PD&R and Public Housing

PD&R and Public Housing

Mark A. Reardon, Ph.D., Affordable Housing Research & Technology Division, PD&R

In 1974, Michael Moskow, then the assistant secretary of the newly formed Office of Policy Development and Research (PD&R), stated in the November issue of HUD Challenge that the “preservation or rehabilitation of our existing housing stock is a policy problem of the very highest priority.” In the 50 years since that declaration, PD&R has continued to support the dual mission of preserving the public housing stock and researching innovative and alternative approaches to housing assistance.

Public housing and PD&R’s research agendas, roadmaps, and their outputs provide context to HUD’s policies and programs as well as the rise and decline of the public housing stock. PD&R’s research offers insights into the more than 900,000 housing units owned and administered by local public housing agencies (PHAs), which serve nearly 2 million people. Since its mid-1990 peak of 1.4 million units, the nation’s public housing stock has declined by more than 500,000 units, emphasizing the effects of shifting housing policies and programs over the decades. Today, the Department faces challenges as it continues to provide vital shelter and assistance, as recent reports cite over 80 percent of public housing units have not undergone construction since 1997.

Complicating the need to address the total backlog of capital needs, or the costs associated with property and building maintenance, is the challenge of obtaining reliable estimates to improve housing quality and performance. Over the past two decades, PD&R has commissioned several studies to more accurately estimate the extent of capital needs in public housing and assess the total costs of completing the work. This article reviews HUD’s past interventions to improve public housing, such as the HOPE VI program, Choice Neighborhoods initiative, and the Rental Assistance Demonstration program, and discusses ongoing efforts to better assess HUD’s capital needs. The article closes with a look at planned initiatives to preserve affordable housing through investments in housing quality.

1970s

Working with partners still researching these topics today, PD&R output captured the implementation of milestones such as the Experimental Housing Allowance Program (EHAP), an alternative funding program that bypassed housing administrators and provided families with direct cash assistance, which set the stage for future policies and programs by producing outcomes from case studies. EHAP was one of three experiments PD&R conducted at the time that adopted a supply-and-demand approach rather than a construction approach to rehabilitation and leased-housing programs, in which agencies were tasked with locating housing. Research included the following reports:

• A Comparison of the Experimental Housing Allowance Program and Great Britain’s Rent Allowance Program (1978). This report compared two programs formed under differing initiatives, because the United States sought to evaluate outcomes rather than address inequities.

• First Annual Report of the Experimental Housing Allowance Program (1973). This report described progress on EHAP’s objective to expand housing choice and offer families freedom of movement in the housing market.

• Housing Allowances: The 1976 Report to Congress (1976). This report examined the demographics of the 14,000 EHAP participant households and detailed how families used their payments, the costs and administrative demands of the program, the response of housing markets, and more.

• Housing Allowance Demand Experiment: Final Report of the Housing Allowance Demand Experiment (1980). This report concluded that housing allowances compared favorably to creating housing through new construction in terms of cost and satisfaction without aggravating racial and economic segregation, but they were not clearly an improvement over existing cash transfer programs.

• Consumption Increases Caused by Housing Assistance Programs (1982). This report found that housing allowances generated nearly double the increase in housing consumption per program dollar of public housing and more than two times the housing consumption of cash grants.

By the late 1970s, PD&R's research reflected the nation's growing interest in tenant-based rental assistance to increase flexibility and choice in subsidized housing, linking the previous EHAP results to the policymaking that produced the Section 8 program. The drive to improve programs through evidence-based policy decisions positioned PD&R not simply as a traditionally retrospective research office but also as an active participant in HUD policymaking. In a 1978 report on existing Section 8 housing, Donna Shalala, then the assistant secretary for PD&R, wrote:

The findings in this report are more than facts on paper. They have already been used to improve the implementation of the program and in designing program alternatives such as the moderate rehabilitation component of Section 8 Existing. The data are also contributing to policy decisions.

