Jack Kemp's 'Perestroika' : A Choice Plan for Public HousingTenants

Report Civil Society

Jack Kemp's 'Perestroika' : A Choice Plan for Public HousingTenants

March 26, 1992 16 min read Download Report
Carl Horowitz
Bradley Fellow in Education Policy

(Archived document, may contain errors)


888 while the former Soviet Union and Eastern European countries busily are trying to introduce market incentives into their housing systems, midents of Americas public housing projects continue to live under stifling bureau cracy and perse economic incentives. These Americans have little or no incentive to find work, form intact families, or move to better neighborhoods. In too many instan ces, families find themselves trapped in housing projects where few people, of any inc ome level, would want to live.

Department of Housing and Urban Development (HUD) Semtary Jack Ikmp last December unveiled a proposal intended to help public housing tenants over turn some ofthis dispiriting system. Kemp calls his new program ~smika.

The R ussian wdpereszroiku means restructuring. Frequently invoked by former Soviet President Mikhail Gorbachev in his effm to revamp the ailing Soviet economy, Gorbachevs perestroika proved to be far more rhetoric than reality. He found himself battling-unsucc essfully-a huge, entrenched govern ment bmaucracy conmlling the availability of virtually all goods and services.

In applying the concept to American conditions, Kemp specifically takes aim at the public housing bureaucracy MarCb26,1992 JACK KEMPS PERESTRO IKA A CHOICE PLAN FOR PUBLIC HOUSING TElS INTRODUCTION Chance for Tenants. Kemps Perestroika plan was inmduced by George Bush in his proposed fucall993 budget. The plan would give public housing tenants a chance to replace public housing authorities (As) a s managers and owners of their xespective projects. With a proposed budget authorization of $373.1 million far fiscal 1993, all of it financed out of existing HUD programs, the new program would complement Kemps Homeownership and Oppormnity for People Eve rywhere (HOPE) program,.enacted in 1990 as part of .the National Affordable Housing Act.

The public housing program is becoming expensive and unworkable. Budgeted at a record $6 billion for the current fiscal year, with $5.25 billion going to sup port the operation and modernization of existing projects, a good many housing authorities, especially in large cities, have myriad troubles. Drug use, violent crime, vandalism, and maintenance breakdowns characterize all too many projects. PHAs.often aidthis proc ess through indifference; corruption, and inep titude in their management.

Consider the following Detroits public houslng projects have a cumulathre vacancy rate of 44 percent Past due rents in Washington, D.C.s proJect8 outnumber present due rents by a do llar figure of almost four=tosne Newarks public houslng system has more than double the number of main= tenance_emp~~~s-it.actually-needs,.desaite the fact that It has at least 22 corn pletely vacant high-rlse buildings Perestroika is one solution to thes e breakdowns in the operation of housing projects. The program would grant tenants of housing authorities on HUDs list of troubled authorities a chance to vote in new managers or owners. Only authorities with at least 250 apartments would be affected by th e program. Some 23 authorities, encompassing 18 percent of the total public housing stock, would qualify under this program in fiscal 1993.

