Testimony to the New York City Council Committee on Public Housing

Thank you for the opportunity to testify before the New York City Council Committee on Public Housing.

The Community Service Society of New York (CSS) works with and for New Yorkers to promote economic opportunity and champion an equitable city and state. Since 1843, CSS has powered change through a strategic combination of research, services, and advocacy to make New York more livable for people facing economic insecurity.

The Legal Aid Society is the largest, most influential social justice law firm in New York City. The Legal Aid Society is built on one simple but powerful belief: that no person should be denied their right to equal justice.

Last year, CSS carried out its annual survey of New Yorkers with a focus on capturing the experience and needs of low-income residents, including those in public housing. We found that in 2022, almost half of NYCHA residents say that leaks and mold are a serious problem in their homes, and more than half say that properly working doors are a serious concern. These are the types of issues we continually hear from residents. We were shocked to find that more than 30% of NYCHA residents said that access to clean drinking water was a serious concern. There has never been a more critical moment to turn our collective attentions to NYC’s public housing stock and the most up-to-date estimates of what it will cost to modernize, rehabilitate, or replace it. We applaud NYCHA for taking a step towards openness and transparency by providing their Physical Needs Assessment in a data-friendly format for the first time. Upon reviewing this data and the report prepared by STV-AECOM PNA A JOINT VENTURE, we find that there are various facts and figures worth highlighting and several worrying trends and questions that need to be addressed for NYCHA and the City to best serve residents moving forward.

Overview

The 2023 Physical Needs Assessment of NYCHA’s portfolio is a worrying but important accounting of conditions in the 264 public housing developments. The assessment was the result of the inspection of 30 developments, including building exterior, common areas, systems, a selection of apartments and the opening of several walls. With these inspection reports and additional factors to update the assessment performed in 2017, NYCHA estimates that its total needs are $37.57 billion today and another $40.77 between now and 2043.

NYCHA CAPITAL NEEDS 2023-2043

Source: NYCHA 2023 PNA

A majority of the capital needs are for renovations and modernization work needed right now! The needs can be further broken down to understand where lawmakers can focus their efforts.

There are major differences in how the 2023 PNA estimate was arrived at vs. the 2017 PNA. The most notable change is the addition of 7 new categories—decarbonization, façade repairs, lead, security, open spaces, waste infrastructure, and Section 504 (accessibility upgrades). However, these important additions make up less than 20% of the costs (only 15% over the next 5 years). The addition of these categories provides crucial information in terms of ways to significantly impact the lives of NYCHA residents immediately. We now know that, at only $3.4bn, façades repairs could be made to all public housing buildings; this would not only improve the outward appearance of residents’ homes but also ameliorate one of the biggest safety hazards they face and finally allow the 26 miles of sidewalk sheds to be dismantled. The new categories tell us that, $1.4bn could prevent a single additional NYCHA resident from being exposed to lead poisoning.

Ultimately, the bulk of the capital needs NYCHA has had for the last two decades remains the same— 40% is apartment-based (mostly kitchens, bathrooms, and floors), followed by architectural work (mostly windows) at 11%, and mechanical (mostly water and heating systems).[1]

Comparing 2017 to 2023

The 2023 PNA was less comprehensive than the 2017 PNA, taking a representative sampling totaling 30 developments instead of having inspectors visit all 264. The 2023 PNA used an equation to model capital costs that assumes that the buildings’ systems and assets deteriorate slowly at first speed up in the middle of their ages and slow down toward the end of their useful lives. Both PNAs looked at inflation, market conditions, the cost of materials and labor, and other financial influences to calculate the capital costs.

NYCHA 2023 PNA BREAKDOWN

Source: NYCHA 2023 PNA[2]

While the total figures in both PNAs may seem alarming—given the ~90% increase in 5-year need and ~73% increase in 20-year need—it is important to understand that a majority of the increase stems from “market conditions and inflation”. The PNA points to COVID-related price increases to explain this dramatic increase in cost. Though, it would be helpful to get a full accounting of what input specifically led to this bump; especially since the City should be looking to help newcomers to our city find employment, including in the construction labor market where a shortage can mean higher capital costs. If there are specific materials that were more expensive while supply chains were disrupted, we would expect their return to normal (as well as the lessons-learned in chain resiliency) to mean costs that are lower than estimates calculated at the height of our global inflation perfect storm. If market prices were inflated due to increased transportation costs due to a tightened oil supply after the Invasion of Ukraine and decisions made by OPEC, we should consider that this increase will not last 5 and 20 years from now. The overall point being, we need more information on how this market price escalation was arrived at due to how significantly it contributed to the overall capital cost increases.

