Baltimore's Housing Authority is selling nearly 40 percent of its public housing to private developers under a national model designed to raise millions for upgrades and maintenance, Commissioner Paul T. Graziano said Wednesday.
Beginning next year, 22 complexes will undergo $300 million in long-overdue upgrades, such as roof replacements, new elevators and heating systems, and remodeled kitchens and bathrooms, Graziano said.
The proposal expects to use multiple funding sources, including tax credits which are made available by the state of Maryland through the U.S. Department of the Treasury. The sale of the buildings is part of an initiative by the U.S. Department of Housing and Urban Development.
Graziano said tenants in the 4,000 units — most of whom are senior citizens and disabled individuals — will continue to pay low rents determined by a formula based on household income. The main result of the program will be to raise the money needed to improve the properties, he said.
"This is a lifeline," Graziano said. "We would be grossly negligent in our duties if we didn't pursue this opportunity."
But housing advocates say they're worried residents will fall victim to profit-driven developers. In the long run, they contend, the plan could result in fewer affordable rentals and more families on the street.
"It's a terrible idea," said Jeff Singer, former CEO of Health Care for the Homeless. "The positive side is that the private developers, theoretically, can improve the facilities. But the rest is really terrible. We don't need less public housing. We need more."
Others are optimistic. City Councilman Bill Henry said he believes the program has potential, though he wants city officials to remain significantly involved in the management of the properties.
"As with so many really creative, innovative and great-sounding ideas, the true devil will be in the details, and if done right could be an incredibly good thing," Henry said.
State Del. Samuel I. "Sandy" Rosenberg, a Baltimore Democrat, said he has asked the state attorney general's office to review the plans so he can evaluate whether the General Assembly needs to add any protections in law for seniors and disabled individuals.
Rosenberg said he wants to be sure that the properties won't be converted over time to apartments rented at market rate, and that vulnerable residents aren't forced out of their neighborhoods.
"There are important questions that need to be publicly addressed," Rosenberg said.
Graziano said that under provisions of the federal program, the units being sold must be kept available for elderly and disabled individuals and low-income families.
Tenants who serve on the Housing Authority's Resident Advisory Board declined to comment on the proposal Wednesday.
Under the program, developers will purchase the buildings, which will become privately owned housing for qualified tenants under a federal program known as Section 8. Graziano and other officials said that under one financing scenario, the city in effect will lend the purchase money back to developers to pay for the repairs. The new owners will make money primarily through federal tax credits associated with the arrangement, officials said.
To get the credit, the buildings must be rented to people with low income for at least 40 years, Graziano said.
One to two years after a building is renovated, residents could request Section 8 vouchers to move to other properties if they wish, subject to availability. The unit they vacate would remain available for another elderly, disabled or low-income family, Graziano said.
Sales of the first round of 11 complexes will be closed late this year or early next year, with construction to begin shortly afterward, Graziano said. The next 11 properties will be sold by early 2016. Properties have been selected, though some changes in the list are possible.
Residents may be moved to hotels or temporary housing while buildings are renovated, but Graziano said the Housing Authority hopes to use other vacant units in a complex to accommodate residents during construction.
The Housing Authority will maintain a small ownership interest in the properties and, after 15 years, has the right to reacquire the properties at a modest cost, Graziano said.
Niki Edwards, a regional spokeswoman for HUD, said Baltimore's participation in the Rental Assistance Demonstration is part of the first 60,000 units nationwide. The Obama administration is developing the public-private partnerships as a way to help preserve the country's public housing, she said. Edwards said the program is expected to generate nearly $816 billion in private-sector investment and support about 12,000 jobs.
Baltimore applied for the program in October after identifying qualified developers through a competitive-bid process over the summer, housing officials said.
Graziano said Baltimore needed to look for an alternative solution to public housing upkeep because of "chronic under-funding" in federal cash for capital needs. Money for capital improvements was slashed to a low of $4 million in recent years, he said.
That created an "emergency situation" with outstanding maintenance and upkeep costs reaching about $800 million, he said.
"If we don't put money in these buildings they would be come less and less habitable," Graziano said. "The choice was very stark and very clear. We couldn't let these buildings deteriorate."
The condition of the J. Van Story Branch building in the Charles North neighborhood — one of the high-rises to be sold — is an example of the compounding problem with upkeep, Graziano said. The building, which is "leaking like a sieve," is undergoing a $5 million renovation, the cost of which consumes more than the authority's entire annual federal allocation for capital expenditures.
"Once we finish that work with the capital funds, we will still need another $20 million to do improvements in the interior of the building," Graziano said.
Addressing a concern circulating among some who live in the properties, Graziano said the Housing Authority and developers are prohibited by law from throwing the current tenants out.
"They are going to be in nice, clean, shiny buildings with elevators that work, new kitchens, new bathrooms, new lobbies; clean, modern, safe homes, and they are going to be preserved for future generations," Graziano said.
Councilman Henry said he expects to call a hearing of the council's Housing and Community Development Committee to discuss the sales at 1 p.m. March 20 in City Hall.
What's for sale
Baltimore's Housing Authority is selling 40 percent of its public housing to private developers. Here are the complexes scheduled to be sold. Officials said changes are possible in the second-year list.
•McCulloh Homes Extension
•Somerset Court Extension
•Bernard E. Mason
•Bel Park Tower
•Pleasant View Gardens
•J. Van Story Branch
•The Townes at the Terraces