The Kemp proposal has three components 1) Choice in Management, which would give tenants the right to vote in new ma nagers of their projects 2) Choice In Ownership, which would give tenants the right to vote in themsel ves, another nonprofit group, or a public-agency as new owners of their projects; and 3) Take the Boards Off, which would transfer ownership of vacant p r ojects or project sections to tenant groups or statebcdagencies The political battle for housing perestroika is certain to be uphill. The liberal controlled Congress, heavily allied with various public housing organizations, can be counted upon to resist. They know that the very idea is a threat to their busi ness-as-usual approaches that have brought the public housing program into so much disarray State of the Union address: We must empower the poor with the pride that comes from owning a house, getting a job, being a part of things. Perestroika gives Bush the opportunity to put these noble words into action This is why it is essential for Bush fully to back Kemp. Said Bush in his recent 2 A RECORD OF MISMANAGEMENT The recent performance of many public ho u sing authorities is a scandalous catalog of waste, fraud, and mismanagement. The hard evidence for this comes from IUDs internal audits, and from a report released last September by the Na tional Center for Neighborhood Enterprise (NCNE a Washington, D.C. - based re search organization specializing in inner-city issues, which heavily relied on these audits. The NCNE report is especially damning, concluding that public housin management frequently suffers from shocking ineptitude and outright abuses weaknesse s Padded payrolls. Troubled housing authorities often have more employees on 5 These revi ws of Americas public housing authorities =veal several recurrent f their payrolls than needed. The extra workers draw paychecks, courtesy of the taxpayer, but do lit t le or nothing to earn them. During fiscal years 1989 to 1991, for instance, 22 of the 23 troubled housing authorities were overstaffed with administrative employees, and 19 of the 23 were overstaffed with main tenance employees The Cuyahoga Metropolitp (C l eveland), Kansas-Cty Missouri Newark (New Jersey), Springfield (Illinois), Washington, D.C and Virgin Islands PHAs averaged more than double the number of expected administrative employees. Newarks program has 106 percent the number of maintenance employe e s that HUD deems appropriate. Yet administration and maintenance still were neglected or inadequate UncOlleCted rents. Rent delinquency is a habitual problem in troubled public hous ing authorities. In 22 of the 23 troubled authorities, audits find that u n col lected rent constitutes at least 15 percent of all rents due? In the Chester Pennsylvania), Philadelphia, and Washington, D.C. PHAs, the cumulative backlog of uncollected rents is 374 percent., 269 percent, and 396 percent respectively, of the total r e nt due for each month. Few landlords in the private market could survive long with such a pattern of rent skipping Hlgh vacancy rates. HUD has set 3 percent as the acceptable maximum vacancy rate in calculating operating subsidies for a PHA, it considers a nything higher excessive. Yet the cumulative rate for the 23 troubled authorities is 14 percent, almost five times this standard. These PHAs account for over 36,000 vacant units6 The Detroit, East St. Louis, and Newark housing 3 4 The Silent Scandat: Mana gement Abuses in Public Housing (Washington, D.C National Cenier for Neighborhad Enterprise, 1991 p. i.

Unless otherwise indicated, all figms here taken from the fid 1993 budget document, Expanding the Opprrunities for Empowerment: New Choices for Residents (washingtosl, D.C U.S. Department of Housing and Urban Development, 1992).

The one exception was the East St. Louis Housing Authority.

About 104,OOO units in the public housing system are vacant. See The Silent Scandal, p. 7 c 5 6 4 patching of walls and floors in a project before the pipes behind and beneath were repaired; and the repainting of a building just prior to its demolition.

The Washington D.C. housing authority has had ten directors since 1980 Many admit the existence of severe problems, yet claim to be powerless to stop them. Former director Alphonso Jackson, for instance, complained in 1987 that he had plumbers on the payroll who knew nothing about plumbing and en gineers who were creating havoc in our boiler moms. The current director, Ray Price, observes-that project managers often hirefriends and relatives over better qualified applicant s for maintenance jobs.I2 Washingtons system is but one example of an almost complete breakdown of responsible enancy and management. Similar stories abound in other troubled authorities. These massive management problems do not happen by chance, but becau s e of the very nature of project control This control is in the hands of bureaucrats, who lack the incentives of an owner and in practice are not account able to tenants, HUD, or indeed anyone. While PHAs are the owners of projects they care little about m aintaining their assets because the federal government provides a stream of subsidies. Thus, many PHA bureaucracies are guided more by local political patronage than by financial prudence.

What is required to make public housing liveable is a dramatic tran sformation in management and ownership of Americas public housing authorities-a shift from the bureaucrats to the tenants they ostensibly serve. Even housing authorities run by honest, competent administraton axe limited in their capacity to patrol hallwa y s and project grounds, and to take a personal interest in the well being of tenants. HUDs version of Perestroika is a frontal assault on business-as usual management in the most onerous of these fiefdoms If3 HOW HUDS PERESTROIKA WOULD WORK Under the HOPE l egislation, HUD awards grants of up to $200,000 on a com petitive basis to resident management corporations (RMCs) and resident councils RCs) in public housing projects. The grants can be used to develop a plan for tenants to manage and eventually to own t heir projects. Recipients of these funds must match every $4 of federal money with $1 of their own 12 IW. Washingtons directors are not the only ones who have been openly critical of local PHA management Recently, Jonathan A. Saidel, chairman of the Phila d elphia Housing Authority (also on the HUD troubled list depicted the Authority 85 paralyzed by patronage and unable to perform even the simplest tasks of repairing windows or cutting grass at housing developments. Quoted in HUD (Again) Roves Government Ca n t Do It Best, Washington Inquirer, February 21,1992. p 1. For a Nl analysis, see Matthew My, HUD Freezes Funding for Southwark. Philadelphia Inquirer, February 5,1992 13 For a graphic description of how decrepit public housing conditions have PJ. ORourke, Parliament of Whores: A Lone Humorist Attempts IO Explain the Entire U.S. Government (New Yok Atlantic Monthly press, 1991 pp. 123-U. See also Nieves, Delays Paralyze Newarks Efforts in Newark, for example, see 6 Under Kemps newperestroika .plan, public h o using residents in housing authorities that have at least 250 units and that have been designated by HUD as troubled for at least three consecutive years would have the chance, on a project by-project basis, either to vote in new managers, vote in new own e rs, or assume ownership of projects with high vacancy rates. At present, 23 public housing authorities, including those of Boston, Chicago, Detroit Los Angeles, New Or leans, Newark, and Washington, D.C fall into this eligible category. These projects con tain about 18 percent of Americas public housin units. Many of the apartments are in poor condition, and 14 percent are vacant.

