GEORGE LAKOFF: HUD is Trying to Privatize and Mortgage Off All of America’s Public Housing

[imurhuckleberry]

The Obama Administration’s move to the right is about to give conservatives a victory they could not have anticipated, even under Bush. HUD, under Obama, submitted legislation called PETRA to Congress that would result in the privatization of all public housing in America.

The new owners would charge ten percent above market rates to impoverished tenants, money that would be mostly paid by the US government (you and me, the taxpayers). To maintain the property, the new owners would take out a mortgage for building repair and maintenance (like a home equity loan), with no cap on interest rates.

With rents set above market rates, the mortgage risk would be attractive to banks. Either they make a huge profit on the mortgages paid for by the government. Or if the government lowers what it will pay for rents, the property goes into foreclosure. The banks get it and can sell it off to developers.

Sooner or later, the housing budget will be cut back and such foreclosures will happen. The structure of the proposal and the realities of Washington make it a virtual certainty.

continue...http://blog.buzzflash.com/contributors/3216

[JanMichael]

1. What a shitty idea. No surprise though. Great "change"?

yuck...

[BR_Parkway]

12. Actually, what's stated as the outcome in the article is incorrect

Here's the actual info:

http://docs.google.com/viewer?a=v&q=cache:UfXOZhZMzIwJ:portal.hud.gov/portal/page/portal/HUD/fy2011budget/signature_initiatives/transforming_rental_assistance/documents/PETRASectionalAnalysis2010-05-11.pdf+PETRA+legislation+%2B+affordable+housing+USA&hl=en&gl=us&pid=bl&srcid=ADGEESjeCcGTul0RwXTSEaa6wKxf6Q9dErkEgUWGjlPYYL77Sj8RqUMdjGBpgTDvik8Ex2VLc9fvyXHk2BbWtAJb3-K_on-0dslb1tniI2euffVvrrnoWAQXEZPcBhBGORK3Z75fZ4X3&sig=AHIEtbQZt5BS_h7-6eJ8N626aUmUokc6YA

Since the Tax Reform Act of 1986, almost 90% of low income housing has been done through private developers (profit and non-profit) through the use of various gov't backed bonds and tax incentives. If I want to develop a new property, or rehab an old one, I could use those tax credits to entice investors to give me money in exchange for credits that they can write off against their other income. Depending on the structure of the deal, the investors would get between 9%-18% return on their money and it's pumped billions of dollars into the system creating or upgrading 100,000's of units nationwide for people making between 30-60% of the median income for their area and family size. The drawbacks in the program were that the investor couldn't get their money out the first 10 years without severe penalties and the property owner/developer was locked in for 15 years. Part of this proposal is giving owners and investors who may need the cash now a way to restructure their deals.

Properties in the 15-25 year range are also coming up on the end cycle of their major systems lives - not to mention how inefficient those are compared to today's technologies. So the building own who'd like to upgrade his HVAC system can't between his locked in gov't committments as well as a 25-40% drop in the property's value given the past couple years of the real estate bubble popping. Obviously it would be better for the tenants, building owner and environment if they were able to install a newer, cleaner, greener system - part of this gives them the flexibility to do that where they would have been locked out before based on their previous government program participation.

Part of this is designed to encourage owners to upgrade properties to the point that some of the units are market based while some retained as assisted rent units - the upgrade is a boost to the families living there with rental assistance while creating neighborhoods that are not solely low income tenants. There is also a very specific section that mandates that HUD not lose any units it currently has on a net basis - it does give them the authority to transfer vouchers and contracts to other properties to ensure that doesn't happen.

Some important provisions that remain in place - 40% of the units must be set aside for people/families paying no more than 30% of their income for housing, subsidies continue to make up the shortfall - landlords are still capped on rental amounts to no more than 110% of local similar rents (and it's damn near impossible to get any increase over 100% even when you can show that the total tenant's cost of housing and utilities will be less).

