCHA projects is about four times higher than that for the city as a whole. That's what dependency and hopelessness will do to the human spirit.
The federal government has the power to put NYCHA completely out of its misery by the simple expedient of zeroing out the subsidy. To cut NYCHA's annual subsidy by 2%, or even 10%, will just prolong the misery. NYCHA will continue to limp along in an increasingly-desperate situation, hands out to beg from the state and local taxpayers, buildings crumbling, and residents with nowhere to go. The closest analogies in today's world are North Korea and Venezuela.
But if the subsidies are zeroed out, then the jig is up. NYCHA will be forced into immediate drastic restructuring or exit from this unsustainable business. The obvious strategy is to give away the projects to the residents. Of course, this would be the best thing that could ever happen to the residents. Thousands would become instant multi-millionaires, and tens of thousands instant millionaires. They could sell the apartments, rent them out, or borrow against them. The funds for renovation and upgrade would magically appear. The need for taxpayer subsidies would go away.
Please, please don't pussyfoot around on this one!