Why privatization became the fashionable solution to public housing

Photo of the demolition of the Pruitt-Igoe public housing project.

The demolition of the Pruitt-Igoe public housing project in St. Louis. Photo courtesy of the U.S. Department of Housing and Urban Development Office of Policy Development and Research / Wikimedia

This article was first published by Greater Greater Washington on Aug. 12. 

Public housing started as a government-led system of razing slums and replacing them with housing affordable to people in the lowest-earning households across the US. But after decades of federal disinvestment created slums out of public housing, policy has turned toward privatization of public housing, from subsidizing privately-owned units to razing-and-replacing public housing with mixed-income redevelopments.

Here is how the public sector shifted responsibility for offering “a decent home and a suitable living environment” for low-income families back to the private sector.

Disinvestment and deterioration cast doubt on the public sector’s competence at housing production

The privatization of public housing did not become the solution du jour overnight, but has become widely accepted as the right thing to do, particularly as many public housing developments have been allowed to decline.

Between inconsistently-applied standards and insufficiently-funded maintenance, public housing authorities (PHAs), the local agencies that own and oversee development of public housing portfolios, enabled slumlord behavior from community managers and those communities steadily deteriorated.

While deferred maintenance and federal disinvestment make it clear that public housing did not necessarily have to be a failed experiment, it has been written off as such by government officials and most of the American public, and attention is turning back toward the private sector to compensate for yawning financial gaps and facilitate better outcomes for low-income households.

Photo of the Raymond M. Hilliard Center, the last vertical housing project in Chicago.
The Raymond M. Hilliard Center, the last vertical housing project in Chicago. Photo courtesy of Teemu088 / Flickr

The push to deconcentrate poverty

Within the first decade of the public housing system, the need for reform was apparent. Before waiting lists were shut down, public housing had become the poster child for concentrated poverty and both residents and non-residents were questioning whether public housing was worsening outcomes for its residents. A geographical area is described as having concentrated poverty when a high proportion of households are lower-income or are below the poverty line.

Along with creating the Department of Housing and Urban Development (HUD), the Housing Act of 1965 launched a new era of public housing where federal and local authorities began trying new approaches to housing, much of it justified under the guise of deconcentrating low-income households. This Act included one of the earliest iterations of direct housing subsidies with the Rent Supplement Program, which created a way for would-be public housing residents to instead have their rent partially covered in privately-owned units. (The DC Housing Authority created a local version of this program in 2007.)

Chicago became an early testing ground for this push for housing subsidies, as settlement of a series of lawsuits in 1966 against the city’s housing authority and HUD led to creation of the Gautreaux Assisted Housing Program ten years later, which awarded housing vouchers to thousands of families. Prior to the settlement, HUD began testing the concept of housing allowances via the 1970’s Experimental Housing Allowance Program (EHAP).

Before EHAP was complete, and without any proper assessment, the system was implemented nationwide in 1974 with creation of Section 8, which subsidized construction and rehabilitation of low-income housing and also offered households certificates to find privately-owned units, priced at HUD’s accepted market rates, and subsidized the difference above 25% of household income.

The momentum toward Section 8 accelerated during Richard Nixon’s presidential administration, as he lambasted the federal government’s performance as a housing provider and advocated for voucher assistance as a means to provide low-income households with options. “This plan would give the poor the freedom and responsibility to make their own choices about housing—and it would eventually get the Federal Government out of the housing business,” Nixon said in a 1973 address to Congress.

After Section 8 was established, more scholarship came out on the ills of concentrated poverty. A lot of this work was inspired by the introduction of “ecological systems theory” by Urie Bronfenbrenner in 1979, which considers how the psychological development of children is influenced by their environment and community.

Resulting studies in the 1980s through the early 2000s and beyond zeroed in on how children are negatively impacted by growing up in impoverished neighborhoods, pushing the conversation toward deconcentrating poverty and encouraging mixed-income communities.

