Is It “Doomsday” For Public Housing?

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CHA’s new mixed-income communities could wind up with few–or even no–public housing units, under a “doomsday clause” in federal housing law being inserted into redevelopment plans across the city, according to lawyers for residents.

But, though members of the Central Advisory Council and lawyers for residents alike voice concern, no action is planned in the near future to fight the unit conversion option.

“We’re not crazy about the concept period,” said attorney to the CAC Robert Whitfield after a recent CHA Board of Commissioner’s meeting.

“What we don’t want is the developers to just arbitrarily on their own decide that they may not be making as much money as they think they could and then start reducing units, and [U.S. Department of Housing and Urban Department] regulations don’t allow that,” Whitfield said.

But that’s exactly what will happen, predicts Madden Park Local Advisory Council President Eunice Crosby.

“Yes it bothers me. I don’t think it’s right because we are going to have poor people here period,” Crosby said.

“But, over a number of years I believe that is going to happen.”

Chicago Housing Authority officials deny this, saying conversion is not in the best interest of the developments and so developers won’t flip units to market rate.

“They can jeopardize what they and their partners have put into the new mixed-income communities,” said CHA spokesperson Kim Johnson.

Ultimately, however, developers can eliminate public rate units if they deem it necessary, though only in “worst-case scenarios,” according to HUD spokesperson Anne Scherrieb.

Conversion of the public housing units into market rate units would be “The last step considered and taken…if there were a tremendous decline in the revenues that support the public housing units or if there were a tremendous increase in the expenses related to management/maintenance of the units which would render the on-going income grossly inadequate,” according to a written statement by Scherrieb and exclusive to Residents’ Journal.

As to whether the CAC is going to challenge the HUD policy allowing the owners of mixed-income communities to convert public housing units into market rates units if the need arises, Whitfield said there was nothing CAC could do at the present.

“Like I said, by no means are we happy with it. But HUD passed [the policy.] So what can we do,” he said.

Whitfield said that he didn’t see how anybody could challenge the clause now before it’s implemented, because he wasn’t aware of it violating any federal or state law, or any federal regulations or the Relocation Rights Contract. “It’s one thing to sue something that’s either discriminatory based on race or sex or a violation of the Relocation Rights Contract.

This isn’t on its face either one of those,” he said.

The New Madden Wells mixed-income community, currently in the redevelopment stages, is one such site at which public housing units could be in danger of being “transformed” into private market rate units, according to the Tenant Selection Plan and Screening and Selection Policy recently approved by Chicago Housing Authority Board of Commissioners.

According to the “Shortfall in Revenues for Public Housing Units” clause–or ‘doomsday clause’ as some have referred to it–that appears in the approved return lease policy for New Madden Wells, “Continuing residency and lease terms for public housing tenants may be changed in the event there is a shortfall in revenues to the Owner from the operation of the public housing units.”

Bulldozers demolish these public housing units at the Madden Park Homes in May 2002 to make way for new replacement public and market rate housing construction originally scheduled to begin in 2003.

The changes may include increasing the rent up to market rate levels, and may include termination of public housing leases at mixed-income sites, according to the document.

The developers currently working under the Chicago Housing Authority’s ongoing $1.6 billion Plan for Transformation would be allowed to do the conversions if CHA fails to provide them with the money necessary to manage or upkeep the public housing units.

HUD spokesperson Anne Scherrieb, from the Illinois regional office, stated in writing to Residents’ Journal in January that Scherrieb added that the “Tenants Selection Plan and Screening and Selection Policy for Madden Wells” that was approved by the CHA Board of Commissioners has not yet been either reviewed or approved by HUD.

Scherrieb also said that she could not address in detail much about the conversion clause because the regulations concerning the provision still must be developed and published by HUD.

Crosby, who was part of the working group that developed the property-specific requirements for the New Madden Wells mixed-income community, added that there was very little that she could do about the clause being included in the tenants selection policy. But she agreed with Whitfield that the developers who will own and/or manage the mixed-income communities would be watched like a hawk.

“I had my say at the table. It was just three of us at the table, and you’ve got all of these other folks with personal opinions,” said Crosby.

“But like we said at the working group, ain’t nothing etched in stone.”

A glimpse of the draft lease agreement for the Robert Taylor Homes residents gives the impression that the provision may also appear in other Chicago resident return site criteria.

According to that document, “The Landlord’s operation of all Public Housing Authority-assisted units…is supported in part by operating subsidies which the PHA is contractually obligated to pay to the Landlord.”

If the PHA is unable to meet its contractual obligation to pay the Landlord operating subsidies with respect to all PHA-assisted units, the document states that the Landlord may be legally permitted under federal law to increase the rent as high as market rate.

The Quality Housing and Work Responsibility Act of 1998 for mixed-finance projects, specifically states that the owner may increase rents or convert the units as long as they maintain “the low-income character of the units to the maximum extent practicable.”

CHA doesn’t expect the developers to carry out their option to convert the public housing units into market rate units anytime soon, because of a lease agreement regarding the land.

“The developers are operating essentially on a 99-year ground lease. So for 99 years, those units that are designated public housing units are [at] least public housing units for that long,” said CHA spokesperson Kim Johnson during a phone interview in mid-January.

Johnson also said that the residents shouldn’t worry.

“This is not something that the residents need to be concerned about,” Johnson said.

Whitfield said that the CAC will be keeping their eye on what the developers do in the future regarding the clause.

“But, we will be monitoring it very closely. One thing we can say is that those provisions the way they are, they must follow HUD’s regulations. If [the developers] don’t do that in implementing it, or putting [the HUD regulations] in [the clause], then we will challenge it.”

“And if it’s implemented, and we think it has some negative impact on our tenants, then we’ll have no qualms, and we won’t hesitate to seek judicial action. Our main concern is that the rights of the tenants are not being deluded, ignored or denied,” said Whitfield.

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