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The Minneapolis Public Housing Authority is changing the way it does business, and some city council members are worried about it

Minneapolis Public Housing Authority
MinnPost photo by Jessica Lee
The Minneapolis Public Housing Authority is preparing to change ownership of its entire stock of single family homes — totalling some 650 units — to free more federal funding.

The Minneapolis City Council is trying to assert more control of the city’s public housing authority in response to the agency’s plans to change the ownership structure of its housing and privatize some of its oldest units.

That effort comes in the form of a Memorandum of Understanding the council is likely to make final with a vote next week. Among other guidelines, the document says the Minneapolis Public Housing Authority (MPHA) will disclose when it makes new property deals that could force residents to move into new homes, either temporarily or permanently, a move that seeks to allay fears that the MPHA’s efforts to involve private investors in rehabilitating its portfolio of properties could lead to higher rents and the displacement of tenants.

The MOU is just the latest step in the city’s efforts to ensure that as much affordable housing is maintained as possible while protecting the rights of tenants, especially those at the lowest end of the economic ladder: people who make annual incomes of $19,850 — 30 percent of the area median income — or less.

It also comes as MPHA’s moves forward with a plan to privatize the Elliot Twins high-rise buildings in downtown Minneapolis, which has sparked worries from activists and some tenants that residents could lose their homes under new ownership. The housing authority says it needs the capital from private investors to renovate the sites and keep them livable, and that it will help tenants find affordable housing arrangements during and after the construction.

MPHA Executive Director Greg Russ says the authority needs to make big changes to its current structure so it has enough money to fix and maintain properties in the future. Right now, the agency faces a growing backlog of repairs that the federal government is not covering in its annual budgets, he said. In 2018, the U.S. Housing and Urban Development Department (HUD) set aside $14 million in capital funding for MPHA, which is a little less than a tenth of what the authority says it needs.

Meanwhile, the city’s housing crunch is putting new pressure on the agency, as more and more Minneapolis residents are applying for public housing each year. “We have to start now,” Russ said of the overhaul to MPHA’s housing portfolio, which now totals some 6,000 units. “In order for us to preserve all of this housing, we have to make a big investment in real estate.”

‘It’s not going to be a takeover’

The Elliot Twins high-rise apartments, in Minneapolis’ Elliot Park neighborhood just south of U.S. Bank Stadium, are at the center of the city’s debate over public housing financing. The authority argues it needs to attract private investors to help pay for necessary repairs to the buildings, including new windows and roofs. Through a federal program called Rental Assistance Demonstration (RAD), private developers would receive tax credits in exchange for paying for the renovations. After 15 years (or in some cases, sooner), full ownership of the buildings will revert to MPHA, Russ said. 

During construction, MPHA said it will help residents find new homes — either for the short or long term — elsewhere in public housing space, and the agency says the repairs will happen in phases to avoid displacing tenants.

But some residents fear they will lose their homes if the authority partners with private entities. “They are afraid,” said Council Member Abdi Warsame, whose Ward 6 includes Elliot Park. Dozens of residents have documented their opposition to the plan in a letter to the MPHA, accusing the authority as “acting as a broker, not a public agency” and taking advantage of some of the city’s most vulnerable residents.

Residents of MPHA’s Glendale complex in Prospect Park expressed similar worries in 2015, when the authority explored a possible application for RAD to pay for renovations for the complex’s 184 townhomes. Some tenants formed an advocacy group, Defend Glendale & Public Housing Coalition, and MPHA eventually backed away from the plan.

For the Elliot Twins, the MPHA still needs final approval from HUD to move ahead, and the agency is in the process of completing a financing plan and meeting with residents so it can negotiate their relocation rights, Russ said. The agency hopes to close on a deal as early as spring of next year.

If that happens, he said documents will list the new owners as having 99.99 percent of the properties, and the MPHA will have .01 percent. Despite that split, Russ said the private and public groups will work “as equals.” Indeed, Russ and the MPHA have pushed back aggressively on the notion that the changes amount to privatization, saying the buildings will remain “publicly subsidized, publicly controlled, publicly managed, publicly owned and true to their public mission,” as Russ wrote in Star Tribune op-ed from September 2018.

