Under Rahm Emanuel, Chicago Opens the Door to Privatizing Half its Public Housing

Residents fear that a new redevelopment initiative will usher in another wave of displacement.

Rebecca Burns

December 1998 demolition of S. Lake Park Avenue & 39th Street (Christopher Morris / flickr.com)

Chica­go, long a pio­neer of pri­va­ti­za­tion, is poised to embark on a sweep­ing exper­i­ment with the city’s pub­lic-hous­ing stock. The Chica­go Hous­ing Author­i­ty (CHA) plans to court pri­vate invest­ment in as much as half of its pub­lic-hous­ing units through the Rental Assis­tance Demon­stra­tion (RAD), a new fed­er­al pro­gram billed as a way to revi­tal­ize” hous­ing for the poor and address a $26 bil­lion back­log in need­ed repairs.

Casey speculates that senior housing, much of which is located on the city’s wealthier and whiter north side, could represent the most attractive option for investors. 'We can walk to the lakefront and ride our bikes. Many times in the summer, I just walk down to Michigan Avenue,' he says. 'If I were an investor looking to buy property, this is where I’d want to do it.'

But hous­ing advo­cates around the coun­try wor­ry that RAD is just a pre­lude to pri­va­ti­za­tion. RAD, approved by Con­gress in 2011, gives local hous­ing author­i­ties broad lat­i­tude to raise funds, includ­ing the abil­i­ty to mort­gage or sell pub­lic-hous­ing build­ings. Crit­ics believes that if pub­lic hous­ing is opened up to the vagaries of the mort­gage mar­ket and the whims of pri­vate devel­op­ers, large swaths of low-income hous­ing could wind up in fore­clo­sure, or become lux­u­ry con­dos once RAD’s afford­abil­i­ty require­ments expire.

Steven Knight, super­vis­ing attor­ney at the Nation­al Hous­ing Law Project, says that the program’s stat­ed goals are very laud­able” but the dev­il is in the details – local hous­ing author­i­ties have to get these trans­ac­tions right, and if they don’t, the con­se­quences may be severe and long-lasting.”

So, will Chica­go get it right? RAD arrives in the city as the CHA is already under fire for fail­ing to spend mil­lions of dol­lars ear­marked for afford­able hous­ing while amass­ing at least $440 mil­lion in cash reserves, even as more than 280,000 peo­ple sit on its hous­ing wait­list. These finan­cial shenani­gans were enabled in large part by the CHA’s dereg­u­la­tion in 2000 under now-May­or Rahm Emanuel’s, who pushed to remove fed­er­al over­sight of the hous­ing authority’s bud­get as vice chair­man of its board.

As may­or, Emanuel has been lam­bast­ed by hous­ing activists and pro­gres­sive chal­lenger Jesus Chuy” Gar­cia for block­ing reform of the CHA, whose board the may­or appoints. Over the course of Emanuel’s tenure, notes an inves­ti­ga­tion this month in the Huff­in­g­ton Post, the CHA has become as much an invest­ment fund as a hous­ing agency,” using its funds to pay down its debts ear­ly, pur­chase gov­ern­ment bonds and secure a AA cred­it rating.

Hous­ing advo­cates fear that the CHA’s trans­for­ma­tion into an asset man­ag­er, rather than a direct provider of hous­ing, is about to be inten­si­fied through RAD. (The mayor’s office did not respond to a request for com­ment on the initiative).

The CHA has sub­mit­ted the largest RAD request of any U.S. city, for near­ly 11,000 pub­lic-hous­ing units. The agency is still wait­ing for approval from the Depart­ment of Hous­ing and Urban Devel­op­ment (HUD), but is mov­ing ahead with plans to imple­ment RAD, stir­ring sus­pi­cions among pub­lic-hous­ing res­i­dents that they will be left out of cru­cial decisions.

