Committee Report CR-5
The Housing Committee held a public meeting on October 8, 2008 at three o’clock and five minutes P.M. in the Sullivan Chamber. The meeting was held for the purpose of receiving an update from the Cambridge Housing Authority (CHA) on recent developments and issues, and receiving from the Community Development housing staff a comparison of the CHA resident preference policy and the resident preference policy used in other city-funded affordable housing programs.
Present at the meeting were Councillor Sam Seidel, Chair of the Committee, Mayor E. Denise Simmons, Councillor Henrietta Davis, Councillor Craig Kelley, Councillor Kenneth E. Reeves, Councillor Timothy J. Toomey, Jr., and City Clerk Margaret Drury. Gregory Russ, Executive Director of the Cambridge Housing Authority (CHA), Terry Dumas, Director of Planning and Development, CHA, Michael Johnston, Deputy Director, CHA, and Angelina Bentzan, CHA represented the Cambridge Housing at the meeting. Present from the City Administrative staff were Beth Rubenstein, Assistant City Manager for Community Development, Christopher Cotter, Director of Housing, Community Development Department (CDD), Cassandra Arnaud, Housing Planner, CDD, Linda Prosnitz, Housing Planner, CDD.
Councillor Seidel convened the meeting and explained the purpose. He outlined the topics for discussion and invited Gregory Russ, Executive Director of Cambridge Housing Authority to begin the discussion. Mr. Russ began the discussion with the CHA’s capital planning. He said that the CHA has been at work on a proposal to submit to the Massachusetts Department of Housing and Community Development (DHCD) for capital funding starting with the state units which are in the worst condition. They had a round of community meetings. They are ready to see what the state is willing to do. Clearly, the larger economic world will affect their plans. The proposed financing plan would utilize tax credits; however, the values for tax credits are shrinking. They are now at 72 cents on the dollar which is down from 94 cents on the dollar. Fannie Mae and Freddy Mac were large buyers of tax credits and that has changed drastically. The other big factor is that all financing subject to bonding is subject to delay at best given the state of the financial markets. Mr. Russ also expressed concern about state subsidies for operating expenses. The CHA will be proposing a contingency plan if there are cuts to existing operating budgets. He added that at the moment the federal government is operating on a continuing budget until there is a new administration. Public housing in Massachusetts could use a $30 billion dollar infusion of capital. Instead we are likely to be faced with difficult state and federal budgets.
Terry Dumas, Director of Planning and Development, CHA, then discussed the capital planning process. In 2006 the CHA held a series of meetings around the community. They started by commissioning a capital needs assessment, which found a total capital need of $163 million for 2,600 units in 2006 dollars. To that figure, one must add 25 percent soft costs and administrative costs for a total of $228 million. Not all units and buildings need the same amount of renovation. The biggest differences are between the state funded units with rehab needs of over $200,000 per unit for the old family housing like the Jefferson Park state funded units and the federally funded units where the costs are in the area of $65,000 per unit.
Ms. Dumas said that the CHA financing plan of choice would involve both tax credits and bonds. Tax credits are allocated by the DHCD. There are nine percent tax credits which are allocated by DHCD through a competitive process in which DHCD chooses the projects it deems most worthy of support, and there are four percent tax credits. The four percent credits are not part of the competitive rounds; they would be awarded by DHCD along with an allocation of bonding allowance coming from the state bond capacity. Ms. Dumas said that the soft costs associated with tax credits are exorbitant. Developers using tax credit financing really need to do big developments and the CHA projects are small by development standards. Ms. Dumas said that they are looking at a different model in which the CHA becomes a mini-Mass Housing Authority. The CHA has bonding authority. The CHA could get some of the State bond allocation; they could issue bonds to fund the development. They would divide the projects and the funding for the projects into packages. The first package would require $78 million and would include the Willow Street Homes, Lincoln Way, Jackson Gardens, the state-owned units at Jefferson Park, Manning Apartments and the LB Johnson Apartments.
Mr. Russ said that CHA planning and administrative staff will have 12-14 community meetings around the City about their capital plans. The big message for today is that the CHA has a financing plan. They are starting to put together a contingency plan, given the economic uncertainty of federal and state funding. Their goal is to have an overall plan including contingency planning by next spring.