In terms of NYCHA’s work completed since the last PNA, less than $4 billion in capital needs has been addressed. NYCHA and the City have leaned on Section 8 conversions instead. So far, more than $6 billion in needs have been addressed through Section 8 conversions in the PACT program and $15 million more needs are in developments with planned/ongoing conversions. The limited capital work outside of PACT draws attention to NYCHA’s capital spending, which is as limited as it is opaque.  

Addressing the Need

Since 2001, NYCHA has faced an operations funding shortfall from the Federal Government, with Congress consistently providing less funds than is needed to manage its housing stock. This lack of funding has added to the capital needs seen in the 2023 PNA. From 2001 to 2013, NYCHA’s capital funding from the federal government continually declined each year. However, there has been a noticeable rebound in funding over the last five years.

NYCHA CAPITAL FUNDS (FEDERAL) 2016-2022

Source: NYCHA Capital Plan 2015-23 & NYCHA Budget Book 2015-23

In its capital plans, NYCHA estimates future funding amounts by using a conservative guess based on prior funding. For example, from 2016 to 2019, NYCHA guessed that capital funding for the subsequent five years would be $306,356 million a year. This sort of guessing what funding levels will be makes planning capital projects very difficult. Capital planning is done in five-year increments, wherein money that will be spent in 2022, must be dedicated in 2017. However, it appears that federal funds have exceeded NYCHA’s estimated funding levels since 2016. It is important to note that, Federal capital funds must be obligated in 2 years and spent in 4 years, otherwise, NYCHA faces punishment including potential forfeiture of funds.

In terms of City capital funding, there are various capital fund allotments the city has put towards specific work types for NYCHA development rehab and modernization. However, NYCHA has opted to prioritize spending of federal dollars which have a deadline, and has stated that City funding has been difficult to spend down for several reasons. We took a look at the funds for roof repairs as an example:

The DeBlasio Administration’s Roofing Initiative capital funding allocated $1 billion starting in 2017 (including a $300 million investment in 2015). At the time, the costs of fixing all roofs in NYCHA were estimated to be $1.4 billion, as stated in the 2017 PNA. The former mayor’s plan set $100 million every year from 2016 to 2028 to cover $1.3 billion of this work by the end of the plan. The plan was set to replace 1153 roofs over the period in 13 tranches. Under the plan, NYCHA was expected to be on tranche 8 by this fiscal year (2023) and to have replaced 576 roofs. However, only 319 roofs have been replaced so far and NYCHA is only on tranche 6.

NYCHA CITY CAPITAL ROOF REPLACEMENT (TIII & TIV)

NYCHA Capital Plan  2017-2023

While legal issues slowed tranche II, questions remain regarding NYCHA’s ability to efficiently complete this work. According to the 2023 PNA, roof physical needs are still at $1.1 billion (short-term). Given the considerable amount of work that has been completed already replacing roofs, the most recent PNA figure is worrying. Was the initial plan never realistically going to address the total roof replacement need? If so, are deterioration rates for roofs extraordinarily higher than what the 2017 PNA estimated? Or are there other issues with the procurement, work quality, internal capital planning process, administrative capacity, or contractor/material availability that have slowed down construction or required renovations earlier than expected? Or is the City capital just being spent at a slower rate due to the need to use Federal spending first? A look at tranche III and IV as examples, shows that it took NYCHA 5 years to move 94 roofs from bidding to completion, with much of the construction not beginning until long after the bidding, in both scenarios.