Perestroika would extend consumer choice to public housing tenants, where market competition is most needed. It would serve noti ce on poorly run PHAs that their days are numbered. The plan consists of thnx components 1 Component #2: Choice in Ownership Tenants would have the right to assume ownership of the project. Unlike the Choice in Management component, which requires approva l by a simple majority among tenants of a project, Choice in Ownership would require approval by two thirds of affected tenants. Residents could select a tenant management carpara tion, another non-profit group, or a public agency other than the current PH A to be the new owner. The group would have to be approved by HUD prior to receiv ing title to ownership. In cases where more than one group applied for ownership HUD would select the one that it felt could do the best job I Component #1: Choice In Managem ent.

Residents of public housing would be guaranteed the right to choose, through majority vote, new managers of their housing projects. The PHA would retain ownership, but a public, private, or non-profit group could be selected by tenants to take over ma intenance, rent collection, and all other management respon sibilities. The new management staff would have to demonstrate continually that it could run rental housing because the residents would have the right to fm as well as hire Component #3: Take the Boards Off (TBO TBO would transfer ownership of substantially vacant projects, or portions of projects, from the housing authority to one of two types of groups: 1) groups rep resenting tenants who plan to return the buildings for use as habitable public h ous ing or 2) state and local agencies pledging on behalf of nonprofit housing or ganizations to expand affordable rental or homeownership opportunities to low-in come families and individuals. HUD would issue transitional subsidies to 14 There we= 253,02 7 units in these projects in 19

91. Interestingly enough, almost 25 percent were in Puerto Ria and thevirgin Islands. Excluding projects in these two U.S. possessions, the overall vacancy rate within the troubled housing authorities was 17 percent 7 tenant s-over a three-year.period,.after which.the PHA would be required to give tenants vouchers or low-income housing rent stamps, to ensue that families could secure housing for themselves.

The proposed combined budget for Choice in Management and Choice in O wnership is $100 million, to be used for modernization of buildings. The proposed budget forTake the Boards Off is $273.1 million, with $192 million to be used for modernization, and the other $8 1.1 million going for 2,500 vouchers.

All modernization mon ey.would come out of the fiscal 1993 public housing mod ernization budget, The money for new vouchers would come from the Section 8 voucher program. Up to 5 percent of the funds in each of the programs can be used for technical assistance.

Kemp understand s that families who live in poverty, like families who do not benefit from exercising direct and personal control over their immediate living en vironment. Without this element of control, creating stable communities is impos sible in what are now welfare - dependent, highcrime public-housing projects, un less residents gain some proprietary control over their neighborhoods. To do this they must be able to determine how their projects will be run Givhg low-income tenants a financial stake in their housing al s o lessens their isolation from the rest of American society. Public housing residents under Perestroika would be running real estate enteqnises. Micials of the new Russian government understand this better than Washingtons liberals. Remarks Elena Kotova, h ead of the Moscow City Council Economic Policy Commission: The salvation of housing cannot be distinguished from privatization and private enterprise.15 Such is precisely the spirit in which Russian perestroika must apply to Americas public housing, yet h a s been missing from most housing policy debate in this country TENANT CONTROL WORKS Experience shows that with management or ownership in the hands of resi dents, projects are less subject to bureaucratic des than projects run and owned by professional ho u sing bureaucrats. Moreover, resident management groups will do things that housing authorities are unable or unwilling to do because they live with the consequences of inaction. Kenilwd-Parkside is a Washington, D.C project that was turned over to tenant management in 1982, and became in part a resident-owned housing complex in 19

