Jacob Frey speaks at the Public Housing Preservation and Expansion Convening press conferences with MPHA CEO Adbi Warsame behind (source KSTP)
On March 10th 2023, Jacob Frey convened a press conference at the Minnesota State Capitol about expanding housing affordability in Minneapolis. He chaired the Public Housing Preservation and Expansion Convening and included a classic list of Twin Cities governmental entities and NGOS including the Metropolitan Council, The Pohlad Family Foundation, The Minneapolis Foundation, The McKnight Foundation, Minneapolis Public Schools, and Minneapolis Highrise Representative Council. According to Frey, by bringing together “elected officials, community leaders, and housing experts,” the Convening exemplifies the “best way” to expand Minneapolis’ “public housing stock”.
Interestingly, the keystone of the convening was House File 2477, state legislation that would have initially granted $45 million for the Minneapolis Public Housing Authority (MPHA) to renovate and build more “affordable housing units”. Frey claims that the $45 million grant would go towards current public housing units, benefitting 31,000 families and building new units for future families.
However, as with all things rolled out by Frey and Minneapolis’ DFL politicians, the devil is in the details. This report highlights two important contradictions in the city’s housing policy. First, when Twin Cities politicians and their friends in real estate talk about expanding public housing, they are usually talking about privatizing it and replacing it with so-called “deeply affordable housing”. This explains why the two terms – public housing and “deeply affordable housing” – were used interchangeably in Frey’s convening and the subsequent discussions about House File 2477 in the Statehouse. And second, that very privatization itself explains why Jacob Frey has to put on a massive “convening” just to ask for more money from the State of Minnesota to fund his own city’s “housing” plans which is privatizing public housing therefore ending public housing as we know it.
Deeply Affordable Housing Is Not Public Housing
House File 2477 itself does not mention public housing, contradicting Jacob Frey’s claim of wanting to “expand public housing”. Instead, the bill language refers to public housing units as “deeply affordable family housing units.” This contradiction between the labeling of the exact same units as “public housing” by the press but “deeply affordable housing” by the politicians themselves highlights the true nature of the goals of the Minneapolis Public Housing Authority and the city’s politicians.
First, “deeply affordable housing” and “public housing” are not the same. In Minneapolis, truly public housing is owned by the public, it is a public good and operated by government agency MPHA (Minneapolis Public Housing Authority), but “deeply affordable” housing is not actually owned by the government. This is apparent the moment one examines the fine print of HF 2477. The $45 million that MPHA initially asked for will not go directly to MPHA for its own public housing stock but to Community Housing Resources (CHR), a nonprofit that MPHA created.
Actual text of HF 2477
Since 2018, MPHA has offloaded its entire stock of over 736 scattered sites single-family public housing to CHR through the Section 18 Demolition & Disposition Conversion process. This process allows public housing authorities to transfer ownership of housing from the government to a private sector landlord. Once converted, this housing is no longer public housing.
On the surface, “deeply affordable” housing appears similar to public housing. Housing is considered deeply affordable by HUD and most municipal agencies if it is “affordable” to someone earning under 30% of the Area Median Income (AMI). Affordability in this context means that rent itself does not surpass 30% of a resident’s monthly income. Similarly, Residents earning 30% or under of AMI are eligible to live in public housing and they pay no more than 30% of their actual earned income in rent and fees to MPHA.
Because of these similarities, it would seem that public housing residents and those dwelling in “deeply affordable family housing units” would enjoy similar experiences. This narrative, which MPHA regularly pushes, obscures some important details. Because the “deeply affordable” definition applies to rent but not other charges, residents whose homes have been converted pay higher fees and maintenance charges than before. These fees are added to the monthly rents and if the tenants don’t pay then they face eviction. Going forward, there is no guarantee that rent itself will stay the same at 30% of income because CHR residents do not enjoy the same legal protections as public housing residents.In fact, landlords are free to change rent itself for housing subsidized through Section 8 while the voucher may stay constant, leading to volatile and unpredictable out of pocket-costs year to year. Without a legally binding document or policy that will keep CHR under the supervision of MPHA, in a few years CHR could have a private board and investors who will profit from the 736 scattered sites formerly operated under Section 9 public housing.
