A look at One Charlestown and the future of public housing by Tim Snyder
Washington, DC – (RealEstateRama) — The unique sound of spring in the Charlestown public housing development is a chorus of chirping birds and smoke detectors chirping for new batteries.
Residents there also complain of poor ventilation and long stretches without hot water. The Boston Housing Authority has only $6 million a year to put toward a growing $750 million maintenance backlog across its entire stock of 12,623 public housing units. As a result, the 77-year-old Charlestown complex of 1,100 units needs major renovations that the authority simply cannot afford.
Throughout the country, many public housing complexes are just as old and dilapidated. They’re now in such bad shape that only the federal government has the resources to resuscitate them meaningfully. But the feds have been trying to extricate themselves from the public housing business since the mid-1990s. Since that time, there have been no federal dollars to build new public housing, and the overall number of units nationwide has fallen by 200,000.
Government housing in the United States never really worked as intended, a promising idea poorly maintained. Still, the need for below-market housing hasn’t dried up with the funding. To raise the money to just maintain existing public housing units, local authorities have resorted to complex financing arrangements to bring in investment dollars through public-private partnerships.
But preserving public housing in this backhanded way brings its own set of complications.
The writing on the wall has been clearly legible for those willing to read it. Public housing complexes still need to be maintained, even as federal dollars to do so have decreased by 73 percent since 2010. A 2013 report by the Joint Center for Housing Studies at Harvard found conditions in public housing were worse than in any other type of housing. Half of the units surveyed lost heat for more than six hours at least three times that year — one in eight had water leaks.
“Ultimately I came to the conclusion that the money was gone, and it wasn’t coming back,” explained Boston Housing Authority administrator Bill McGonagle. In 2015, he challenged his staff to find creative ways to preserve housing for Boston’s extremely low-income families without relying on federal funding.
While the buildings of the Charlestown development may be worth little, the land they sit on is very valuable. The authority now seeks to use that to the development’s advantage. In 2015, it solicited proposals to redevelop the complex’s existing 1,100 public housing units. In exchange, the winning developer would be allowed to build market rate apartments on the complex’s highly coveted land.
Boston used a similar deal to rescue the Columbia Point development in 1984. The resulting Harbor Point Apartments, constructed by Boston’s Corcoran-Mullins-Jennison, won several design awards and became the model for the federal HOPE VI program that promoted similar mixed income communities nationwide.
The city selected Corcoran-SunCal, a partnership between that same firm (now Corcoran Jennison) and SunCal of California to redevelop Charlestown. Their $1 billion 10-year plan, termed One Charlestown, replaces all 1,100 reduced-rate units, creates 2,100 additional market-rate units, and adds space for retail and parks. Corcoran-SunCal envisions a vibrant mixed-income development that is fully integrated into the broader Charlestown community.
Some neighbors have been skeptical of the development’s size. “We’re not downtown Boston. We’re a community with families,” explained resident Mary Boucher at a heated public hearing in November. Opponents fear One Charlestown will strain infrastructure and public services. “It’s too big. We have two fire engines and one ladder, and you want two 21-story towers that don’t fit here,” said resident Elaine Scadding.
“What this is all about is keeping a roof over our heads. The money from Washington is going away. It’s gone. If we do not go mixed-income now, these units we live in are going away,” countered Phil Wright of the Charlestown Tenant Task Force, a tenant advocacy group at the development.
Since the 1960s, federal housing policy has preferred elaborate agreements with private developers to house low-income families in publicly owned and operated complexes like the Charlestown development. As time passes and income inequality grows, the implications of this shift are becoming clearer and harder to ignore.
The Housing Act of 1937 established the federal public housing system, which allocated federal money to local public housing authorities to build and operate public housing complexes. Construction spending provided short-term relief after the Great Depression, while the new housing was a pillar of the New Deal’s long-term economic reform.
‘Ultimately I came to the conclusion that the money was gone, and it wasn’t coming back.’
For the next decade, public housing developments replaced slums and drove urban renewal nationwide. The $6 million Charlestown complex opened in 1940. Public housing peaked when large numbers of servicemen returning from World War II touched off a housing crisis. In response, Congress authorized 810,000 new public housing units with the goal of providing “a decent home and a suitable living environment for every American family.” Soon enough, short-term relief became a long-term liability.