A free-mar­ket fix 

A pared-down ver­sion of a Bush-era pro­pos­al to over­haul pub­lic hous­ing, RAD was launched in 2013 as a HUD pilot pro­gram. The pro­gram essen­tial­ly cre­ates a new fund­ing struc­ture by con­vert­ing tra­di­tion­al pub­lic hous­ing units — which local hous­ing agen­cies man­age using direct fed­er­al sub­si­dies — to Sec­tion 8 rental assis­tance con­tracts. This will allow the agen­cies to bor­row mon­ey against the prop­er­ties and use low-income hous­ing tax cred­its (LIHTCs) and oth­er forms of pri­vate financ­ing to make improve­ments. In short, RAD hopes to attract pri­vate cap­i­tal in lieu of fed­er­al rein­vest­ment in pub­lic hous­ing, for which fund­ing has declined sharply since the Rea­gan era. In return, investors can receive future fed­er­al sub­si­dies for the build­ings, inter­est pay­ment on loans, or, in cas­es where they’ve tak­en over day-to-day oper­a­tions of build­ings, hefty man­age­ment fees. 

In Octo­ber 2013, the CHA applied to con­vert near­ly 11,000 of its 21,000 pub­lic-hous­ing units through RAD. CHA spokesper­son Matthew Aguilar tells In These Times that the agency is pur­su­ing RAD in order to help pre­serve and pro­tect its cur­rent port­fo­lio of pub­lic hous­ing units, since it allows CHA to tran­si­tion iden­ti­fied units from the pub­lic hous­ing fund­ing plat­form to the HCV [hous­ing choice vouch­er] fund­ing plat­form, which pro­vides more stability.”

While RAD has been pitched to the nation’s pub­lic-hous­ing res­i­dents as a minor tech­no­crat­ic tweak, crit­ics wor­ry that it will turn out to be the lat­est in a long line of pri­va­ti­za­tion schemes — most notably, the Clin­ton-era HOPE VI pro­gram — that gen­er­ate a wind­fall for pri­vate devel­op­ers while dis­plac­ing pub­lic-hous­ing residents.

Until recent­ly, RAD con­ver­sions were capped at 60,000 units nation­wide, leav­ing Chica­go and many oth­er cities on a wait­list. But at the urg­ing of HUD and devel­op­er lob­by­ists, that cap was lift­ed in Decem­ber 2014. Aguilar tells In These Times that the CHA has not yet received the go-ahead from HUD on its RAD appli­ca­tion, but con­tin­ues to pre­pare for implementation.”

Though CHA has held pub­lic meet­ings on RAD, it’s been smoke and mir­rors,” says Per­ry Casey, who lives in one of the city’s near­ly 9,000 units of pub­lic hous­ing specif­i­cal­ly for senior cit­i­zens. Casey also serves as pres­i­dent of the res­i­dent-led Cen­tral Advi­so­ry Coun­cil for the CHA’s Senior North group of prop­er­ties, where res­i­dents have been scram­bling to under­stand what RAD will change for them, he says. Res­i­dents are still unsure of which prop­er­ties will be con­vert­ed through RAD or when, he notes, but We feel that even­tu­al­ly, [the CHA] will either find a way to sell the prop­er­ties or oth­er­wise turn them over to pri­vate own­er­ship, and the seniors will have nowhere to go.”

The CHA’s web­site says that there are no pro­posed changes in own­er­ship” for the first phase of RAD. CHA intends to main­tain the prop­er­ties and day-to-day oper­a­tions as they are today,” Aguilar tells In These Times. CHA will main­tain own­er­ship or oper­a­tional con­trol of all prop­er­ties with­in the RAD pro­gram, we will main­tain on-site prop­er­ty man­age­ment, and we will retain exist­ing services.”

Leah Levinger, exec­u­tive direc­tor of the afford­able hous­ing coali­tion the Chica­go Hous­ing Ini­tia­tive (CHI), finds such state­ments cold com­fort. While the hous­ing author­i­ty has assured res­i­dents and advo­cates that it won’t be pri­va­tiz­ing build­ings through RAD, she says, there’s noth­ing in the fed­er­al ini­tia­tive that pre­vents them from doing so, and there’s noth­ing to hold them to their ver­bal assurances.”

