Committee Report CR-1
The Housing Committee held a public hearing on December 17, 2014 beginning at 4:06 p.m. at 831 Massachusetts Avenue, Basement Conference Room.
The purpose of the hearing was to receive an update from the Cambridge Housing Authority (CHA) on programs, projects and policy changes CHA is implementing or planning to implement in the coming year.
Present at the hearing were Councillor E. Denise Simmons, Chair of the Committee, Councillor Dennis Carlone, Councillor Craig Kelley, Councillor Nadeem A. Mazen, Councillor Marc C. McGovern, Brian Murphy, Assistant City Manager for Community Development, Chris Cotter, Housing Director, Cassie Arnaud, Housing Project Planner, Community Development Department (CDD), Meryl Brott, Recycling Program Manager, Department of Public Works, Neal Alpert, Aide to Councillor Simmons, and Paula M. Crane, Deputy City Clerk.
Also present were Gregory Russ, Executive Director, Mike Johnston, Deputy Executive Director, Terry Dumas, Director of Planning & Development, James Comer, Director of Operations, Cambridge Housing Authority (CHA), Justice Laher, Cheryl-Ann Pizza-Zeoli, Bill Cunningham, Alliance of Cambridge Tenants (ACT), Elaine DeRosa, Executive Director, Golnaz Tabatabai, Cambridge Economic Opportunity Committee (CEOC), Kathy Watkins, and Jan Devereux.
Councillor Simmons convened the hearing and gave opening remarks. (Attachment A). Councillor Simmons then introduced Gregory Russ. Mr. Russ then introduced CHA staff, Terry Dumas, James Comer, and Michael Johnston. He stated that the CHA is in the process of undertaking the 5
largest effort to preserve public housing in the country. He acknowledged a very unique set of opportunities because of the City Council's support of low-income housing and City support for this effort. He stated that the support manifests itself in many ways, and that the CHA does not operate in a vacuum.
Mr. Russ then explained the Rental Assistance Demonstration (RAD) He stated that the CHA has been trying for 8 years to raise sufficient capital money to rehabilitate, preserve or rebuild all the housing that the CHA currently owns, and that the proposed rehabilitation programs are very much needed. He stated that the CHA was already able to preserve Lincoln Way, LBJ Apartments and Jackson Gardens. He stated that these properties were the first phase of the redevelopment effort. He stated that over the next five years, the CHA is approaching $360 million in capital activity. He stated that the CHA came to RAD after failing to secure HUD approval for a property disposition. He stated that the CHA asked HUD if they could dispose of their property to non-profit affiliates and that HUD came back to the CHA and asked if they were interested in another program. He stated that RAD is attractive because housing authorities receive HUD monies in 3 ways: from tenant voucher funds, from capital fund from the United States Congress that is appropriated each year (less than $3 million per year), and from operating subsidy. A typical tenant rent is around $430-450 per month. HUD has proposed, and Congress has agreed, to try the demonstration. He stated that two ways to make improvements is to borrow money or to secure low-income housing tax credits. In one case you are raising equity that does not have to be paid back. In the other, the debt does have to be paid back. He stated that when CHA looked at RAD they couldn't get anything to work. HUD then changed the regulations and the numbers worked for CHA. He noted that the first round participation is funded by Citibank and Wells Fargo and that HUD approved 1,150 units in first round.
Mr. Russ stated that nine properties are being converted to RAD in the first round. He stated that they will invest about $200 million dollars in those properties. The second phase of RAD consists of 979 units which cover Corcoran Park, Burns Apartments, Truman Apartments, Russell Apartments, Jefferson Park Federal, Roosevelt Towers, small elderly properties and scattered sites. He stated that they expect approval for this second phase in February or March 2015. Mr. Russ stated that this is a rolling process. In exchange for doing the whole portfolio, HUD advised CHA that they would help the CHA get conversion of Millers River for preservation through the process of disposition. This triggers tenant protection vouchers and once attached to the property, CHA can take on debt and use tax credits to renovate that property. He stated that the driver is to preserve these hard units in the city. Mr. Russ explained that the Cambridge housing market is becoming more expensive and is now in the same grouping as San Francisco, Silicon Valley and parts of New York. He stated that the CHA Board has felt that if there is strategy to pursue, it is to keep hard units in the city from disappearing.
