A Future for Public Housing

Two primary reforms are needed for the future success of the current public housing program: revision of the funding system for operating subsidy and development of a strategy for capital improvements and future use of the inventory. The current funding system has been criticized because of the dramatic growth in operating costs in the last decade and because of apparent over-funding of some public housing authorities (PHAs) and a distributional bias against housing authorities operating in distressed environments. Either a cost-based operating subsidy system or a market-rent based system would have strengths as well as weaknesses. Either type of system can provide adequate, fair, constrained, and predictable subsidies. The current level of deterioration of the public housing stock, the concentration of social and physical problems in 7-to-15% of the inventory, and the perverse incentives of the present modernization program, suggest a need for reform of the capital improvement funding system. Each PHA should be provided fixed levels of funds, based on its needs, both for rehabilitating and maintaining projects. Further, a project-by-project assessment should be made to identify those which cannot be cost-effectively managed or rehabilitated.
The President's Commission on Housing contributed importantly to public discussion of these policy areas, by recommending a dramatic reassessment of each project and its future use in the context of a change to a market-based subsidy system.