City Council Member Alexa Avilés leads the NYCHA budget hearing (photo: William Alatriste/NYC Council)
The New York City Housing Authority is facing a fiscal crisis as rent revenue has plummeted in the wake of the pandemic, affecting its operational budget, constraining its ability to hire personnel, and forcing it to suspend dozens of infrastructure improvement projects. Amid the city's larger affordable housing and homelessness crisis, the public housing authority is also struggling with a worsening ability to get vacant units repaired and filled with new tenants, a problem apparently exacerbated by Mayor Eric Adams' budget cuts.
At a City Council budget hearing on Monday, NYCHA officials outlined the dire situation facing the public housing authority as it struggles to recover its financial footing while continuing to make repairs and upgrades at its 175,000 units, home to nearly half a million New Yorkers and many in deep disrepair. The authority is in the midst of implementing a major transformation plan, while also complying with the mandates of an agreement with the federal Department of Housing and Urban Development (HUD) to make repairs at thousands of apartments under the watch of a federal monitor.
“Our public housing is an incredible asset and a lifeline to hundreds of thousands of New Yorkers who deserve healthy and safe homes,” said City Council Member Alexa Avilés, a Brooklyn Democrat and chair of the Council’s public housing committee, in her opening remarks. “But its beleaguered finances present existential challenges.”
“Every level of government can and should do more,” she added. “Each level is making active choices to defund NYCHA or minimally fund NYCHA. Every day this choice imperils residents and some of our greatest social housing assets.”
As part of NYCHA’s transformation plan, repairs and upgrades are being made at 62,000 apartments under the Permanent Affordability Commitment Together (PACT) program – which turns over developments to private management, allowing them to access federal funds under the Rental Assistance Demonstration (RAD) program. Last year, Governor Kathy Hochul and the State Legislature also worked to fulfill one of Mayor Eric Adams’ top priorities, approving a new Public Housing Preservation Trust that is projected to help the authority raise billions of dollars for repairs for about 25,000 apartments.
While the priority has usually been NYCHA’s $40 billion capital need for maintenance and upgrades to its buildings and units, this year the authority, its residents and their allies are more urgently focused on filling the hole left by tenants that have not paid their rent.
NYCHA relies on rent for about a third of its annual operating budget and current tenant rent arrears total about $466 million across 73,000 households, up from $125 million in 2019. The authority only collected about 65% of rent it was owed over the last year, and had to dip into its reserves to cover an operating deficit.
NYCHA officials predict an operating budget of $4.4 billion for the 2023 fiscal year, with a $35 million deficit while again having to rely on reserve funds. That will also leave the authority with less than one month of reserve funds, though HUD recommends that public authorities should have at least three to four months of reserves on hand.
[READ: NYCHA Rent Arrears Crisis Shifts Budget Focus from Capital Needs to Operating Assistance, But Hochul’s Budget Includes Nothing]
“Without additional funding or an increase in rent payments beginning next year, NYCHA will have no choice but to significantly cut expenses and curtail repairs, including those related to the HUD agreement, which will have a real impact for our residents,” said NYCHA’s interim CEO, Lisa Bova-Hiatt, in her opening testimony to the City Council. Though she said the agency will undertake cost-cutting measures and expects to cover its projected deficit, that deficit will grow to about $57 million by 2027 if rent losses continue to mount.
NYCHA has sought emergency funds to help its tenants. The authority applied for $120 million worth of aid for more than 31,330 households from the pandemic-era Emergency Rental Assistance Program (ERAP), a state program created with federal funding. But the state placed NYCHA residents at the bottom of the priority list, and not a single NYCHA tenant has received ERAP funding so far.
Rent arrears for those households have already grown to about $240 million. The agency is now looking for $330 million from the state to help cover lost rental revenue, though Governor Hochul included no new NYCHA money in her executive budget released earlier this year, which is now the subject of negotiations with the Legislature. A deal is due by the April 1 start of the new fiscal year.
When Avilés asked about NYCHA’s contingency plan if state aid does not come through, and whether they would ask the city for help, officials insisted that they do not want to let the state off the hook. “There has to be funding from the state for ERAP,” Bova-Hiatt said. “There has to be a way to protect affordable housing and our NYCHA residents.”
Brian Honan, NYCHA’s senior vice president for intergovernmental affairs, said the authority is working hard to lobby on the issue before the Legislature. “We feel very confident in our ability to make our case and I think we have made our case,” he said. “However, if that does not come to fruition, we will come right back to the Council, I'm telling you, on April 2, to present a plan B. I do not want to give that today because I think that we'll be letting other folks off the hook.”
NYCHA has several allies in the fight for rent arrear funding. The New York State Association for Affordable Housing (NYSAFAH), a trade group, and Legal Aid Society have proposed a $2 billion Tenant Fund for Affordable Housing (TFAH), of which, $500 million would be dedicated to NYCHA. State Senator Brian Kavanagh, chair of the Senate Housing Committee, and Assemblymember Grace Lee, member of the Assembly Housing Committee, have also called for $389 million in additional ERAP funding to cover both public housing tenants and those living in subsidized housing.