Mr. Russ explained that Phase 1 and 2 were designed to raise enough money to complete the backlog of capital improvements that have not or would not be funded for decades to come under the current public housing funding system.
Mr. Russ stated that the system of policies that surround tenant protections, lease, tenants' rights and agreements would transfer into the RAD Program. He stated that the CHA has just adopted a new administrative plan for the voucher program with a "Part 2" section designed just for RAD to ensconce the mission to keep as much of the public housing procedures and protections in place and unchanged as possible. They are keeping this public housing policy forum because it is good business. The CHA was not interested in making hundreds of administrative changes as construction disruption on tenants will be significant enough.
Mr. Russ stated that another impact the CHA must contend with it that the tax credit money the CHA will be receiving comes with a new, different set of rules and restrictions that are imposed by the IRS; this means that some rule changes or eligibility changes will be imposed on the CHA by the IRS. He explained that when you buy into the tax credit program, you buy into those rules in a way that is not always compatible with what you have been doing in public housing. He admitted that this is not an easy concept to explain. In addition, because you need an event that the IRS considers to be a taxable event to allow the credits to flow, the property has to change ownership, at least on an interim period. He noted that many people have interpreted this, incorrectly, as the CHA now bringing in an investor and moving toward privatization. He explained that the CHA retains the ownership of the
and sells the buildings to the investors for fifteen years - but control of the buildings remain with the CHA. This is the fundamental principle. Mr. Russ said that the CHA will make sure that when the investor exits, that they have the ability to control that outcome and long term affordability in a much stronger way. He stated that the CHA would take that property back into the CHA fold and the CHA is managing agent for the properties during the tax credit period.
Mr. Russ stated that the CHA views the tax credits as a means to an end, and not the final configuration of control or ownership. He stated that the CHA is looking to put rehab funds into properties with a 30-40 year life expectancy. There are substantial reserves required by the RAD.
Mr. Russ explained that the debt amount is reasonable and not excessive given the agency's cash flow. He explained that the CHA has spent a lot of time making sure that cash flow at the sites can support reasonable amounts of debt on these properties.
Mr. Russ stated that the rent structure will change. RAD rules and tax structure rules are slightly different. He stated that the CHA has had to reconcile those two programs. He explained that the latest estimate is that there are about 87 households that would receive some kind of rent increase (out of the 2100 units that would be converted between Phase 1 and 2). Councillor Simmons asked the reason why the rent increases would take place in 87 units. Mr. Russ answered that under the RAD, it requires you to raise the maximum rent that a family would pay at any point above the CHA's current ceiling rents (but at 30% or less than the households income).
Mr. Russ explained that there is a transition initiative in the plan that has not been initiated. He added that there will be meetings with all of the 87 affected households before any increase takes place. He noted that the CHA retained ceiling rents so they have many working households at their properties. For some of the households, the period of implementation will be over many years.
Councillor Simmons stated that RAD influences each development at different times. She questioned if households will experience an increase in rent from one site to another. Mr. Russ responded that the first recertification will start the clock and the increase will then be phased in over three years. He noted that there will be a one-year suspension of re-certifications because of the RAD program.
James Comer stated that the CHA will retain their bi-annual recertification schedule. They wanted to keep that consistent. They wanted to have them occur at the same time in alternating years. The annual income certification for tax credits will not have any impact on rents. Rents will be reset every two years.
Councillor Simmons asked about the possibility of holding harmless the 87 households across the total portfolio that are due to have rent increases in Phase 1. Mr. Russ stated that tax credit rules will not give the CHA the discretion to do that. He noted that most increases are not large but a few are. The CHA has been advising households that they would have 3-5 years before being fully impacted. James Comer stated that 30 days notice of rent increase is required by the CHA. Mr. Comer then gave an example of a household with a significant rent increase. He stated that a gentleman who recertified in November currently pays $1,280 per month. His new rent will be $1,946. His next recertification is in November 2016 but in 2016 there will be rental increase amnesty. His next recertification will be in 2017 and then if his income stayed the same, the CHA would begin to phase in the increase. Councillor Simmons asked if the rent increase will take place all at once. Mr. Russ responded in the negative and stated that it will be phased in over three years after his next recertification. Councillor Carlone asked the household income of this gentleman. Mr. Comer stated that the total household income is $120,000, and that there may be multiple individuals earning income within that unit.
