Controversial program boosts funding for scarce public housing

The Elliot Twins high-rise apartments, not far from U.S. Bank Stadium, are on track for $22 million rehab, starting next year. The 12-story buildings are among the Minneapolis Public Housing Authority’s oldest properties, built back when John F. Kennedy was president.

To help finance the Elliot Twins and future renovation projects, the housing authority will change how it receives much of its federal funding, switching to a program expected to provide a more stable flow of money. The move also allows the organization to raise money from investors and other private-sector sources to fund building repairs and renovations.

Public housing serves the poorest of the poor, including many households making less than $15,000 a year. Virtually no new public housing has been built in decades and federal funding has been inconsistent, leaving many public housing authorities with huge backlogs of deferred maintenance.

The Minneapolis Housing Authority’s 6,000 homes and apartments currently need about $175 million in work.

Resident Jonathan Martin has lived in Elliot Twins since 2006. He likes the new kitchens and bathrooms and other planned improvements.

"This will be a nice place for residents to reside and look forward to coming home to," he said.

Resident Osman Omar also likes what is in the works. Among other things, the buildings will be joined by a first-floor community center.

“It is great,” he said. “It is a good investment for the community.”

Omar said some residents have worried that they could lose their housing. But he said such fears are unfounded.

“Some elderly … interpret they will be evicted. And that’s not true,” he said. “This process, it will help the community.”

A few of the 10,500 residents of Minneapolis Public Housing properties regularly protest that the housing authority is on a path to “privatize” public housing, evicting tenants and raising rents, which average $245 a month. The average rent for a one-bedroom Minneapolis apartment was $1,566 as of last April, according to the website Rentjungle.com.

The housing authority vows tenants cannot lose their housing and that rental rates are capped at 30 percent of income.

Mary McGovern, an Elliot Twins tenant and president of the council that represents 5,000 residents of the authority’s high-rise apartments, trusts tenants will be protected.

“Nobody is going to lose their housing,” she said. “No way.”

What’s fueling the controversy and making the renovations possible is a big change in how the Minneapolis housing authority gets some federal money. The city is using a program called Rental Assistance Demonstration. The program not only provides greater stability in federal funding dollars, it allows housing authorities to borrow money, which they can’t otherwise, and use tax credit programs and other financing tools to raise money to repair and improve properties. Minneapolis is starting with Elliot Twins, said Tracey Scott, the Minneapolis Housing Authority’s interim executive director.

Housing authorities around the country have used the Rental Assistance Demonstration funding program to preserve about 100,000 units of public housing. And Congress has been expanding the program.

“It absolutely is transformative. It’s really one of the few things left with [the Department of Housing and Urban Development] that allows us to get more funding,” Scott said.

The program allows the housing authority to sell tax credits to investors. Scott said those investors would have ownership stakes in authority properties, but only for 15 years.

“And they don't control or operate the property. It's just their investment that allows them to take the tax credit,” she said.

It’s smart to allow housing authorities to use tax credits and other tools long employed by developers of low-income housing, said Matt Murphy, executive director of New York University's Furman Center, which fosters research and debate on housing.

“The way public housing operates and the way it can receive money is just outdated,” he said. “Public housing authorities need to be able to access these forms of financing to be able to do the scale of repairs that they need to do and introduce the quality of life that tenants deserve.”

A lot of public housing dates back as much as 70 years, Murphy said. “And in many cases, cities tore down public housing and replaced it with mixed-income housing in the ‘90s. Now what you're seeing is the next generation of how to modernize the public housing stock,” he said.

The National Housing Law Project — a tenants' rights organization — said the Rental Assistance Demonstration program is a useful tool to increase funding for public housing and includes many strong tenant protections.

"[Rental Assistance Demonstration] is the only game in town right now for the rehabilitation and preservation of this housing. That is absolutely true,” said law project attorney Deborah Thrope.

But Thrope said Rental Assistance Demonstration programs have not always gone well for tenants. Thrope’s organization is concerned about HUD's oversight of the program, as well as housing authorities' respect for tenant rights and their long-term commitment to keep apartments affordable for the poorest people.

“It might be that the next person that fills that unit, they're not in fact an extremely low-income family,” said Thrope.

Minneapolis Housing Authority promises that won't happen and it will remain true to its mission of serving the poorest renters.

“Our mission is quality, well-maintained homes for people of limited means, and we are doing everything we can to make sure folks know that we're not wavering from that mission,” said Scott.

The St. Paul Public Housing Authority said it doesn't have the backlog of maintenance issues that Minneapolis has. But the organization still finds HUD's Rental Assistance Demonstration program appealing. It will put most of its 4,300 housing units under the program, expecting the move will boost the money coming in from the feds.

"We are simply doing [Rental Assistance Demonstration] to lock in better money," said executive director Jon Gutzmann. "We are going to have it locked in place for 20 years, and it will get inflation adjustments — something public housing has never seen."

He applauds Congress for providing the money, overcoming the Trump administration’s efforts to slash funding for housing.

With Rental Assistance Demonstration, he said, the authority may be financially strong enough to build more low-income housing.

Gutzmann said the authority's housing will remain publicly owned and managed. And rents will remain the same.

"The one thing we've assured residents is: nothing changes in their world," he said.

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