1980s

The 1980s ushered in a wealth of PD&R-sponsored research, including publications related to the Affordable Housing Demonstration and Urban Initiatives Anti-Crime Program (UIACP). Formally announced in May 1979, UIACP targeted unemployment, alcohol and drug abuse, and crime victimization through cooperation among PHAs, residents, police, and the local government. By early 1981, programs were running in 39 selected sites. In 1979, PD&R published a guidebook to instruct UIACP managers on employing evaluation methods, using surveys as evaluation tools, and reporting findings and on using these reports to improve performance. PD&R also contracted and published numerous case studies for UIACP sites, including Jackson, Tennessee; Jersey City, New Jersey; Baltimore, Maryland; Hampton, Virginia; Cleveland, Ohio; Charlotte, North Carolina; Seattle, Washington; Chicago, Illinois; Dade County, Florida; Hartford, Connecticut; Toledo, Ohio; Oxnard County, California; San Antonio, Texas; Tampa, Florida; and Louisville, Kentucky, all published in 1984. Although the study findings were not as impactful as hoped, the case study research approach yielded some positive results, such as in Chicago, where local authority was found to foster more community activity and integration than did federal oversight. The final report stressed the importance of planned implementation for cross-departmental issues, such as addressing how housing may exacerbate crime levels or hinder community development. These reports prefaced the National Commission on Severely Distressed Public Housing, which was tasked with establishing a national action plan to address the physical quality of the nation’s public housing. In the commission’s final report, published in 1992, Representative Bill Green stated:

Severely distressed public housing exists in America, and it did not arise overnight; it will not be eradicated overnight. But it can be eradicated by the year 2000, and we offer our best plan for how to accomplish that end.

Among its recommendations, the commission called for enacting the Urban Revitalization Demonstration Program, or the public housing revitalization program, later known as HOPE VI (Homeownership and Opportunity for People Everywhere). The program would address the commission's revitalization recommendations in three general areas: physical improvements, management improvements, and social and community services to address residents' needs.

In 1983, Congress directed HUD to study the renovation needs of the nation's public housing stock, determine the costs of renovation, and estimate the annual accrual of physical depreciation. In 1988, PD&R published the first congressionally mandated capital needs study of public housing, which was conducted by Abt Associates and featured four reports:

• Study of the Modernization Needs of the Public and Indian Housing Stock (1988). This report presented national, regional, and HUD Field Office estimates of the costs of correcting the backlog of physical deficiencies determined during an inspection of a representative sample during the summer of 1985.

• Future Accrual of Capital Repair and Replacement Needs of Public Housing (1989). Prepared by ICF, this report projected costs to 2000, after which the researchers concluded:

  According to our estimates, if appropriations remain at their current levels and if the patterns of modernization expenditures continue as they were observed in 1987–88, the backlog will never be fully funded.

• Evaluation of the Comprehensive Improvement Assistance Program. This report focused on programs and funding for modernization. A pressing issue at the time, which persists today, was the abatement of lead-based paint, which commanded its own separate report and cost estimation. The authors defined capital needs costs as "FIX Costs," which were originally estimated at $9.3 billion and later revised to $8.5 billion in 1985 dollars. The report estimated average FIX costs at $7,392 per unit.

• Project Characteristics Associated With Modernization Needs. This report determined repair methods and schedules.

• HUD Perspective on Public Housing Modernization (1988). In this report, HUD stated:

  Based on data developed by Abt Associates...over half of public housing households now live in project that need moderate to substantial rehabilitation just to meet HUD's mandatory standards for modernization. [In 1986 dollars, this estimation was $7.5 billion to $9.2 billion.]

1990s

During the 1990s, PD&R continued its research on HOPE VI by collecting data in phases at the baseline, year 5, and year 10. The office was evaluating a new approach: the comprehensive revitalization of severely distressed public housing developments by “a simultaneous investment in sites, buildings, and people.” HOPE IV was billed as “a bold attempt to transform distressed public housing. In HOPE IV, the Congress and the Department of Housing and Urban Development (HUD) have shown that they are willing to erase 60 years of program rules and let local actors decide the best way to house and provide social and community services to their poorest citizens.” PR&R reports on HOPE VI included the following:

• An Historical and Baseline Assessment of HOPE VI (1996). This report describes the sites at the start of the program and identifies the plans for revitalizing each development.