“The original theory of public housing was that the rents of its tenants were going to maintain the properties,” explains Howard Husock of the Manhattan Institute. As the economy recovered, those who could afford to move out did so, leaving behind poorer tenants whose rent could no longer support the developments. In 1969, rent calculations were changed to help the remaining residents, but with that “the whole theory that the housing authorities would be self-sustaining went out the window,” according to Husock.
In addition to funding shortages, public housing was plagued by mismanagement and discriminatory policies. The most famous example is the Pruitt-Igoe development in St. Louis, which went from celebrated 1950s urban renewal project to a decaying, crime-ridden disaster slated for demolition in just a decade.
Boston was not immune. In 1979, courts placed the Boston Housing Authority into receivership after it failed to comply with a court order to improve living conditions. Courts also forced the authority to desegregate in 1988 after it lost a class-action lawsuit over policies that discouraged black and Hispanic renters from applying for housing in Charlestown and other predominantly white neighborhoods.
As public housing foundered, policy makers began believing private industry could do a better job. The federal government established programs to entice developers to take on the cost of building and maintaining low-cost housing. In turn, these companies agreed keep rents in these units below the market-rate for an established period of time. The idea punted the problem and started a countdown to a crisis.
“What do you do when that clock runs out? Owners are free to convert that property to a different use,” explained Vince O’Donnell, an independent expert on below-market-rate housing. By 2025, 2.2 million subsidized units nationwide will be eligible for conversion. Hot rental markets, stagnating subsidies, and growing income inequality make it hard to persuade owners to keep their rents below market rate.
Private money also came with private concerns. Developments had to provide acceptable housing and a return for investors. Sometimes this meant using substandard materials or, in the case of many HOPE VI projects, reducing the number of below-market-rate housing units to make the deal pencil out.
The One Charlestown deal tries to address many of these concerns. A 99-year ground lease ensures the authority will retain control of the property when the agreement expires. It avoids the pitfalls of the HOPE VI program by requiring that all 1,100 heavily subsidized units be replaced and that the qualifications, rent calculations, and tenants’ rights remain unchanged.
In return, Corcoran-SunCal gets access to low-interest bonds and transferrable tax credits to fund the $1 billion project. The federal government will guarantee the rent from the reduced-rate units with Section 8 vouchers.
This approach only works in markets with high rental demand. Even in Boston, the country’s third most expensive rental market, Corcoran-SunCal needs to build two market-rate apartments for each low-income one they redevelop for the deal to be feasible, turning One Charlestown into a massive 3,200 unit complex.
“It’s a huge project. It will significantly transform not only the public housing but also the Charlestown neighborhood,” admitted McGonagle. Current public housing residents will be relocated during construction, and only a fraction are expected to return.
When fully occupied, One Charlestown will increase the neighborhood’s population by 25 percent. If property values continue to increase, the longtime residents of this gentrifying working-class neighborhood will find it harder to remain.
While many Americans see public housing as a broken social experiment, that isn’t true everywhere. Instead of providing rental assistance, Singapore subsidizes homeownership. This creates better outcomes by giving low-income households equity and pride of ownership. It also provides developers a faster return on their investment through sales of complete units than through rental vouchers.
In Vienna, government-owned units encompass a wide swath of the city’s housing stock. The broader base makes development more sustainable. Rent is set when residents move in, instead of being tied to income as in the United States. As a result, residents are not penalized with higher rents as they become more successful.
One Charlestown may yet serve as a model for future redevelopment deals in Jamaica Plain and South Boston, two other quickly gentrifying neighborhoods in the city. But, McGonagle admits the strategy can only preserve the number of below-market-rate units. “The sad fact of the matter is, if we’re going to meet the demand of the 38,000 families on our waiting list and the 75 percent of people throughout the country that are eligible for a public housing or a voucher, then the federal government has to get back in the affordable housing business.”
Expanded government incentives would reduce the number of market-rate units developers would need to offset the costs of each below-market-rate unit replaced. This could reduce the density of future mixed income projects, expand the number of below-market-rate units, or make similar deals feasible in less prosperous markets. A proposal to expand a key incentive program has bipartisan support in Congress, making advocates optimistic for the future.
Yet as with all public housing efforts over the past few decades, the key question isn’t how quickly they can be built, but how sustainable they really are.
By Tim Snyder