90. Says Kimi Gray, the president of the projects resident management corporation: When my maintenance man doesnt fix the boiler in the winters, he gets cold too.16 15 Quoted in Jack Kemp, Houses to the People! An Open Letter to BorisYeltsin, Policy Review, Number 59 16 Quoted in John Scanlon, People Power in the Projects: How Tenant Ivlanagement Can Save Public Housing Winter 1992, pp. 4-5 Heritage Foundation Backgrounder No. 75 8 , March 8,1990, p. 9 8 These successes of tenant control of public housing share a common ingredient when trust is placed in the ability of residents to assume many or all of the tasks previously entrusted to the housing authorities, management improves. Kemps Perestroika initiative would give tenants the right to manage, or to select managers, in projects where improvement is needed most UNDERSTANDING THE POLITICAL OPPOSITION The Kemp plan is a prescription for Americas ailing public housing system.

Yet p owerful opposition can be expected Those with a financial or political stake in the system understandably feel threatened by any attempt by the federal govem ment to demand greater accountability from the PHAs. Typically, they argue that problems in the p ublic housing program are exaggerated and sensationalized, or that these problems, though real, result from inadequate government funding rather than from any inadequacies in the program itself.

According to supporters of the public housing program, the program would be working well, were it not for a lack of money. Ignoring all evidence that the dis mal condition of much public housing is due to poor management, and ignoring the fact that the av e rage annual cumulative operating and modernization budget is currently $3,750 per apartment in the 1.4 million-unit system, they argue that Con gress ought to be concerned with how to expand the pie of federal funding, not with how projects are managed or owned authorities, congressional liberals, and several housing researchers who are called upon by the first two pups to tell them what they want to hear t( Housing authorities Capitol Hill. Organizations such as the National Association of Housing and Red e velopment officials (NAHRO), the Council of Large Public Housing Authorities (CWHA and the Public Housing Authorities Directors Association PHADA), defend the current public housing system, and oppose anything even resembling the Kemp plan. CLPHA executiv e director Mary Ann Russ, for ex ample, denounces the Perestroika initiatives as massive, draconian measures that we dont think are justified.,*21 Adds Richard Y. Nelson Jr., executive director of NAHRO: The demand for public housing is so pat that we cant affd to sell a unit and take it off the rent rolls.22 This statement wrongly assumes that low-income people have no desire Those with the greatest stake in the current system are public housing The arguments they use are depressingly familiar.

The public housing authorities employ one of themost powerful lobbies on 20 Scanlon, People Power in the Projects, p. 5 21 Quoted in Bill McAllisw. Kemp Urges Plebiscites for Projects, Washington Post, December 23.1991 22 Quoted in Rita McWilliams. Dmm Houses for th e Poor, Governing, July 1991. p. 57 10 to own their home, or that their incomes will never be sufficient to do so, and that it is better for people to be tended by a bureaucracy than to make their own housing choices. It is an expression of liberal plantat i on mentality, which views the poor as supplicants rather than potential achievers X Congressional Liberals Liberal Congressmen and their staffs long have opposed changes in the manage ment or ownership of public housing. The tenant management and ownershi p provisions enacted in the 1987 Housing and Community Development Act, for ex ample, actually had watered down a version of an earlier bill co-sponsored by Kemp, representing his New York district in the House, and District of Columbia Delegate Walter Fau n troy, a Democrat. The Kemp-Fauntroy bill had been passed but no action was taken by House-Senate conferees whom liberal legislators rely m especially blunt. Frank DeStefano, staff director of the House Banking Subcommittee on Housing and Community Develop m ent is characteristically dismissive. I dont think there is any prospec Stefano, for it getting off the ground on the Hill- anywhere.Adds Bruce Katz, staff director of the Senate Banking Subcommi e on Housing and Urban Affairs: Its a fundamentally dumb an d stupid idea.