A pro­posed list of poli­cies for RAD prop­er­ties was cir­cu­lat­ed to res­i­dents in Novem­ber, but Casey says the 30-day com­ment peri­od wasn’t suf­fi­cient to review the long and tech­ni­cal doc­u­ment. The admin­is­tra­tive plan for RAD prop­er­ties includes a sec­tion on own­er­ship con­trols” and stip­u­lates that CHA must retain oper­a­tional con­trol of RAD prop­er­ties through direct own­er­ship — or through direct or indi­rect legal author­i­ty. What is legal author­i­ty? The doc­u­ment says it may be estab­lished via con­tract, part­ner­ship share or agree­ment of an equi­ty part­ner­ship, vot­ing rights, major­i­ty share of gen­er­al part­ner inter­ests in a lim­it­ed part­ner­ship, or otherwise.”

Aguilar tells In These Times that the doc­u­ment has been approved in final form by the CHA Board of Com­mis­sion­ers. Asked by In These Times to review the CHA pol­i­cy, the NHLP’s Knight notes that it is not suf­fi­cient­ly clear to iden­ti­fy what the spe­cif­ic means of own­er­ship will be after the RAD con­ver­sion.” He notes, how­ev­er, that there are a num­ber of ways that hous­ing author­i­ties can exer­cise long-term con­trol of RAD prop­er­ties, includ­ing by retain­ing own­er­ship of the under­ly­ing land, or con­trol­ling a non­prof­it enti­ty to which own­er­ship has been transferred.

But part of the prob­lem, say RAD crit­ics, is that such deci­sions are large­ly left to the dis­cre­tion of hous­ing author­i­ties, with lit­tle input from res­i­dents and advo­cates. In Bal­ti­more, where RAD is already under­way, many pub­lic-hous­ing res­i­dents say they first learned that the local hous­ing author­i­ty was sell­ing off more than half its hous­ing stock through the pro­gram when a local paper broke the news in Feb­ru­ary 2014

The new Plan for Transformation

As the CHA con­tin­ues prepa­ra­tions for RAD, the city is still in the final stages of anoth­er pub­lic-hous­ing rede­vel­op­ment plan: the Plan for Trans­for­ma­tion, a $1.6 bil­lion ini­tia­tive to tear down the city’s belea­guered pub­lic high-ris­es and replace them with 25,000 new or reha­bil­i­tat­ed units. Launched in 1999 as a 10-year pro­gram, the pro­gram is near­ly six years behind sched­ule and still inch­ing towards com­ple­tion. New con­struc­tion ground near­ly to a halt under May­or Emanuel—the Huff­in­g­ton Post’s inves­ti­ga­tion notes that in the four years before he took office, the CHA cut the rib­bons on an aver­age of 843 replace­ment units each year. That num­ber has fall­en each year Emanuel has been in office, with just 88 units com­plet­ed in 2013 and a goal of 40 new units set for 2014.

The Plan for Trans­for­ma­tion did, how­ev­er, com­plete ren­o­va­tion of the city’s pub­lic hous­ing for seniors. It there­fore strikes res­i­dents as odd that senior hous­ing makes up the bulk of the prop­er­ties that the CHA has pro­posed to con­vert through RAD. The pro­gram has been pre­sent­ed pri­mar­i­ly as a means to make long-need­ed improve­ments in pub­lic hous­ing; senior build­ings have been rel­a­tive­ly well kept-up and do not have out­stand­ing main­te­nance needs, says Casey.

That rais­es the ques­tion of whether pub­lic-hous­ing units that need repairs will get them through RAD, and how the pro­gram will ben­e­fit units already in good shape. Casey spec­u­lates that senior hous­ing, much of which is locat­ed on the city’s wealth­i­er and whiter north side, could rep­re­sent the most attrac­tive option for investors. We can walk to the lake­front and ride our bikes. Many times in the sum­mer, I just walk down to Michi­gan Avenue,” he says. If I were an investor look­ing to buy prop­er­ty, this is where I’d want to do it.”