Mr. Russ stated that CHA staff will meet with each family individually in the near term. They want to make sure that the households understand what the rent change is. He noted that many of the households are multiple wage earners. He reaffirmed the commitment of the CHA that each of the 87 affected households understand the schedule and is made aware of potential change.
Councillor Simmons then asked Mr. Russ for the timeframe of Phase 1. Mr. Russ responded that all Phase 1 developments will be closed by June. He noted that different properties will convert at different times.
Councillor Simmons then asked for clarification of the purpose of a RAD project. Mr. Russ answered that the purpose is to adequately fund both operating and capital costs for each property. He stated that you cannot raise enough money to reinvest in the properties using the conventional funding platform for public housing. The CHA projects that from FY 16 through FY 20 that they are looking at "all in" and construction activity of $362 million dollars will go back into the properties and the community.
Councillor Simmons then asked who the LLC's are going to be and how is this not different than expiring use buildings? Mr. Russ stated that CHA's non-profits enter into ownership with the investor (Attachment B). He stated that the CHA is investing in properties that they intend to hold and keep for the next 30 or 40 years. This is a 30-year build, not a 15-year build. The goal is long-term affordability and not to end up in an expiring use situation.
Councillor Simmons asked where tenants of Manning will be relocated and how this will affect the waiting list. Mr. Russ stated that the general CHA waiting list will be closed. At Putnam Gardens they will have to relocate 18-27 families off-site. He noted that the construction schedule for Putnam is almost 4 years. He affirmed that as units get finished, families will have the chance to come back to their former buildings. He stated that other properties have different construction schedules. Families may be moved in-site or off-site with an offer for return. Michael Johnston stated that they will not be drawing from the wait list for approximately two years. Councillor Simmons inquired if people are going to be told that the list will be closed. Mr. Russ answered in the affirmative and stated that everyone on the waiting list will be notified. Mr. Russ stated that in Jefferson Park, families have been slowly moved out. There are currently eight households left. Councillor Carlone asked where people have been moved. Mr. Russ replied that people have been moved internally.
Councillor Simmons noted the impact of the waiting list in other developments because people who are being moved have priority. Mr. Russ agreed with Councillor Simmons and stated that transfers have priority status. He noted that the CHA will still be processing emergencies.
Mr. Russ then stated that there will be a unit reduction at Jefferson Park State and when completed there will be 94 units. Councillor McGovern asked if there will be unit reductions at other sites. Mr. Russ responded in the negative. In fact, Mr. Russ affirmed that the Manning Apartments will have more units when it is complete.
Councillor Simmons stated that currently there is already little to no movement on the waiting list for housing. Mr. Russ stated that they are staggering the projects to balance competing needs. He stated that the Manning Apartments will not be closed until the middle of next year. Mr. Russ commented that as properties get to a place where they finish off-site relocation, it is not inconceivable that they could be opening a few lists somewhere in that time period. He stated that emergencies get folded into the transfer mix. Councillor Simmons asked how long the waiting list will be closed. Mr. Russ repeated that it would take two years but it could be longer.
Councillor McGovern stated that when talking about the lists opening back up, it is not as if there will be a windfall of apartments, noting that it will only be about 250 turnover per year. He asked how many people were on the lists. Mike Johnston stated that there are 6,500 families and 3,000 elderly on the lists.
Mr. Russ stated that they will be taking applications from people who want to get on the Section 8 list in the spring of next year for a limited amount of time. He stated that there are currently 250 on the list so it will be all new applicants.
Councillor Simmons asked what role immigration status will play. Mr. Russ stated that nothing will change regarding immigration status.
Councillor Mazen stated that he laments the closing of the list but asked if there is some way a non-CHA solution can add the free spots to the cycle without closing the list. Mr. Russ responded that if someone pitched an idea, the CHA would be open to discussions, but that there are no ideas he currently has on this matter. Terry Dumas stated there are very few current residents that will want to move out of the City, so it would need to be Cambridge-based. Mike Johnston stated that the CHA has been meeting with the CDD to pursue options through inclusionary zoning.