Comments like these are dismaying, but hardly surprising. Congress sees more public housing spending as an urgent necessity. Despite the failure of public hous ing to improve the living conditions of the poor, Congress has forced the Bush Ad ministration to earmark money to build more projects. Despite the Admin istrations call for some overdue restraint in the fiscal 1993 public housing budget, Congress may yet appropriate even more money than in 19

92. Mmover many in Congress are hostile to any attempt to change the way projects are run. In 1991, for example, the House Budget ommittee claimed that selling public hous ing to tenants would be misguided I Housing Researchers Congressional and special interest opponents of change are aided by a number of influential housing mearchers who argue that xesident management and owner ship in public housing is doomed to fail. Among the most influential are William Rohe and Michael Stegman, both of the University of North Carolina City and Regional Plan n ing Department. In 1990 Rohe and Stegman completed for HUD a full-scale evaluati n of its Public Housing Homeownership Demonstration FWHD) program. The program was launched in June 1985, and was intended Opposition to the Perestroika plan may be umlenting . Key staffers upon says De 4 ZF 96 23 Quoted in McAUister, Kemp Urges Plebiscites.

U Quoted in Groups See Little Support for More of the Same HUD Budget, Housing and Developmenf Reporter, February 17,1992, p. 760 25 See Ann Mariano, Closing the Door on Pu blic Housing? Washington Post, March 6,1991 26 William M. Rohe and Michael A. Stegman, Public Housing Homeownership Demonsnation Assessmenf Washington, D.C U.S. Department of Housing and Urban Development, June 1990 see also Rohe and 11 to enable tenants to become homeowners, while allowing PHAs wide latitude in establishing resident homeownership ~rograms.2~ It also served as a prototype far potential large-scale public housing privatization of the sort contemplated in Perestroika.

Rohe and Stegman conclu ded that the kinds of resident ownership proposals that Kemp has incorporated intd both HOPE and Perestroika will not work be cause selling housing even at a discount to tenants fails to include adequate safeguards against foreclosure; and.appeals totenan t s with incomes well above those of public housing tenants as a whole The authors claim that as a result of such deficiencies, only 320 unit -one-fourth of HUDs goal-were sold to tenants in the PHHD program Opponents Omissions. Yet Stegman and Rohe admit t h at close to 400 addi tional home sales were close to completion in the program. Equally significant the authors fail to address the reality that neither public housing tenants nor tax payers are well served by the existing public housing program, ignoring PHA mis management as a factor in driving up rehabilitation and other costs associated with sales. Finally, they assume that tenant incomes are static, apparently finding it hard to believe that owning a home is the kind of stimulus that spurs a family to improve its economic condition If opponents of the plan seem overly concerned about anything, it is the pos sibility that it might work. Kemps proposal potentially threatens the jobs of hous ing authority officials and contractors everywhere. Even more ho rrifying for some opponents, the plan could trigger a wider assault on bureaucratic organiza tions that have a strong stake in blocking empowerment initiatives of all varieties.

Opponents of Perestroika can be expected to issue dire warnings about the dis appearance of low-income housing. What they ignore is that much of this hous ing already is disappearing, thanks to the inept and often corrupt management by PHAs. It is time to put more control of housing projects into the hands of resi dents themselves 21 Stegman, Public Housing Homeownership Demonstration Assessment: Case Studies (Washington, D.C U.S.

Department of Housing and Urban Development, June 1990 27 The program was intended to last 36 months, but the 17 recipient housing authorities typically w en still involved in PHHD well after this deadline 28 See also, Michael A. Stegman, More Housing, More Fairly: Report ofthe Twentieth Century Fund Task Force on Afordable Housing (New Yok Twentieth Century Fund Press, 1991 pp. 57-96 12 CONCLUSION Jack Kem p describes his Perestroika approach as radical. He is correct.

Giving public housing tenants the right to hire and fire their managers and owners repsents an abrupt break with the status quo. Ironically, Kemp simply wants to give public housing tenants th e choices that Russian President Boris Yeltsin wants to give tenants of state-owned projects in his country.

Aside from being a promising policy initiative, Perestroika would be funded through existing HUD programs, not through new spending authority. In the long run, it would save taxpayers money by freeing these projects of their current management and ownership, and subsequently, their high operating and modem ization subsidies.

Escaping Despair. Giving residents of public housing greater choice in the running of their projects has worked wherever it has been tried, benefitting the poorest of the poor. It can and ought to work on a much larger scale. If lawmakers are truly on the si& of public housing tenants rather than public housing bureaucracies, C ongress will see Perestroika as a way for tenants to escape despair.

Carl F. Hmwitz, Ph.D. Policy Analyst 13


Carl Horowitz

Bradley Fellow in Education Policy