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Bill Aims to Save Public Housing With Private Financing

November 10, 2010

ST. PAUL, Minn. - About 150,000 housing units have been lost nationwide, according to the U.S. Department of Housing and Urban Development (HUD). The reason: The deteriorating buildings needed repairs, but lacked adequate federal funding to get them done.

Congressman Keith Ellison (DFL-Minneapolis) joined HUD Secretary Shaun Donovan this week in Minnesota to announce legislation that would allow public housing authorities to borrow private money, using their property as equity, to finance much-needed repairs. Ellison says, with a funding gap of at least $26 billion for public housing, it was time to look at innovative approaches.

"So many units are being lost, so many public housing areas are deteriorating, that we are at a critical juncture. We either have to do something to make sure people are going to have a good place to live in public housing, or we may lose the whole thing."

Housing advocates have voiced concern that privatizing public housing will put the nation's poorest, most vulnerable tenants at risk - particularly if a financed building goes into foreclosure. But Ellison says the bill contains safeguards to give HUD the first chance at recapturing property in that situation. He is expected to introduce the "Rental Housing Revitalization Act" in Congress next week.

Jon Gutzmann, executive director of the St. Paul Public Housing Authority, says public housing currently has a unique financing structure and does not carry debt. He is not convinced that the rental amounts would bring in enough money to pay off private sector financing.

"There's great risk in adding debt to this portfolio. I understand that, for many housing authorities, they will seek that opportunity, they will take the risk to raise capital to do needed improvements. And I say, 'Let's keep this program alive without burdening it with private sector debt.'"

While Gutzmann acknowledges the "good elements" in Ellison's legislation, he would rather see the proposed changes tested in demonstration projects before entirely revamping the way public housing is financed and regulated.

Tom Streitz, director of housing policy and development for the City of Minneapolis, agrees that a pilot project approach makes sense. However, he notes that repairs can only be deferred for so long before buildings are closed up and housing units are lost - possibly for good.

"As we all know, the federal budget deficit is at an all-time high. Discretionary funding for discretionary programs at the federal level is very much in jeopardy, so if we lose a unit, the chance of getting it back on the public roll is very, very diminished in these days."

Streitz says so far, Minnesota has not lost any public housing units, although he adds some local housing authorities are in jeopardy, particularly in rural parts of the state.

Sharon Rolenc, Public News Service - MN