The details of MPHA”s Family Housing Expansion Project (FHEP) illustrate another important truth about “deeply affordable” housing in Minneapolis. FHEP is MPHA’s name for the Section 18 Demolition and Disposition of 16 specific scattered site homes. The project will replace the homes with modularly constructed fourplexes, resulting in smaller apartment units unable to house the same large, multigenerational families that lived there before. Because of this, families may not qualify to come back after conversion because their household size is too large and they will need more bedrooms. By making the new privatized units smaller under the Family Housing Expansion Project, MPHA is pushing out large size families who are majority people of color, and who have been on waitlist for 5 to 7 years to live in public housing.
Artist’s rendering of new fourplexes occupying the same space as a previous single-family scattered site home (source MPHA)
Between high fees, high rents, opaque rental policies, smaller new units, and more expensive rent per square foot, “deeply affordable” housing is more expensive than public housing.
Privatization Sacrifices MPHA’s Ability to Use Traditional Funding Sources
MPHA has justified its disastrous use of Section 18 and Rental Assistance Demonstration (RAD) – Section 18’s equivalent program for high-rises – by pointing out that once privatized, it can more easily draw on federal tax credits and private sector cash to fund construction and maintenance. But ironically, MPHA also cites the fact that so much of its housing stock is owned by CHR to justify why it needs more cash from the state. The State of Minnesota operates a special fund for public housing rehabilitation called the Publicly Owned Housing Program (POHP). Typically, public housing authorities across the state apply for 20-year deferrable and forgivable loans through POHP. However, as MPHA pointed out in their presentation to the state legislature, because all of the scattered sites are now owned by CHR, MPHA cannot apply POHP funding to their maintenance.
It is clear that privatization has little to do with ease of funding. By privatizing the scattered sites, and highrises like Elliot Twins, MPHA sacrificed its ability to draw from a key source of public funding. While some private sector cash has flowed in following privatization, it clearly has not been sufficient if MPHA needs to ask the state for an additional $45 million. MPHA portrays RAD and Section 18 as “best practices” for public housing management, but in reality they are only “best practices” for the continuous eradication of public housing across the city. In the long run, CHR burdens residents with fees and forces them into smaller apartments since 1 out of 5 families may come back if they are lucky, while benefiting developers who hope to buy out the buildings.
MPHA’s Disregard for Public Housing Residents is Consistent as it Gambles with the Future of Public Housing
Since 2017, MPHA has increased its yearly repair budget from HUD from $10 million to over $14 million. On top of this, it receives $2 million annually from the state. At the same time, MPHA claims it needs an additional $31 million for repairs for the scattered sites alone, failing to identify a time frame for the budgetary estimate and conveniently leaving out the existing funding from the public sector in its PR. Where does this $31 million “estimate” come from and why isn’t MPHA simply using two years of $16 million in public funding to fix the repairs? In the past, MPHA’s previous capital backlog could be eradicated by existing public sources.
This apparent fiscal dilemma served as the major justification for HF 2477 at Frey’s convening. Since then, HF 2477 had one hearing in the House of Representatives after it was introduced by Representative Ester Agbaje and was introduced in the State Senate by Senator Omar Fateh. The bill was added to a Housing bill package, or an omnibus, where the ask has been reduced to $20 million, not enough to meet MPHA’s initial ask. As of late last month, it is unclear if the bill will gather enough support by the end of the legislative session.
Ultimately, scattered site residents are losing from this whole process. MPHA privatized their homes and handed the properties over to CHR, which exploited the subsequent change in legal requirements to hike up fees and remove long-term housing security guarantees. When MPHA decided to convert the housing through Section 18, it eliminated its own ability to use POHP funding, sacrificing an important financial resource. Now, it is facing an uphill battle to secure alternative public funding sources, no matter how many nonprofits and foundations Jacob Frey packs into a room. Meanwhile, residents continue to lose as their homes fall into disrepair and face the risk of being displaced due high rents that is more then 30% of their actual income.
Defend Glendale & Public Housing Coalition
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