In the past, City capital funding for NYCHA has been restricted. As we can see, the funding mentioned is restricted to roof work, another $335 million could only be used for façades; $16.3 million for dealing with rats; and another collection for boilers and another for waste management. These constraints make it difficult for City money to be worked into NYCHA’s capital planning and have an added disadvantage of oversight by the city’s Office of Management and Budget (OMB). To make matters worse, state law continues to limit City capital funds to “hard costs” so that they can’t be used to pay for much of the necessary work that is required to get repairs done. Meanwhile, the Adams administration attempted to cut $47 million of the Community Development Block Grant (CDBG) funding for NYCHA developments from 2024-2026 in the preliminary budget. The CDBG is a source of operations funding for NYCHA that was significantly used to staff NYCHA capital work under the DeBlasio administration. While the council was able to restore the funds, NYCHA needs an increase in flexible capital funding.

The Adam’s administration did increase capital funding over the last capital plan, but the increase is almost entirely shifted towards the PACT program. It is clear that the closing of PACT deals moving forward will require the use of subsidy from the NYC Department of Housing, Preservation, and Development (HPD). However, this should not lessen the obligation to address needs in developments that are not converting AND should not preclude advances in NYCHA’s ability and aptitude to spend capital dollars, addressing the conditions facing public housing residents today.

It is with this context that we propose the following recommendations:

1. Fund NYCHA Operations: The amount of capital funding that the city provides NYCHA with is meaningless if the agency is not adequately staffed. Every year austerity budgets and cuts to capacity hollow out our public agencies more and more.
2. Continue to push to Reduce Restrictions on City Capital Funds.
3. Increase City Capital and Bond Financing to $4 billion annually: This will allow NYCHA to perform more aggressive planning in capital budget outyears.
4. Stop the Ban on Using Low Income Housing TA Credits (LIHTC) for NYCHA Capital Projects
5. Improve NYCHA’s Budget Transparency: While the fact that NYCHA’s budget is on the calendar year and not the fiscal year like City agencies makes the timing of comprehensive budget documents difficult, it should not be difficult for taxpayers, residents, and stakeholders to understand what was spend and what wasn’t. We recommend that NYCHA provide an annual capital spending breakdown by funding source to accompany the budget documents on its site. This should at least be from 2015 looking forward.
6. We recommend that NYCHA be clearer in its messaging of the findings of the PNA investigations and help explain more fully to people about the real costs and future expenses: We are concerned that announcements about the 2023 PNA put the unmet capital needs at a whopping $78 Billion, nearly double that of the 2017 PNA.  After a close read of the Report and conversations with NYCHA, it became clear that they expect PACT conversions and possible conversions to Section 8 under the new NYCHA Preservation Trust to address over $37 Billion of those needs, leaving about $40 Billion of remaining outstanding capital repairs.  We are concerned that the alarmist nature of the $78 Billion announcement sends a message to those on the federal, state, and city levels that NYCHA public housing is not worth saving because unmet needs are just too great and could lend unreasonable and inaccurate credence to the idea that demolition of public housing is the only option for the future of these valuable homes. 

NYCHA has begun to embark on a voting process for select residents, instituting a first-of-its-kind preservation process. We cannot stress enough that residents cannot make informed decisions as to which programs to use to make necessary repairs at their developments if they do not have accurate information concerning the actual needs and associated costs to repair and available financing tools to meet such costs. We are concerned about the comprehensiveness of inspections and findings under PNA investigations and reports.  As mentioned above, the 2023 PNA was much less comprehensive in terms of the number of units that were inspected in order to come up with a predication of unmet needs.  Indeed, only 30 developments were actually inspected.  In addition, a number of other items were added to the list of items to be inspected and included in coming up with the final total of capital needs costs.  As NYCHA turns to different programs to address repair issues throughout its portfolio, including through the use of PACT and conversions under the NYCHA Preservation Trust, it is crucially important that all parties, including NYCHA residents and potential development partners and finance teams understand the real needs at each development.  Recent changes to the PNA used by the Fulton Elliott Chelsea Working Group to come up with comprehensive plans as to addressing redevelopment needs at the developments are alarming and have not been made publicly available.

Thank you for the opportunity to speak on this pressing matter. With your help, we can advance these recommendations and substantially impact the lives of many New Yorkers who deserve a safe and healthy home.

[1] Decarbonization, a new category, makes up 12.3% of short-term needs which mostly refers to switching to electric heat and water pumps.

[2] The light blue portion of this chart is accelerated deterioration, which increased in the 20-year cost estimate but decreased in the 5-year.

Issues Covered

Affordable Housing