Asked about the cri­te­ria used to select prop­er­ties for RAD, Aguilar says that the CHA iden­ti­fied prop­er­ties that would be able to most ben­e­fit from the sta­ble fund­ing struc­ture avail­able under RAD,” based on fac­tors that includ­ed exist­ing prop­er­ty con­di­tions, recent con­struc­tion activ­i­ty, over­all finan­cial health and eli­gi­bil­i­ty for the RAD Program.”

He tells In These Times that a list of all poten­tial RAD prop­er­ties is still being final­ized, but con­firms that most of the prop­er­ties select­ed for the first phase of RAD are senior or mixed-income build­ings. Asked what spe­cif­ic issues will be addressed in these build­ings, he says that the CHA’s RAD plan will include plans to address iden­ti­fied crit­i­cal repairs as well as an approach to address future cap­i­tal needs over the long term.”

The only alternative?

Chica­go pub­lic hous­ing res­i­dents’ fears of dis­place­ment have proved pre­scient in the past. Just 11 per­cent of for­mer pub­lic-hous­ing res­i­dents whose high-ris­es were demol­ished begin­ning in 1999 had returned to mixed-income devel­op­ments con­struct­ed through the Plan for Trans­for­ma­tion as of 2011. For exam­ple, Chicago’s Robert Tay­lor Homes were once the nation’s largest pub­lic-hous­ing project, with 27,000 res­i­dents. A $500 mil­lion rede­vel­op­ment effort knocked down the complex’s 28 high-ris­es and replaced them with a mixed-income com­mu­ni­ty of just 2,300 units.

RAD does con­tain a num­ber of pro­vi­sions that offer greater pro­tec­tions to res­i­dents than its pre­de­ces­sors, such as a right of return for res­i­dents who are dis­placed dur­ing repairs or ren­o­va­tions, as well as a require­ment that any units demol­ished or rede­vel­oped as part of RAD must be replaced. Ear­ly into the HOPE VI pro­gram, for exam­ple, Con­gress dropped a require­ment that each demol­ished unit be replaced with a new afford­able unit, with the result that only about a third of the pub­lic hous­ing destroyed through the pro­gram was ever replaced.

RAD cor­rects this issue with a require­ment for 1:1 replace­ment, but the pro­tec­tion con­tains what the CHI’s Levinger calls a glar­ing loop­hole:” Units need only be replaced through RAD if they have been occu­pied with­in the past 24 months.

That rais­es eye­brows giv­en the CHA’s more than 15 vacan­cy rate across the city, and the agency’s track record of allow­ing long-term vacan­cies dur­ing rede­vel­op­ment projects. A 2012 inves­ti­ga­tion by the Chica­go Reporter found that at Lath­rop Homes, a pub­lic-hous­ing com­mu­ni­ty that sits on prime North side real estate and is still being rede­vel­oped as part of the Plan for Trans­for­ma­tion, the CHA had con­sis­tent­ly neglect­ed lease-up units when they became vacant, result­ing in an occu­pan­cy rate of just 18 percent.

Levinger is adamant that RAD is not the only tool avail­able” to secure funds for low-income hous­ing. A coali­tion of hous­ing advo­cates have been push­ing for a city ordi­nance that would require greater trans­paren­cy and addi­tion­al over­sight of the CHA, a move that they say would help ensure that before turn­ing to out­side investors, the agency uses its mil­lions in reserves to expand pub­lic hous­ing and make nec­es­sary repairs.

The mea­sure is stalled in com­mit­tee — which Levinger believes is due to oppo­si­tion from May­or Emanuel. In the absence of trans­paren­cy, We can’t real­ly eval­u­ate the claim that RAD con­ver­sions are essen­tial to the via­bil­i­ty of the pub­lic-hous­ing stock,” she says. But there’s plen­ty of cash and plen­ty of options avail­able that don’t involve pri­va­ti­za­tion of own­er­ship what­so­ev­er, or turn the city’s pub­lic hous­ing into a prof­it cen­ter for investors.”

Rebec­ca Burns is an award-win­ning inves­tiga­tive reporter whose work has appeared in The Baf­fler, the Chica­go Read­er, The Inter­cept and oth­er out­lets. She is a con­tribut­ing edi­tor at In These Times. Fol­low her on Twit­ter @rejburns.
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