Like the original revisions under Clinton, the Enterprise Community Trust (one of the largest non-profit low income housing groups in the country) had a big hand in writing these modifications to the current program - they are trying to keep investment in low income housing coming in so more projects can be developed. http://www.enterprisecommunity.com/about/mission.asp

[OregonBlue]

2. This story is misleading at best. Read Daily KOS and get the facts on it.

It's actually about section 8 and is very good for section 8 people.

http://www.dailykos.com/storyonly/2010/5/21/868448/-Below-the-Radar:HUD-is-Trying-to-Privatize-and-Mortgage-Off-All-of-Americas-Public-Housing

[mopinko]

4. very good comments there, and yes, it is a complete misrepresentation of

the proposal. now why would someone do that?? hmmmm

[nichomachus]

5. Just read your link and it seems to make your post misleading

"Along the way, tenants’ rights will be trampled, since tenants could not longer seek redress from the government through their public officials — because the government would no longer own the buildings."

[MadHound]

6. Umm, the Daily Kos link you provided seems to back up the OP?

:shrug:

[rudy23]

3. self-delete

[bobbolink]

7. How many more homeless people will it take before "progressives" care enough to take action?

[leftstreet]

8. When has homelessness ever been a 'progressive' cause?

:shrug:

[bobbolink]

9. Never. So, they can give up expecting our votes OR our action on *their* pet issues.

I no longer give a shit about anything else, because I have been ignored.

So, they turned a life-long activist into a one-issue person.

Some gain, eh?

[Gormy Cuss]

10. I've only done a quick read of it, but this seems to be an attempt to address limitations

in existing rental programs. Neither the Council of Large Public Housing Authorities(CLPHA) nor the National Low-Income Housing Coalition (NLIHC) has posted an independent analysis of the effects of PETRA and both of these organizations are expert at dissecting new HUD policies and I look forward to what their assessments are.

The troubling thing to me on first read is the bit about selling public housing units to private entities with 20 year HUD rental assistance programs.

This is similar to the privately owned, publicly subsidized rental programs which began in the 1960s after HUD pretty much got out of the business of financing new public housing developments. Under some programs for privately owned/publicly subsidized housing, the development had a project-based Section 8 contract and income-eligible tenants. Unlike Section 8 vouchers, the tenant's subsidy was not portable and moving meant that the tenant would need to recertify for Section 8.

The main problem with the similar earlier programs however was that owners could and did sell after their contractual obligation was done and tenants had no more protection than any other private market tenants, which meant that when new owners decided that they didn't want to participate in Section 8 dozens of low income tenants were added to already crowded pools of low income people seeking housing.

Add to that the fact that much of the HUD-backed public housing has been demolished or rebuilt with fewer units and the slots replaced with Section 8 assistance.

As I wrote at the beginning, I'll reserve judgment on PETRA until I read the CLPHA and NLIHC analyses.

[femrap]

11. I believe HUD

has been a sesspool of money laundering for a long time. Catherine Austin Fitts at Solari.com was Deputy Sec'y there under Kemp and boy, does she have stories.

She left DC and now works advising people how to enjoy life and get back to community-style living.

I, too, want to see what those groups have to say about PETRA.

It seems there are fewer and fewer homes for the Section 8 people out there. Section 8 Developers used to get big tax write-offs for building such housing...but maybe the laws have changed since I was involved with this.

[Gormy Cuss]

13. Yeah, the rules have changed for developing under Section 8.

Those units are in fact the type that had expiring use restrictions after 20 years (Secs. 236 and 221d3 developments, for example.) The National Housing Partnership did the definitive study on the impact on low income housing back around 1990 because during that decade most would be free of the HUD restrictions and with escalating property values in many parts of the country those units were lost.

Kemp's administration was clean compared to Samuel Pierce -- talk about a cesspool. I found many of the lifers at HUD to be honest, caring, dedicated people but the political appointees were another story.

Section 8 rental assistance alone is never going to fill the need no matter how many permutations of it are put out there. There is a fundamental need for massive amounts of publicly-owned housing because that is the only way to guarantee a sufficient supply. It's really a shame that large scale development of units isn't ever put on the table. The old model of a large number of units on a small amount of land failed everywhere but a few places like NYC, but there are models of redesigned, lower density public housing communities that have worked.

[Quantess]

14. Welcome to DU and thanks for posting this.