Councillor Simmons asked Mr. Russ what housing advice the City Councillors should offer to the residents. Mr. Russ stated that when the Section 8 list opens in the spring, people can apply. He proposed that because this is a staggered set of financing and construction, the CHA could provide the City Council with some of their best estimates. If the event of an emergency situation, they can take an application and then determine if it meets criteria of emergency status. Mr. Russ stated that he does believe that they will not be placing applicants from the waiting list for at least 24 months.
Councillor Simmons suggested that it would be helpful to receive information from the CHA on a regular basis. Mr. Russ stated that CHA could give quarterly updates to the City Council to give the sense of the bigger picture.
Councillor Simmons then asked Mr. Russ if there will be Section 3 jobs and will those jobs be available to Cambridge resident. Mr. Russ replied that Section 3 jobs are a goal. He stated that in addition to job opportunities, you can satisfy Section 3 goals by working with Section 3 owned businesses or engaging in other economic opportunities. He stated that Section 3 speaks to jobs for qualified individuals. He noted that a possible employer has a say in whether a person can be useful in a certain position. He noted that, despite the construction jobs that would be opening for the rehab efforts on the CHA buildings, he very much doubts that these would translate into Section 3 jobs for CHA tenants, as they would need a guaranteed opportunity and a guaranteed apprenticeship for this to be viable. He stated that CHA efforts have been on providing other economic opportunities such as training, education, job readiness, tenant coordinators, and the hiring of a significant number of people for the CHA workforce. He said that over the past 6 years, the CHA has hired 1 professional, 6 office staff and 3 maintenance workers that were Section 3 hires. Councillor Simmons then asked Mr. Russ if he could come back before the committee to speak to Section 3 opportunities, as he had a City Council that was eager to help the CHA think outside of the box. Mr. Russ stated his willingness to do so.
Councillor Simmons then submitted Summaries of Questions and Comments from the October 2014 Tenant Town Meeting to be made part of the record (Attachment C). She stated that most of the people attending that meeting were dwelling in CHA units. She stated that people feel that they are not heard. She noted the importance of having residents better-informed.
Mr. Russ stated that public outreach with RAD has been ongoing for years. He stated that 17 meetings have taken place on rent simplification. He noted that there was significant input from the community. Mr. Russ stated that with respect to RAD, starting in 2007 there has been a public process. There have been approximately 37 meetings to date. He noted that if the City Council has specific suggestions on how to improve their tenant outreach, he would be happy to entertain those suggestions.
As it relates to immigration issues, Mr. Russ stated that a federal rule is imposed on CHA by virtue of the housing subsidy that is received. He stated that if money is coming through HUD there will be that rider attached. In some cases they are not always the bearer of news that they can shape that policy. He stated that often the CHA does have to function like a landlord, and that can lead to a difficult dynamic with some CHA tenants. He stated that he is not aware of anyone at the CHA that wants to see a tenancy come to an end. He stated that the CHA is very careful on the eviction front. He approximated that 20 evictions per year take place. He stated that CHA is doing a series of RAD meetings every month all around the city, which take place on the 3
Thursday of every month. Mr. Russ stated that he will inform the City Council of those meetings, as well. He stated that the CHA would be happy to give response to the questions posed as a result of the Town Meeting. He stated that when RAD is complete, the properties will be an affordable asset for the next 30-40 years.
Councillor Kelley stated that he cannot conceive how complicated the challenges the CHA faces are. He asked if $360 million is the amount of money used to conduct the extensive renovation of these buildings and questioned if this figure includes the amount to fix the elevators and pre-existing problems. Mr. Russ responded that elevators have been replaced at Burns, Roosevelt Towers, and Jefferson Park with Truman Apartment repairs beginning in February. He added that new wiring is in the scope of work for almost all of the developments and that he is trying to get the maximum amount of work completed at each site as can reasonably be afforded.
Councillor Kelley asked what happens if people lose their jobs and cannot pay rent. James Comer responded that a resident can come in for interim recertification and rent can be lowered to 30% of their income.