Ms. Dumas said that the level of work will require relocation of residents, either within the development, or moving residents off site. She also noted that to make this funding work, the CHA has to change the ownership structure. The ownership entity would be controlled by the CHA, but this structural change will add an additional insecurity. Mr. Russ said that the goal is to get as close to another 40 years of useful life as possible for all of the units. The CHA is looking to the long term.
Councillor Seidel asked what percent of Cambridge affordable housing these 2600 CHA units represent. Mr. Cotter said the citywide total is 7,000 units, so CHA units are 30-40 percent of all of the subsidized housing in the city, not including Section 8 leased housing units.
Mr. Russ said that the estimate of funds needed to meet the public housing capital needs in Massachusetts is $30 billion. In addition, the Secretary of Administration and Finance may limit the amount of bonding that can be put out to less than the whole allocation under the State Housing Bond Bill. He added that the CHA expects $20 million of bonding capacity from regular state bond bill.
Councillor Davis asked about plans for energy efficiency and Mr. Russ reiterated that the CHA plan is to look at is a variety of energy conservation measures and possibilities. The CHA has taken many energy conservation steps already, for example solar panels on Washington Elms. The next step will be solar hot water. Lower utility costs means more money for services. He added that CHA staff will be meeting with the Cambridge Energy Alliance in the next two weeks. Councillor Davis said that solar hot water has a very fast payback.
Mr. Russ said that the plan that they have been discussing is Plan A, what the CHA would prefer to do. It would involve the least use of project-based vouchers. But they have to look at what if the State cuts operating funds. There are already insufficient funds to run the state units. The CHA is currently using Moving Toward Work funds for operating expenses for the state units but the Moving Toward Work program is slated to expire. Then the CHA would need to look to project based vouchers just to sustain daily operations. The other problem would be loss of federal funding and/or the inability to raise enough money via bonds. The CHA believes that the prudent path is to present this contingency. Under this scenario, the CHA would take 500 vouchers out of the 2,000 total and convert those 500 vouchers to project-based vouchers. Currently there is no mechanism to replace these vouchers. Congressman Barney Frank did propose a bill that would replace such vouchers, but the bill did not pass.
Attorney Ellen Schacter, Cambridge and Somerville Legal Services, said that this plan raises a number of concerns. Every single voucher that becomes project-based represents a loss of an affordable unit. She asked how many vouchers would become project based. Ms. Dumas said under the CHA’s preferred plan, 200 would be needed. In response to Ms. Schacter’s question, Ms. Dumas agreed that the contingency plan could involve the use of 500 vouchers.
Ms. Schacter asked whether the whole plan could be scaled down, in exchange for not losing as many affordable housing subsidies to the city. Mr. Russ responded that the CHA is thinking about this plan in a phased way. They have tried to group the worst sites into the first group. He said that he does not think they would be “project-based” in one clump, but when you start breaking these projects down, they end up costing more. They have not thought of selling any of the units.
Elaine DeRosa, Executive Director of CEOC, resident of 4 Pleasant Place, asked about the impact of the change of ownership. Ms. Dumas said there would be a lot more paperwork for the residents to fill out for recertification and it would have to happen every year, not every two years, as happens now. If the CHA cannot pay the bills, the tax credit holders would have the right to take over the building, but they would still have to keep the units affordable.
Cheryl Ann Pizza-Zeoli, Cambridge, asked about the potential impact on immigrant households. Mr. Russ said that HUD has a requirement that differentiates between documented and undocumented residents. The state does not. If the development has federal subsidies, at least one member of the family has to be documented, and the rent is prorated so that only documented members are covered. The state subsidies do not have this requirement. As a result the CHA has changed the way the rent rate is calculated. HUD has accepted their rent calculation. The CHA also can use MTW to use project based rules crafted through MTW authority.
Minka VanBeuzekom, 20 Essex Street, asked whether the CHA is asking the City of Cambridge to provide financing. Mr. Russ said that the CHA will be requesting the Affordable Housing Trust for support for the capital funding.
Attorney Schacter commended the CHA for a creative solution for the federal income requirement of prorating family household income to exclude undocumented family members, but this does not deal with undocumented families. If the CHA were to lose ownership control of the tax credit units, none of the regulations that govern CHA would apply.