The construction and rehabilitation provisions of Section 8 were ended in 1983 and the voucher system was expanded, limiting tenants’ rental payments to 30% of income moving forward. These were consolidated into the voucher system most are familiar with as Section 8, or the Housing Choice Voucher Program, in 1998 as part of the Quality Housing and Work Responsibility Act (QHWRA).

The Act was, in some ways, a federal admission of guilt for the failures of public housing, and the final nail in the coffin of pivoting away from that system.

“Congress finds that there 1) is a need for affordable housing; 2) the government has invested over $90 billion in rental housing for low-income persons; 3) public housing is plagued with problems; 4) the Federal method of oversight of public housing has aggravated the problems; and 5) public housing reform is in the best interests of low-income persons,” a summary of the Act reads.

With increased investment in vouchers also came deliberate efforts to divest completely from public housing. These efforts were codified in 1995 when Congress rescinded the requirement to replace any demolished or disposed units one-for-one, and with passage of the QHWRA came the Faircloth Amendment, which prohibited HUD from funding construction of any new public housing units. (A bill passed in the House of Representatives in June including a provision to repeal the Faircloth Amendment, although the bill has not been introduced in the Senate.)

However, the attempts to deconcentrate poverty by giving public housing residents vouchers did not necessarily succeed in moving those residents into mixed-income buildings and communities. For households that had received voucher assistance, in 2010, 15% of households in public housing with children had moved to low-poverty neighborhoods compared to 18% who moved to extreme-poverty neighborhoods.

New HUD programs offered alternatives to public housing

The QHWRA included much more ambitious public housing reform measures than consolidation and expansion of the voucher program; it also granted more freedom to PHAs, required PHAs take a “mixed-income” approach to admitting residents to each community, established time limits for federal funding to be spent on rehabilitation or construction, and created more avenues for disposition of public housing units and conversion of public housing into subsidized housing.

But perhaps the most well-known experiment was HOPE VI (Housing Opportunities for People Everywhere), which allowed PHAs to pursue demolition of “severely distressed” public housing and replacement with new mixed-income developments, giving existing households vouchers in the meantime.

Established in 1992, the program has had more success in getting rid of public housing than in creating improved living conditions for public housing residents. Urban Institute reported in 2004 that 49,828 households had been displaced, but only 21,000 replacement units were built for those households.

Photo of houses in Capitol Hill in D.C.
Row houses in Capitol Hill, D.C. Photo courtesy of Payton Chung / Flickr

The push to privatize public housing

On a federal level, the aforementioned programs laid the foundation for the public funding of privatization initiatives, and have signaled a shift in responsibility toward housing society’s most vulnerable from the public sector and back to the private sector that has only accelerated in recent years. Between 1989 and 2017, the number of HUD-assisted households increased from 4.07 million to 4.54 million, but the share of households in public housing decreased from 33.4 to 21.3%.

Part of this decrease was due to repositioning, which had long been a HUD strategy to convert public housing units via voucher subsidies, most recently with 2011’s Rental Assistance Demonstration (RAD). Repositioning typically redefines the use or class of a particular development, but where public housing is concerned, it essentially involves removing units from traditional public housing stock.

RAD allows PHAs to leverage funding from the private sector to rehabilitate or replace existing units and boils federal funding down to long-term subsidies. By 2018, RAD had converted over 100,000 public housing units into Section 8-subsidized housing.

This has only snowballed: in 2018, HUD’s Office of Public and Indian Housing informed PHAs that HUD wanted to “reposition” 105,000 public housing units by October 2019, noting that “in 2010, HUD conservatively estimated the public housing capital needs backlog at almost $26 billion, and we believe this figure continues to grow at around $3.5 billion every year.”

Although many have criticized whether privatization of public housing is an acceptable solution, decades of deferred or patchwork maintenance along with chronic underfunding have left some communities with few options. In our next article we will discuss how privatization of public housing played out in the District.

Nina Perry-Brown has been writing reporting on public housing for Greater Greater Washington since March, with a focus on the redevelopment of Greenleaf Gardens. Click here to read the previous articles or to continuing following the series.

Issues |Housing|Housing Vouchers|Public Housing

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