NCPA - National Center for Policy Analysis

Cleaning Up The Public Housing Mess

May 22, 1996

Now that the House of Representatives has approved a bill aimed at reforming the 60 year-old public housing program, critics and supporters alike will be watching to see if and how it will achieve results, if it becomes law.

The bill would permit the nation's 3,400 local public housing authorities (PHAs) to make more decisions, as well as induce them to compete for better tenants. The original aim of public housing was to construct low-cost rental units for working poor households. But critics say that over the years PHAs -- only 4 percent of the nation's rental stock -- have evolved into a catch-basin for people at life's social and economic bottom.

Here are some of the provisions of the House bill:

  • It would replace PHAs with a new type of local agency having more autonomy.
  • Public housing aid would be consolidated into block grants.
  • A prohibition against charging more than 30 percent of a worker's income to cover rent would be abolished, as would a requirement that PHAs add one dwelling for each one it tears down.
  • A provision according preferential treatment to certain types of households for admission to projects would be removed, and vouchers would be given to tenants in the most run-down projects.

Originally, local governments were to set up housing authorities which would build, own and manage projects. Construction would be financed through bonds and federal payments, and rents were to cover all operating costs.

But when rents fell short of operating costs, the federal government had to step in and shell out funds to cover the deficits.

  • These operating subsidies, first authorized in 1961, stood at less than $10 million in 1969.
  • By fiscal 1982 they had exploded to $1 billion, and continued to soar to $2.7 billion in fiscal 1995.
  • The government's checks -- sent out by the Department of Housing and Urban Development -- amounted to a monthly per-unit subsidy of $80.38 by 1988, up from $2.19 in 1966.

Although the original concept was to provide housing for the working poor, all that changed in 1949, when Congress decreed that welfare families could not be barred from public housing.

  • As a result, by 1989, wages and salaries were an income source for only 35 percent of tenants -- the rest existed mainly on Social Security and welfare.
  • More than three-fourths of all renters in the U.S. had at least some income from wages and salaries at that time.
  • Also in 1949, tenants were required to leave public housing if their incomes grew too high.

Thus, higher-income workers were forced out, leaving public hosing largely to those with little or no work-related income. Legislation in 1969, called the Brooke amendment, capped the amount a tenant was required to pay in rent at 25 percent of income -- later raised to 30 percent. This was, in effect, federally mandated rent control and it led to what rent control always leads to: the fall in rental income caused landlords to cut maintenance and upkeep; the replacement of the working poor with the nonworking poor brought a sharp rise in rent-skipping, vandalism, drug-dealing and violent crime.

It would seem that government took all the wrong moves which have led to the present disgraceful state of public housing.

  • While the courts have hindered evictions over the years, the federal Legal Services Corporation has eagerly pleaded the cases of problem tenants.
  • Federal "preference" favored certain groups, such as the "nonelderly disabled" which have harassed elderly residents.
  • Of course, it's not all the feds' fault: Public Housing Authorities contributed their share of problems through waste, fraud and lax oversight.

The reform bill, proposed by Rep. Rick Lazio (R-NY), has been softened somewhat to earn Democratic support. It still keeps a 30 percent ceiling on rents -- that covers 76 percent of all tenants.

Source: Carl Horowitz, "A New Era For Public Housing?" Investor's Business Daily, May 22, 1996.


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