Councillor Kelley asked what happens if the CHA does not bring in enough money from its tenants that it cannot pay off the debt that it is assuming as part of RAD. Mr. Russ stated that there might have to be a reduction in the number of vouchers it issued in that event, but he also noted that the CHA will have structured debt and it is not taking on so much debt that it cannot be repaid. He stated that the CHA feels comfortable with the estimate and that the ratio of debt is not so burdensome that they cannot make payment.
Terry Dumas stated that the investors are incredibly careful and will do everything in their power to minimize their risk. The underwriting is very conservative. The CHA has done four developments like this in the past. In every case, the underwriting was stringent and they are doing well.
Councillor McGovern stated that as it relates to communication, it is important to realize that sometimes agencies that are intended to be supportive and helpful are often bureaucratic, and are seen, rightly or wrongly, by those it serves as the enemy. He stated that the CHA is battling some of that, and it must recognize that fact. He stated that some residents have that feeling of "If I complain, I could put myself in jeopardy." He asked Mr. Russ about the option of an ombudsman or that someone that could be the middle person. Mr. Russ stated that there is a customer service person. He stated that if residents feel that they are not getting traction with the building manager, there are other options. He added that James Comer and two deputies are available to sit with residents. He stated that if someone feels that there is a rent or policy issue, they are protected in the lease and through the grievance process. He stated that Mike Johnston, in the last couple of years, has become the point person for elected officials to speak with about any concerns they may have. He stated that this is a question for the CHA to determine if they raise that position to the level that is being discussed.
Councillor Mazen echoed Councillor Simmons' statement regarding bringing forth information about the process to the masses and policy makers. He stated that it would be nice to do a State of Public Housing address. Mr. Russ agreed that this would be helpful. He noted that the CHA is open to do an individualized session or regular sessions with City Councillors to walk them through the program.
Councillor Carlone questioned if RAD is only for housing authorities. Mr. Russ responded in the negative. He noted that RAD is available to other owners of what are called "the orphan programs." Non-profits and private owners can take advantage of RAD. He stated that he is pleasantly astounded at the scale of what is being done. Councillor Carlone asked how the contractors will be managed. Mr. Russ stated that the CHA has staffed well for both the planning and construction phase. He noted that four new people have been hired to deal with the construction phase and that Planning staff has been beefed up. Terry Dumas stated that the pool of contractors is the same group of contractors that do schools, town halls, fire stations, etc.
Cheryl-Ann Pizza-Zeoli stated that as it relates to income eligibility and immigration status, people in the 60-80 percent of area median income range will have fewer units available. That should inform people of what the City does around its housing policy. She noted the need for housing available to people in that income range. She stated that households that have immigration status concerns may not meet income status for inclusionary zoning.
James Williamson stated that he appreciates the hearing. He stated that he does believe there are people who are looking at ways to develop policies who may have contributed to this approach of housing. He stated that there are people who really sought this direction in terms of an affordable housing policy. He stated that Congress is funding the voucher side, not public housing. He said that it is important not to contribute to something that is not positive. He noted his concern that Citibank is going to be the lender, as Citibank has been in the news lately and has been involved in the scandals in Mexico. This should not be overlooked. He stated that the most important issue for him is respect, communication, etc. He stated that regarding Section 3, it is not the CHA that does the browbeating but there should be opportunity for people interested in these jobs to get them. He stated that the phasing is hitting tenants really hard. He stated that the total amount of money on the ceiling rent is apparently $200,000. Without going after staff resources, one of his biggest complaints is that when he hears about the travel expenses for CHA staffers that come up at every Board of Commissioners Meeting. He asked the CHA to take a look at expenses that may not be crucial. He stated that lawyers' fees are also expensive which is not affordable. He said that this is distressing when you hear about this at meetings.
Councillor Simmons asked Mr. Russ to respond in writing to the questions that were gleaned from the Town Meeting. She suggested a follow-up meeting with the CHA to discuss Section 3. Mr. Russ stated that he would be happy to respond to these questions in written form.
ORDERED: That the Mayor be and hereby is requested to schedule a Roundtable Meeting with the Cambridge Housing Authority and stakeholders to discuss RAD and actions to be taken going forward.
ORDERED: That the City Manager be and hereby is requested to consult with the Community Development Department and other relevant City personnel to determine the feasibility of having the City commit to constructing 1,000 brand new affordable housing units in the City by the end of this decade, and to report back to the City Council on this matter in a timely manner.