Councillor Seidel then moved to the local preference discussion. He requested an overview from Christopher Cotter. Mr. Cotter began by laying out what units are covered by the City of Cambridge policy, which applies to all affordable homeownership units and inclusionary rental units funded by the Community Preservation Act funds and other state funding services, and 70 percent of the homeownership units. Mr. Cotter explained that the CHA policy, which is somewhat different, applies to Section 8 leased units and public housing. The City’s local preference policy covers Cambridge residents. Under the policy, people who work in Cambridge would only be considered after every resident on the waiting list has been served. The CHA policy offers the local preference both to Cambridge residents and nonresidents who work in Cambridge. In addition to residents and nonresidents working in Cambridge there is a third category called “ties to the community.” Under the City policy, this local preference is only available if the applicant has been displaced due to the end of rent control, which at this point is very difficult to document. The CHA policy has no local preference based on ties to Cambridge. Mr. Cotter said that the CDD staff would like to look at possible extensions to the “ties to Cambridge” policy.
Councillor Toomey asked about the “ties to the City” policy and specifically, whether a person who moves out to live with family elsewhere and now wants to come back to Cambridge would be eligible for local preference. Mr. Cotter said that is not presently allowed under either the City or the CHA policy.
Councillor Toomey said he would like to see a policy that would allow someone who has lived in the City for 60 years and is forced out by bad luck to have a local preference. He hopes that there is a creative way to address that type of situation.
Councillor Reeves asked what the difference is between the City and CHA local preference policies. Mr. Cotter said that essentially the difference is that the CHA gives local preference to people who work in the City.
Councillor Reeves said that he agrees with Councillor Toomey, although he does believe that it is still possible to see a connection to the loss of rent control for tenants forced out when a rental building that used to be covered by rent control has been converted recently into condominiums, for example long term residents at 55 Magazine Street.
Councillor Reeves added that he also believes people who move away and then come back or elders who move because they need to be closer to family should receive a local preference.
Mr. Cotter said that the CDD housing staff want to address the issue of some expansion of the local preference to include some “ties to Cambridge”. They will incorporate some of what they heard today and come back with a draft policy for further discussion. Mr. Cotter said that the local preference policies for the CHA and the City are substantially similar except for the CHA inclusion of non resident applicants who work in Cambridge in their local preference. The housing staff would like to hear from the City Council whether they believe that non resident applicants who work in Cambridge should be given the same local preference as Cambridge residents.
Lorraine LaVoie, 10 Lancaster Street #1, said that she would like to see local preference for residents only continued. People who live and Medford and work Cambridge should live in Medford and push for more affordable housing in Medford.
Ms. Schacter said that under the CHA policies if you live in subsidized housing in Cambridge, you are no longer considered a Cambridge resident even if you are an adult child of the primary tenant and have a child of your own with you. Mr. Russ disagreed with this characterization. He said that the CHA local preference applicants include two groups. Group A includes applicants who live here or work here or have been in transition services. Group B consists of applicants who live in Cambridge in subsidized housing, such as people in the situation Ms. Schlacter described.
Councillor Seidel asked whether the City policy makes the same distinction. Mr. Cotter said that they do not look at it that way; they want to encourage people to move out of public housing rental units into homeownership.
Councillor Seidel then moved to a discussion of the CHA Workforce Program. Mr. Russ provided a brief explanation of the program, a grant-funded program that serves 135-140 children per year at three sites. They are interested in having a fourth site and would like to broaden the programs to include a small site that serves younger kids in developing literacy skills. Mr. Russ said that they are very open to expanding on either end of their age spectrum older or younger. They would also like to follow kids after high school to provide support services during college and then try to get them to return to Cambridge to teach. The CHA would be willing to give them a free unit as an incentive. Shelter in of its own is a good thing, but if you want the family to progress you must also provide services. They are concerned about being able to keep their funding.
Mayor Simmons described the Harlem Children’s Zone (HCZ) approach: “Whatever it takes.” The HCZ is committed to providing the families they serve with whatever services are necessary to enable the children to go college, starting at infancy.
There was further discussion of the HCZ, with enthusiastic descriptions of the HCZ programs and their relevance to Cambridge offered by Mayor Simmons, Councillor Reeves and Councillor Seidel.