“It is a valid question whether anything the MPHA is exploring would be considered ‘privatization’ by any reasonable standard,” he wrote in the op-ed. “When you hear that word, what comes to mind? Are we selling our buildings? No. Will we give control of our buildings — operational policies, resident rights, setting rent levels — to anyone? No. Can public housing residents, under any scenario, lose their federal housing benefits in this process? Once again, categorically, no: Residents’ housing and rights are protected by a raft of public documents, including federal law, residents’ lease with us and the terms of the programs we might use.”

In an interview with MinnPost, Russ said: “There’s a sense that somehow if you’re using private capital, it will compromise you,” Russ said. “You can use private capital to reinvigorate and sustain these units, but we’re going to do it in a very careful and thoughtful way. It’s not going to be a takeover.”

Council ‘ready to hold the public-housing authority accountable’

Other public housing agencies around the country are facing a similar conundrum as the MPHA: high demand for subsidized housing and not enough federal money to keep units in good condition. In recent years, the housing authorities have turned over 60,000 public units to the private market, under agreements that the new landlords accept Section 8 vouchers. An increasing number of agencies have also submitted properties to RAD, according to HUD.

The Obama administration launched RAD in 2012, and it is among a few policies of that era that current HUD Secretary Ben Carson supports. The federal law requires the new owners to keep the renovated sites affordable and that residents have the right to return to the properties after the construction. Some 111,000 housing units nationwide are now part of the program.

Deborah Thrope, a supervising attorney at the California-based National Housing Law Project, said the rate at which public-housing authorities nationwide are using RAD or Section 18 — which allows the tear down and disposition of properties with HUD approval — is moving fast. That’s partly due to the federal governments’ limits for how many units can enter the programs. “We’re going to see a significant reduction in the number of public-housing units across the country,” said Thrope. “Congress has put a cap on the RAD program; We’ll reach that in the coming years. HUD has been clear that it’s trying to get out of the business.”

MPHA Executive Director Greg Russ
MinnPost photo by Jessica Lee
MPHA Executive Director Greg Russ says the authority needs to make big changes to its current structure so it has enough money to fix and maintain properties in the future.
But skeptics of RAD have long argued that program leaders at the local and federal level do not always follow the rules — in part due to a lack of staffing or technology necessary for oversight, according to an investigation by the progressive research center ThinkProgress. The organization studied agreements by public-housing agencies and private groups, finding instances in which construction forced residents to live in poor conditions or caused new screening of tenants that disqualified them from re-entry.

Those type of concerns are at the core of the Memorandum of Understanding. Council members want to show residents they are trying to keep housing accessible for low-income households — and that it will hold the authority responsible as the agency overhauls its funding model. Several council members have also stressed that their approval of the memorandum does not mean they support MPHA’s new approaches to financing.

“We are absolutely ready to hold the public-housing authority accountable,” said council Vice President Andrea Jenkins. “HUD is not creating more money, so they’re differing the mechanisms and ways for people to do their repairs the only way to get those renovations.”

The Minneapolis City Council will host a public meeting on the document next week before the full council considers it Friday.

New ownership structure for single-family homes

In addition to Elliot Twins, MPHA is preparing to change ownership of its entire stock of single-family homes totaling some 650 units to free up more federal funding for repairs and renovations. Control of the houses will be under a nonprofit the authority runs, Russ said. It will likely be the first transaction with the Memorandum of Understanding in place.

As the owner, the new nonprofit will be able to apply for project-based vouchers from the federal government that could be worth up to 50 percent more than current subsidies. It will also be able to secure funding for 20 years, instead of relying on the current system in which budgets fluctuate from year to year. Rent will remain the same for tenants and they will not be displaced, though they will have to sign new leases, according to public-housing officials. “The practical goal is that we’re still running the units as a housing authority, but the ownership is a little different,” Russ said.

Most of the MPHA’s single-family homes are in North Minneapolis or south of downtown. Some are more than 70 years old and need significant repairs, Russ said. Minneapolis Mayor Jacob Frey and City Council President Lisa Bender have expressed support for the idea, which is pending final approval by HUD.

