"I've come full circle," Rep. Edward Boland (D-Mass.) said last week during an appropriation subcommittee hearing on the federal housing budget. "I'm coming back to the conclusion that public housing is the answer for very low-income families."
Public housing still conjures up in the minds of many the images of huge, impersonal apartment buildings in a sad state of repair. The well-publicized, failure of such major developments as the Pruitt-Igoe project in St. Louis was largely responsible for a government decision in the early 1970s to stop financing families by giving them rent subsidies, largely under a program known as Section 8. The Ford administration preferred to finance people in existing homes where possible rather than build new high-rises, but the Carter administration has declared one of its aim to be stimulation of construction.
Boland's defense of public housing was occasioned by what he called the "staggering" costs of new housing built under leased private housing programs. The annual cost for 1.2 million units now contemplated, when all are receiving subsidies, wil be $2.3 billion annually - or 9.3 billion if the subsidy is maintained for the 40 year maximum legally allowable.
According to estimates by the Development of Housing and Urban Development, the annual federal subsidy for new public housing is $2,750 per unit. The same unit, privately financed, costs the taxpayer $3,900 annually. Financed by state government, the cost rises to $4,100 a year, or approximately $350 a month.
In other words, Boland observed, the cost to the federal government of subsidizing a low income family in state-financed apartment is equivalent to the monthly amount the average American is paying on a new $42,000 single-family home.
Concerned that new Section 8 housing is becoming "inordinately expensive," Boland asked HUD Secretary Patricia Roberts Harris if she felt that "this is the type of housing program we want and can afford."
Harris replied, "For fiscal year 1978, yes; for the long run, I do not see Section 8 as the only housing program."
The Carter administration has restored funds for 50,000 public housing units in the 1978 budget. Secretary Harris declared, "We have restored public housing as a viable program with funding requested by this administration." Most of the housing, she said, would be new, only a small amount of it, rehabilitated units.
The annual cost of subsidizing residents of new and substantially rehabilitated houses is almost twice as high as subsidizing them in existing units, according to a new Library of Congress study by Morton J. Schussheim, senior specialist in housing. Existing costs about $2,200 versus $4,000 for new. He concludes that "where market conditions are favorable" (where there is enough housing at reasonable prices), a good case can be made on cost grounds to utilize existing units."
The study, entitled "Subsidized Housing - Where Do We Go From Here?", attempts to offer what the author calls a balanced approach to lower income housing. He warns that "pressing" home ownership on families with slim prospects of raising their income will make "severe problems virtually inevitable." Consequently, he recommends it not be urged for families with incomes below $10,000 a year.
HUD, Schussheim notes, proposes to raise the mortgage limits on the home ownership assistance program (Section 235) and make reservations of 100,000 units a year in 1977 and 1978, far more than the 19,000 units reserved in 1976. He estimates that even with interest rates subsidized down to 5 per cent, "homebuyers without previously accumulated equity or other resources will need incomes between $14,000 and $18,000 to participate."
The study contains some sobering evidence about past rehabilitation efforts with HUD support. In four cities - New York, Boston, Pittsburgh and Detroit - rehabilitation outlays ranged from $8,000 to $18,000 per unit on top of acquisition costs of $2,000 to $5,000 per unit. The cost would be much higher today, 10 years later.
Yet, none was a financial success, the mortgages on practically all of the rehabilitated structures were foreclosed or assigned to FHA. The reasons for failure included destructive families, unsuitability of the structures for rehabilitation, and overestimation of the market for small rental units.