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.
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.
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.”
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.”
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.’