• HOPE VI Programs Application: Revitalization Program, Demolition Program (1997). This document was a Super Notice of Funding Availability, a single notice announcing funding for 39 HUD grant programs and program components. The notice includes an application package for the HOPE VI Revitalization and Demolition programs.

• Public Housing: Status of the HOPE VI Demonstration (1997). This report states that participating PHAs had demolished 6,538 housing units out of a planned total of 22,573 units, rehabilitated 705 units out of a planned total of 5,407 units, constructed 419 new units out of a planned 15,299 units, and provided housing vouchers to 1,639 families displaced by demolition or rehabilitation. HUD identified several innovative approaches, including Cleveland's concept of centralizing its social services, Milwaukee's adoption of a street layout that reduced density and enhanced the neighborhood's security and cohesiveness, and Atlanta's use of private investors to help finance its improvements.

• Interim Assessment of the HOPE VI Program Cross-Site Report (2010). This report documented the program participants’ shift from primarily redeveloping distressed public housing developments to creating mixed-income communities and increasing neighborhood revitalization by leveraging HOPE VI funds.

• HOPE VI Data Compilation and Analysis (2016). This report offered the first comprehensive descriptive analysis of all 260 revitalization grants. The authors concluded that HOPE VI production primarily consisted of public housing and subsidized rental housing; fewer market-rate rentals and units intended for homeownership were produced than anticipated, with more than 43,274 units lost from the public housing stock. In addition, of the 96,476 units produced under the program, only 19,993 units (approximately 20%) were reoccupied by the original tenants.

Many used HOPE VI to call for shifting more public housing management and oversight to the private sector, because they believed competition would improve results. These arguments complemented criticism of existing funding levels for public programs plagued by implementation and operational failures, such as the Urban Initiatives Anti-Crime Program.  

In 1995, HUD published HUD Reinvention: From Blueprint to Action, which it hailed as “the most fundamental and sweeping restructuring of HUD in its 30 years of existence.” By detailing the process of Baltimore’s transition to voucher-based assistance, the reinvention sought to expand choice for assisted households through portable subsidies for rental housing on the private market. Although many practitioners described this shift in approach as “vouchering out” public housing, the report called for disciplined approaches to asset management as public funding diminished for capital expenditures and operating subsidies. As the shift toward housing solutions in the private market became more apparent, so, too, did the importance of fiscal and operational planning to accommodate such significant changes.

2000s

In 2000, PD&R published its second capital needs assessment based on observations from November 1998 to November 1999, Capital Needs of the Public Housing Stock in 1998: Formula Capital Study. The estimated modernization needs for the nation’s 1.2 million public housing units was $22.5 billion in 1998, or $18,847 per unit, and these costs were correlated with PHA size. Compared with the findings in the 1990 report, total unfunded need decreased by more than $10 billion — an overall decrease of 35 percent and a 29 percent decrease on a per-unit basis. Accrual needs were estimated at approximately $2 billion annually, or $1,679 per unit, reflecting an increase of 1 percent overall and 10 percent per unit over 1990 estimates. Large PHAs showed decreases in relative needs, in part because they removed the worst-quality units from their housing stock through demolition programs such as HOPE VI. Among the report’s recommendations for updating funding formulas was the suggestion to base funding on average needs rather than the standard equal weight formula between existing and accrual needs.