The State Senate and the Assembly will each soon pass a one-house budget resolution, likely this week, that outlines their priorities and help inform negotiations among the two houses and governor. NYCHA funding will be among many closely-watched items in the one-house budgets.
At Monday’s hearing, Bova-Hiatt said NYCHA’s challenges aren’t limited to rent revenue. There are other NYCHA costs that are out of its control including the rising cost of utilities and employee benefits, and the escalating costs of maintenance and repairs to the aging housing stock. To control costs, the authority has taken several measures including eliminating 145 vacant positions, cutting nonessential contract spending, and submitting an operating subsidy appeal to HUD to cover some costs of the HUD agreement.
Bova-Hiatt also ran down a lengthy list of capital repairs that NYCHA has achieved in recent years. The agency has about $2.45 billion in available capital funds for 2023 – including about $390 million in federal funds and $741 million in city funds, and other funds from previous years – and is expected to spend about $935 million.
“While the capital funding we receive is only a fraction of the more than $40 billion needed to provide residents with the quality of life they deserve, we are making a difference with the money we do receive,” she said. There are currently more than 700 capital projects underway across the city, she said, including more than 250 that are under construction this year. The agency has also consistently met or exceeded HUD deadlines for allocating and spending federal funds, she said.
She also outlined smaller projects backed by discretionary funding from the mayor, City Council, and borough presidents. She said that 72 such projects were expedited last year – 20 are substantially complete, 32 are under construction, and 20 are in the procurement or completion of design phase and will move to construction this year. But, she said those capital projects could be affected by the authority’s operating shortfall and the consequent staffing issues.
“We are mitigating these impacts to the extent possible, but have identified approximately 70 projects that we must pause in the next few months as a result of our operating budget constraints, which are due to growing rent arrears, insufficient operating funding, rising expenses and staffing and resourcing limitations,” she said, though she noted that they do not relate to the HUD agreement and will not create health, safety or security issues.
Sounding a familiar theme in this month’s budget hearings, Council members also raised concerns about NYCHA’s staffing vacancies. Though the authority’s overall personnel vacancy rate is about 7%, vacancies in core operations such as heating, elevators, and safety services rise to 17.5%. “This is a problem,” said Avilés. “To get the repairs that tenants so desperately need, we need those kinds of operational staff.”
NYCHA officials did insist that their hiring goals were manageable. “Out of 937 budgeted positions, only 696 have to be filled,” said Bova-Hiatt. “We actually think that that's a pretty achievable goal.”
As Avilés noted, the effects of the various challenges facing NYCHA are apparent in its Vacant Unit Readiness program. Wait times for NYCHA to turn around vacant units more than doubled from 182 days in January 2022 to 399 days in January 2023, and the number of vacant units increased from about 486 to 3,593 in that time.
Council members seemed particularly incensed that Mayor Adams’ November budget modification cut contracts for the Vacant Unit Readiness program by 10%, a decrease of nearly $31 million over the next four years. “Cutting this program to get units back online amidst a housing crisis is simply unconscionable for residents who both need to transfer and for some of the quarter of a million people that are waiting on NYCHA’s waiting list,” Avilés said.
Council Member Lincoln Restler echoed that point. “Could you just clarify for us how it's conscionable to cut this program when we're seeing such an extraordinary increase in the length of time that apartments are vacant?,” he asked.
Eva Trimble, NYCHA's Chief Operating Officer, said that NYCHA “worked closely with [the mayor’s Office of Management and Budget] to realign the forecasts” of actual spending on the program, which involves making repairs to vacant apartments, including abating lead and asbestos. “We've worked with OMB to match the funding to our production volume and so we have never had a shortfall in funding to do the work that we need to do,” she said, while insisting that delays in turning around apartments also stem from stricter standards for housing conditions implemented in recent years.
Restler, however, was dissatisfied with the explanation. “OMB is cutting us off at the knees and preventing us from actually being able to do the work that's necessary to fill these vacant apartments and get them inhabitable,” he said. “That's why I'm angry.”
Citizens Budget Commission, a nonprofit fiscal watchdog, also presented testimony at the hearing, reiterating recommendations that NYCHA should speed up repairs of deteriorating buildings, improve property management, boost rent collection and find savings and increased productivity through collective bargaining. In the testimony, Sean Campion, CBC's director of Housing and Economic Development Studies, noted that NYCHA's operating costs are increasing faster than those of comparable rental properties, even though the number of properties under its management has decreased. Overtime costs have also increased despite the authority's efforts to reduce them.
Campion also pointed out that NYCHA has relied on non-operating revenue and city subsidies to balance its budget, an unsustainable practice in the long run.
"While a balanced budget remains in sight for 2023, fiscal stability is not on the horizon. Ultimately, structural reforms, not just one-time bailouts, are needed to put NYCHA’s operations back on the path to solvency," he said.
by Samar Khurshid, senior reporter, Gotham Gazette
Note - this article has been updated with testimony from Citizens Budget Commission.