Internal memos have been warning Department of Housing and Urban Development officials since 1981 that public-housing home-ownership programs would benefit a small minority of poor households at great cost to local housing authorities.
One such memorandum spelled out these and other drawbacks but proposed that the department go ahead with plans to sell public housing to poor families.
Copies of the internal correspondence on public-housing home ownership, long a pet proposal of the Reagan administration, have surfaced recently in the wake of HUD's announcement that about 2,000 units will be sold to low-income families in a trial program.
One HUD official, Joseph Sherman, director of the building technology division, wrote in 1981 that it was "unclear" why tenants would want to buy public-housing units, since the purchases would mean a substantial increase in their housing costs; why housing authorities would want to sell, since the units "most suitable for sale" would be the authority's best, and "why any bondholder would agree to such a transfer."
Despite the pessimistic assessments, and the lack of success of several past ownership plans, HUD officials are vigorously promoting the present demonstration program.
Another of the memos noted that HUD's past attempts "to provide public-housing home-ownership opportunities have met with very limited success."
It also listed what it called "implications for policy consideration":
*A HUD study showed that under the "most generous arrangements," only 6 percent of public housing tenants in non-high-rise units were potential homeowners. Families would have to pay only operating costs and would receive an annual subsidy of $1,200 to help cover the costs under these "generous arrangements." If families had to make higher payments, only 2 percent would be able to buy. An earlier study that included high-rise projects found that no more than 8 percent of the tenants could afford home ownership.
*Only the higher-quality units in stable neighborhoods would be "appropriate for sale." Yet sale of these homes, without replacement, would result in "a decline in overall quality and quantity of the public-housing stock, and to a probable increase in per-unit operating cost."
*Single-family homes in scattered sites would be easiest to sell, but in many areas these homes are the only housing suitable for large families.
*"Large-scale sale of public housing would tend to leave only the lowest-income households as renters . . . concentrated in the remaining lower-quality housing."
*The higher the amount tenants have to pay on their homes, the less likely they are to buy. But without a substantial investment in the property, experience has shown, an owner does not "sustain ownership responsibilities."
*"Home-ownership programs have proven to be difficult and time consuming, even for knowledgeable" public-housing authorities to administer. Housing authorities who financed sales, as many would have to do, would then have "a long-term servicing responsiblity as well as the potential for having to assume title in case of default."
HUD frequently cites the success of public-housing ownership in Britain as an argument in favor of trying it in this country. But one of the memos -- as well as a HUD researcher who prepared a 1983 report -- pointed out major differences between U.S. and English tenant characteristics, income and housing stocks. The memo said the differences limits "the possibility of transfer of British techniques to the United States public-housing program."
Most families in British public housing have at least one wage earner, and 40 percent have two or more wage earners, according to the researcher, E. J. Howenstine, who recently retired from HUD, and to the memo. In contrast, about 40 percent of families in U.S. public housing are headed by elderly residents, making them are unlikely prospects for ownership, and about 52 percent of the non-elderly families receive welfare, the memo said.
The median income of families in British public housing is about $1,200 less than the median incomes of all homeowners and about $665 more than renters in the private market, the memo reported. In the United States, 91.3 percent of U.S. public housing tenants received 50 percent or less of the median incomes in their areas.
Single-family homes make up most of British public housing, which, at 4 million units, makes up 29 percent of the country's total housing stock, the memo said. In most areas, public housing is the newest and best-constructed housing.
U.S. public housing makes up only 1.3 percent of the total housing stock, and few of the units are single-family homes. About a quarter of the units were designed for elderly residents. The small number of single-family and duplex homes usually are in the best condition, while more than half of other units are described as fair or poor, according to the memo.
In his 1981 memorandum, HUD's Joseph Sherman said that projects feasible for conversion to home ownership "must, at a minimum, be reasonably well located, well maintained, and at least 10 to 20 years old." Projects in poor condition "will require costly modernization, which will add to the sales price," he said. High construction and bond-financing costs of structures less than 10 years old "may price units out of reach of public-housing tenants."
Sherman said that although his analysis was based on a "quick survey" of public housing information, he believed "the aggregate data clearly indicates that transferring or selling public housing to current tenants would not be a realistic option for any significant portion of the . . . , primarily because of the low-income profile of the existing tenants who could not afford the carrying costs of ownership without . . . a substantial level of federal subsidy."