2010s

PD&R published a third capital needs assessment study in 2010, Capital Needs in the Public Housing Program. At this point, the study sampling universe was 1,085,407 units, and the total estimate for existing capital needs was determined to be $21 billion in 2010 dollars, or an average of $19,029 per unit. Inspection-based needs were highest for units in the West, averaging $39,221 per unit, and lowest in the Midwest, averaging only $9,507 per unit, potentially related to the age of the properties, the rowhouse/townhouse style of housing provided, or the imbalanced HOPE VI grant rewards. The greatest needs identified among all units were deficiencies in windows, kitchens, and bathrooms, accounting for nearly 40 percent of all existing capital needs — 37 percent of properties needed window repairs and 80 percent needed kitchen or bathroom repairs. When factoring in all locations, lead-based paint abatement, accessibility, and improvements in energy and water efficiency, the total capital needs estimate was $25.6 billion. The report estimated that PHAs would need $89 billion to address capital needs over the following 20 years.

The rebuilding of public housing continued with the Choice Neighborhoods Initiative grant program in 2011. Although Choice Neighborhoods represented an expansion of HOPE VI, it differed from the earlier program because it funded renovation projects that created synergy with revitalization efforts in the surrounding neighborhood. Choice Neighborhoods was a response to the disadvantages a growing number of Americans experienced in accessing quality educational opportunities, jobs, affordable homes, and safe neighborhoods. The program was intended to help rebuild communities and address these historical inequities through local grants to transform neighborhoods into places with quality, mixed-income housing; good schools; safe streets; and accessible jobs. Among its stipulations, Choice Neighborhoods required grantees to build at least one subsidized replacement housing unit for every assisted unit demolished. PD&R published multiple reports on Choice Neighborhoods grantees with the Urban Institute, including the following:

• Developing Choice Neighborhoods: An Early Look at Implementation in Five Sites — Interim Report (2013). This report described ongoing projects of varying scope and size in Boston, Chicago, New Orleans, San Francisco, and Seattle and collected baseline data on coordination and relationships, housing, people, and neighborhoods.

• Spatial Analysis of Choice Neighborhoods Initiative Planning Grant Applicants and Neighborhoods (2014). This report describes one component of Choice Neighborhoods — the Planning Grants — and the geospatial analysis used to identify Choice Neighborhoods Planning Grant neighborhoods, which continues to be an important component of PD&R research.

• Choice Neighborhoods: Baseline Conditions and Early Progress (2015). The authors of this report stress the importance of including strong local leadership committed to the neighborhood revitalization effort, the challenges of addressing serious public safety issues, and the relevance of local housing markets to neighborhood transformation plans and implementation at all sites.

In 2013, HUD introduced the Rental Assistance Demonstration (RAD), which allowed PHAs, nonprofits, and public entities to obtain mortgages with 30- to 40-year terms to finance capital improvements, allowing up to 80 percent of capital and operating funds to secure debt financing (an increase from the previous rate of 30 percent), thus allowing PHAs access to additional funding sources to maintain, repair, and replace public housing units. Developments also were eligible for low-income housing tax credits, and eligibility determinations included the requirement that grantees switch subsidy programs from public housing to project-based Section 8. This change allowed landlords to receive subsidies for the difference between 30 percent of tenant income and total operating costs, and tenants experienced no change in rent, leasing terms, or tenant rights. The demonstration initially was capped at 60,000 participants; however, this limit has been raised several times, and, as of 2020, HUD had converted 136,000 units with more than 267,000 additional units scheduled.

The many forms and types of RAD conversions offered PD&R numerous research opportunities, and multiple issues of PD&R's journal Cityscape reflected such insights, including Alex Schwartz's findings that among 1,160 properties that underwent RAD conversions, an additional $2.2 billion in funding not previously accessible for capital improvements was received. These results were both welcome and timely considering the mounting costs of backlogged projects, which HUD estimated would reach $58 billion by 2019 in its 2010 report; one large PHA, the New York City Housing Authority, estimated its own need at $31.8 billion in 2018.