MPHA wants to grow

Russ believes the MPHA can eventually gain the trust of critics by showing how it keeps homes affordable under the proposed changes. Besides restructuring the ownership of its housing stock, the authority is also pushing to grow its portfolio’s size; it’s planning to take advantage of Minneapolis’ recent decision to change its zoning code so that neighborhoods everywhere allow multi-family housing (via Minneapolis 2040) by building triplexes on lots that now only have single-family homes.

There’s only so much deep subsidy to go around,” he said. “We think over time, maybe we could add 50 units, maybe 100 units, if we’re lucky.”

By this summer, he said the authority will release a comprehensive plan that explains its goals for its entire housing stock and proposed subsidy changes. It will show “what we’re thinking in terms of timing, number of units, which properties and how much we think we can raise” through RAD, Section 18 or other programs, Russ said.

Russ has experience with this type of overhaul. Before he took over MPHA in 2017, he led the public housing authority in Cambridge, Mass., where he said he moved the entire stock of public housing under RAD, using Wells Fargo as the tax credit investor and Citibank for construction and permanent financing. The move raised some $250 million in private investment, he said.

“We’re working with the devil, but … we got our lawyers, we have our general counsel, we have our planning and development group. When we go into the room, we’re not going in there by ourselves,” he said. “We’re going in there as partners, and they recognize that.”

Correction: This article has been updated to correct information about the Rental Assistance Demonstration program — and to provide additional context about MPHA’s objection to the use of the term ‘privatize.’  

Comments (8)

  1. Submitted by Phyllis Kahn on 04/12/2019 - 01:18 pm.

    This article looks as if changes to Glendale are currently not being considered. I hope that is true as that developement in Prospect Park should receive historic preservation status.

  2. Submitted by Ray Schoch on 04/12/2019 - 01:37 pm.

    Just for starters, “working with the devil” makes light of a potentially disastrous arrangement. No government entity should be doing business of any kind with Wells Fargo, which has proven itself to be – regardless of who its CEO might be at the time or what its PR spin is in full-page ads in the ‘Strib – a well-documented and heavily-fined semi-criminal enterprise, with repeated infractions that have sometimes ignored the terms of “admission of guilt” agreements that allow the company to claim that it has done nothing wrong when in fact it has engaged in quite a bit of wrongdoing.

    To pick another issue at random, are there legally-enforceable written agreements that guarantee displaced residents will be able to actually USE the vouchers they’re given when forced out of their homes, whether temporarily or for the long term. That is, what mechanism is in place to ensure that displaced residents don’t run into the same kinds of obstacles that Section 8 voucher-holders routinely have to deal with in the form of rental managers and property owners who – against the law – refuse to sell or rent to holders of those vouchers? A voucher is worthless to either an individual or family if landlords or potential sellers refuse to accept it.

  3. Submitted by Catherine Fleming on 04/12/2019 - 02:47 pm.

    In addition, I have doubts about Mayor Frey’s commitment to the homeless when he has been personally and aggressively lobbying for his 2M Bonding request grant for a “Minneapolis Outdoor Performance Venue” at the Upper Harbor Terminal but no mention of a bond funding request to address affordable housing or homeless issues. This General Fund bonding request was given full support by the City Council, so where are their priorities! HF2529, line 48.31, Subd21

  4. Submitted by Paul Udstrand on 04/13/2019 - 10:11 am.

    It simply makes no sense to assume that any private developers will dump tense of millions of dollars into properties only to keep rents at their current levels. If the current rents paid for the maintenance there would be no backlog in the first place. Obviously the current rental revenue isn’t sufficient NOW… why would it be more sufficient for the “private” sector? How is this NOT obvious?

    Why is not the focus of this story organized around Ben Carson and his HUD leadership? Why aren’t we talking about the federal budget cuts and the catastrophes they’re delivering to the local budgets.

  5. Submitted by Emily Sames on 04/13/2019 - 11:00 am.

    I’ve been in the Elliot Twins – to call them unlivable is absurd. They’re in much better condition than my private rental housing. HUD gives them high ratings too. You can look up HUD’S physical inspection scores for all their properties on their website – Minneapolis public housing is some of the best in the country. These privatization schemes are totally unnecessary.

