Monday, July 28, 2008

The ARHA Files #1: Can ARHA Afford Public Housing?

As incomplete as they are, the ARHA files at Barrett Library do offer some interesting insights into the operations and woes of the public housing authority. We're going to explore some of them over the next few days.

The Growler posed a fundamental question at the most recent meeting of the Braddock East Advisory Group (BEAG): can ARHA afford to continue supporting public housing?

This query was met with a lot of rhetoric about Alexandria as a compassionate city, with the implication that the City could always be relied upon to support ARHA even as HUD funds continue to evaporate.

But in fact it appears that under financial pressure ARHA in recent years has already been forced to take steps of its own to change its housing mix so that it supports fewer public housing units for the neediest families and more Section 8 projects whose residents contribute a higher proportion of income toward rent.

For example, the minutes from 2006 and 2007 ARHA Board meetings reveal what some neighbors already suspect: that Jefferson Village (located at Princess and N. West Streets) was recently converted to Section 8 Housing Choice Voucher Program and the public housing residents offered accommodations elsewhere.

According to notes from the February 8 BEAG meeting, "there are 10 market-rate units and 50 Section 8 units that were converted from public housing units. The units were converted to Section 8 because those units produce higher yields for ARHA's budget."

The heavy cost of subsidizing pure public housing is one of the reasons ARHA had to seek City loans for Quaker Hill.

In 1990 and 1991, ARHA acquired 60 units of public housing (30 townhouses and 30 condominiums) as part of the redevelopment of the old Cameron Valley public housing site.

Yet by 1999 ARHA was forced to change the site fundamentals. According to the docket materials for the City Council hearing of December 16, 2006 "Prior to ARHA's issuance of Housing Choice Vouchers to Quaker Hill residents in 1999, the property's rental income came solely from low-income residents rents equal to 30% of their adjusted income, and therefore was not sufficient to cover its expenses. [Emphasis added.] Over time ARHA made operating deficit loans from its other housing programs totaling $6.9 million to cover Quaker Hill operating costs."

Hence the first loan from the City, which was later rolled into a second loan to help the housing authority purchase the project from its owners who had invested in the property for tax credit purposes and after their expiration were threatening to make it market rate.

In moments of financial stress, ARHA has been forced to consider similar conversions for other properties, although not all have come to pass.

The Hopkins-Tancil project in Old Town was built in 1942 as a public housing project, but since 1983 has been a "Section 8 Moderate Rehabilitation" property with 111 units, in which tenants pay 30% of their adjusted income as rent.

In April 2006, according to the ARHA papers, the housing authority had considered changing the status of Hopkins-Tancil to market rate because of "recent financial penalties ARHA had been advised of under the Moderate Rehabilitation Contract." (Presumably these were HUD penalties for using Hopkins-Tancil surplus funds to subsidize the mold-ridden and increasingly uninhabitable Glebe Park project — a no-no in HUD's playbook.)

According to the minutes and supporting materials, ARHA officials intended to appeal the penalties, but considered giving families Section 8 tenant-based vouchers (meaning the vouchers travel with the person rather than stay with the site) and tell HUD that the authority would no longer participate in the Moderate Rehabilitation contract. This apparently didn't come to pass, but it was an idea on the table.

During the complex negotiations to refinance Glebe Park, ARHA sought a new financial firm to provide a letter of credit backing the bonds for the troubled project. Only Bank of America responded to the ARHA RFP, and then got cold feet because the project assessed under the estimated value. ARHA then applied for "Voluntary Conversions" for both Glebe Park and Jefferson Village to move tenants to vouchers. This voluntary conversion would raise the value of the Glebe Park site. But HUD wouldn't authorize the conversion (at least for Glebe Park), and Bank of America withdrew from the negotiations.

This reverse undoubtedly forced ARHA to seek a City bailout for the Glebe Park property in 2007, and the tandem redevelopment of Glebe Park and James Bland has forestalled the need — for now — to convert the Arlandria property.

With this history, does it appear that ARHA (and the City) can afford pure public housing in the future?