In 2016, PD&R published Evaluation of HUD’s Rental Assistance Demonstration (RAD), an interim report that compared the physical and financial conditions of RAD and non-RAD projects, described PHAs’ interpretation and implementation of RAD policies and objectives, and identified obstacles to successful RAD implementation. The study reported that nearly 40 percent of outside funding came from private investors using low-income housing tax credits, 22.7 percent came from lenders, first mortgage financing, and third-party debt such as HOME Investment Partnerships loans or Choice Neighborhoods Implementation loans, and only 10 percent came from the PHAs themselves. Using a leverage-to-debt calculation, the researchers found that for every $1 PHAs invested in their RAD projects, external sources invested almost $9. The researchers also found that among HUD programs, RAD demonstrated the most flexible access to additional funding because of the stable revenue streams generated long-term, project-based Section 8. The report concluded that RAD had demonstrated “proof of concept” for successful conversion, a finding reinforced by the repeated funding and policy modifications for expanding the program, which still exists today.

PD&R published a final report in 2019 that used data accurate as of 2018, which was notable because when the evaluation began, the program had been capped at 60,000 participants; by the end of the evaluation, the program had expanded to 455,000 participants. As a result, the analysis allowed researchers to report only on “early adopters.” This report reinforced the need for ongoing research to capture program variation resulting from policy changes and program evolution and for PD&R to provide continuous evidence-based recommendations. The final report updated the leverage ratio to $9.66 for every dollar that HUD’s public housing programs provide and $7.47 for every dollar that PHAs investment from their own resources, proving RAD’s ability to satisfy its statutory requirements of expanding financing flexibility and increasing opportunities. By measuring rehabilitation needs the report also concluded that most PHAs participating in the program were successful, meeting all needs with minimal delays and improving the physical condition of their properties, whereas the physical condition of non-RAD properties declined over the same period. In the long term, RAD was found to preserve affordable housing by ensuring viability through Section 8 contracting.

The Current Status of Public Housing (2020 and Beyond)

The RAD program’s success made it the leading influence on the public housing stock, with policy and research funding targeted to analyzing the program and its impacts during implementation. PD&R’s research also focused on housing choice mobility, long-term preservation, asset management, and PHA organizational changes. In its work focusing on housing choice mobility, or the conversion to tenant-based assistance after residents lived in a RAD converted property for either 1 or 2 years, PD&R published a 2022 Urban Institute study, Evaluation of the Rental Assistance Demonstration (RAD): Early Findings on Choice Mobility Implementation. The researchers found that few tenants elected the choice mobility option because of the fierce competition for newly constructed RAD units and residents’ difficulty in navigating the housing search process.

Questions concerning resident education about the choice mobility program remain, however, because many residents reported an interest in tenant-based vouchers, prompting follow-up work still scheduled for publication. PD&R continues to identify research opportunities to create recommendations that will benefit HUD-assisted households. Publications such as Review of Energy Performance Contracts in Small and Very Small Public Housing Authorities (2020) and Review of Energy Performance Contracts in Public Housing (2020) focus on energy improvements and retrofitting to further HUD’s goal of promoting efficiency through evidenced-based policymaking.

In 2021, HUD issued guidance enabling Faircloth-to-RAD conversions, which allow PHAs to use RAD to apply long-term project-based Section 8 contracts to additional housing units up to the limit set by their Faircloth cap. Under this new authority, PHAs can expand the number of units they subsidize up to the Faircloth cap, replacing lost stock. Faircloth-to-RAD conversions directly increase the number of affordable housing units available and the quality of affordable housing stock, furthering the second goal of HUD’s strategic plan: to ensure access to and increase the production of affordable housing.

PD&R continues to work with industry partners; researchers; local, state, and other federal agencies; various stakeholders; and the public through its research solicitations and its role as a research and data resource. Two recent PD&R projects include the latest capital needs study, intended to examine how modern PHAs define, measure, and meet their capital needs. PD&R is also pursuing research and advocacy related to the digital divide and technology access, evaluating the status of connectivity and satisfaction rates for PHA-owned properties and HUD-assisted households. Both research areas further PD&R's mission to identify emerging challenges and opportunities by promoting research that fills key knowledge gaps and evaluates HUD policies and programs. PD&R is dedicated to producing research that advances opportunity for those it serves — for the next 50 years and thereafter.