    What’s more, MPHA goes around claiming it has a funding crisis when it’s sitting on a $23 million surplus according to their own documents. PLUS, despite CM Andrea Jenkins’ misleading quote in this article that HUD isn’t giving any more money for public housing, MPHA actually got a 42% increase in their capital budget last year (the money that goes toward repairs and renovations).

    MPHA is taking advantage of a lack of understanding (or refusal to learn) on the part of City Council members to push through a plan – that residents oppose – that is a giveaway to private developers and investors. MPHA showed residents of Glendale Townhomes a PowerPoint several years ago that showed these new arrangements would cede 99.99% controlling interest in the buildings to private investors. The remaining 0.01% will be controlled by a newly-created MPHA-affiliated (but private, not public) non-profit. When MPHA sells these schemes, they act as if the non-profit will be 1) indistinguishable from a public agency (flase) and that 2) it will own and control the properties (also false).

    The ThinkProgress piece referenced in this article underscores the fact that these schemes are part of Donald Trump and Ben Carson’s agenda. Carson has been drastically cutting back staff to monitor and oversee the RAD program, which has been wracked by abuses and mistreatment of tenants. I’d also look into what the National Low Income Housing Coalition has published about Section 18 Demolition and Disposition (the second program MPHA wants to use to privatize public housing). Carson’s HUD has gutted residents protections for that program.

    I’ve examined MPHA’s “relocation plan” for residents of Elliot Twins (who I can tell you from personal experience are largely elderly and disabled, many don’t speak English and have never lived away from Elliot Twins since they came to this country – to expect them to move even temporarily will be dangerous and extremely traumatic for them) and NOWHERE in that document is there a guarantee that residents will find temporary replacement housing OR be able to return to Elliot after privatization. MPHA uses sneaky words like “to the maximum extent feasible,” or even admits that they can’t guarantee certain options. They literally tell people to go live with friends and family. It’s absurd. This author could have done a little digging to get at those details.

    It’s upsetting that MinnPost didn’t see fit to include resident voices in this piece, despite alluding to their concerns by referencing the ThinkProgress piece. That’s erasure, plain and simple. Residents have been extremely vocal about their opposition to these plans, and have in fact been doing and exposing more research than any local news outlet. Local media has been silencing residents for years while amplifying people like Greg Russ (who has a conflict of interest in that his family owns and manages the type of private subsidized housing he’s trying to turn public housing into…but that didn’t make it into this piece for some reasons). There’s a strong element of racism and xenophobia in that, in addition to elitism.

    Just really disappointed, but not surprised, at MinnPosts’ coverage of this incredibly important issue.

  6. Submitted by Kathie Noga on 04/13/2019 - 03:08 pm.

    There is a $22 million dollars surplus for the housing authority to work with to fix up public housing. Also Minneapolis Public Housing has a 98% rating, one the best in the country for keeping up their housing. Their housing is way better than the housing around in many parts of the city. Come to South and North Minneapolis and actually see housing and see what a lie it is that they need to tear down housing here. The public does not want this. This guy who they hired in charge of housing has down this all over the country tore down public housing. There are 7,000 people on the waiting list for public housing. We need more of it. We should not be tearing it down. Shame on this immoral people who want this to happen.

  7. Submitted by Dean Carlson on 04/19/2019 - 10:12 am.

    The conversion of MPHA’s ~750 Single Family, Duplex, and 4-plex units will be an interesting case to monitor. MPHA is correct in stating that they will get more $$$ per unit for a Project Based voucher than through traditional public housing funding. But that amount is supposed to cover both operating and capital costs. MPHA will need to make sure they put enough money into a replacement reserve to cover future capital needs because HUD won’t be providing that capital funding any more. In addition, by having the non-profit own the units, MPHA can go to a bank to get a loan to fix up buildings much like you or I can get a home equity loan to update our kitchens.

    But also by having a non-profit own the units, MPHA can much easier get rid of poorly performing buildings or even sell highly valued units for a profit. Whether that is good or bad depends on your perspective.

    Oversight of MPHA’s activities will be much more difficult, but that’s the purpose of the MOU with the City I think. But it is probably incumbent on the public to watch what MPHA does with this housing stock. Could be a boon for providing more affordable housing or could be a way for the Authority to slowly back away from this type of housing if it becomes to expensive to operate.

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