Raleigh Housing Authority could drop public housing at Capitol Park

ccampbell@newsobserver.comJanuary 18, 2014 

CAPITALPARK01-NE-011714-RTW

From left, Cameron Hicks, 13, Darius O'Neal, 15, Minkah Ransom, 12, and Nikolas Hicks, 16, play basketball in the alley behind homes in the Capitol Park neighborhood between N. Blount and Halifax Streets in downtown Raleigh, N.C. on Friday January 17, 2014. Capitol Park is as Raleigh Housing Authority development with a mix of apartments, townhouses and single family homes. It was built to replace Halifax Court.

ROBERT WILLETT — rwillett@newsobserver.com Buy Photo

  • Public vs. ‘affordable’ housing

    The Raleigh Housing Authority has two separate entities that provide housing for two different groups of people.

    The agency’s traditional public housing units provide subsidized rentals based on income level to the city’s poorest residents. To qualify, residents’ income typically must be at or below 30 percent of the area median income. In Raleigh, a family of four that earns less than $22,750 a year would be eligible, according to HUD. They pay 30 percent of their monthly income in rent.

    The agency also offers market-rate “affordable” housing through a nonprofit affiliate called Capitol Area Developments. Steve Beam serves as housing authority director and is also CEO of the nonprofit, which is governed by a board that includes a board member and employees from the housing authority. CAD had a funding surplus of $1.27 million last year and pays about 15 percent of Beam’s salary; Beam says the surplus will be used to upgrade and redevelop housing communities. Many of the 337 homes and apartments available are built on the sites of former housing projects such as Halifax Court and Chavis Heights.

    Those properties are targeted to renters who earn 80 percent or less of the area median income, which means a family of four earning $60,650 or less would be eligible. At least 75 percent of renters there must meet that qualification. Monthly rents, however, don’t change based on income.

    A three-bedroom home at Capitol Park is currently listed for $1,100 per month.

  • By the numbers

    The number of public housing units in Raleigh is dropping:

    1,956: Raleigh public housing units in 1998

    1,719: Raleigh public housing units in 2011

    1,310: Raleigh public housing units under Steve Beam’s new plan

    1,850: Durham public housing units

    1,357: Raleigh Section 8 vouchers in 1998

    3,869: Raleigh Section 8 vouchers in 2014

— Housing authority Director Steve Beam wants to remove public housing from Capitol Park, a development near downtown Raleigh that was built in 2003 with a $29 million federal grant.

Under Beam’s plan – which will be presented Tuesday to the Raleigh City Council – the 60 low-income apartments and homes there would become market-rate affordable housing, with monthly rents of up to $1,100, significantly more than tenants pay now.

The move would further reduce housing options for Raleigh’s poorest residents, more than 10,000 of whom are on the agency’s waiting list. It would also prompt Raleigh to fall further behind Durham, a smaller city that now offers 500 more public housing units than Raleigh.

Beam says the move is necessary to address cuts in federal funding for public housing, pointing out that his agency has seen funding drop about 20 percent in recent years. The U.S. Department of Housing and Urban Development, he said, “has been in the process of defunding public housing. The bottom line is if the funding is not there, you can’t continue to operate the properties at that level.”

To remove the homes from the public housing rolls, the agency would sell them to its affiliated nonprofit for a fraction of their market value: $5,000 per unit, for a total of $300,000. According to Wake County tax records, the properties have an assessed value of nearly $8 million.

Revenues from the sale would be part of a larger plan for new public housing and a community center at Walnut Terrace, which is being rebuilt as a mixed-income community. The new version of that 300-unit complex south of downtown will include fewer public housing units than the old barracks-style buildings to make room for market-rate affordable housing. The housing authority used the same model at Capitol Park when it opened a decade ago.

Beam said the sale price for Capitol Park is so low because putting too much money into the housing authority would risk HUD taking any reserve the agency acquires. The federal government has “recaptured” funding reserves from other housing authorities.

“If you bring too much into it, and that money is left over at the end of Walnut Terrace … you’ll be sending the money back to HUD,” he said. Selling the properties to an outside developer, he added, wouldn’t work because Capitol Park would then have two owners managing connected units. “We’d lose control of the property itself,” he said.

Beam stressed that if the sale is approved by HUD, current public housing tenants at Capitol Park would be given Section 8 vouchers allowing them to stay or find private rental homes that accept the vouchers for subsidized rent.

If the federal housing agency doesn’t provide additional Section 8 vouchers, the housing authority would pull from its existing allotment of 3,869 vouchers – putting the Capitol Park residents ahead of the 4,659 people waiting for vouchers.

Beam couldn’t get federal money for the $50 million Walnut Terrace project but will use reserves and has sold some property. He plans to raise additional cash by selling 115 single-family homes scattered around the city that are currently used as public housing. He said he’d like to replace that portion of the agency’s inventory with Section 8 vouchers but notes that HUD funding to do that is “unavailable at this time.”

The houses won’t go on the market until their tenants choose to move out, he said.

Walnut Terrace will have 145 public housing units, down from the 300 before demolition, because the authority’s nonprofit also is building 147 market-rate units there.

Plan is unusual

While housing authorities across the country are grappling with budget cuts, Beam’s plan to eliminate low-income housing at Capitol Park is unusual, according to Erika Poethig, an expert on public housing at the Urban Institute in Washington.

Poethig, who recently served as an acting assistant secretary at HUD, said the proposal “really works against the principles” of the federal HOPE VI grant program that funded Capitol Park.

“I’m skeptical,” she said. “The purpose behind HOPE VI was to create mixed-income communities, so residents of public housing would benefit from being in communities with higher-income people.”

Having low- and moderate-income residents living side-by-side is credited with lowering crime at Capitol Park, formerly a troubled public housing complex called Halifax Court. Residents there have easy access to the jobs and amenities of downtown Raleigh.

Poethig said low-income renters could find themselves in a less-desirable neighborhood under the Section 8 program because landlords in wealthier areas often don’t accept the vouchers.

“You’re asking public housing residents to trade off access to jobs and access to better amenities for a voucher that may not help them afford the same kind of neighborhood,” she said.

‘Move the poor people’

Raleigh Mayor Nancy McFarlane said she hasn’t yet reviewed the details of Beam’s proposal but would question anything that cuts low-income housing.

“We don’t want to lose units from public housing,” she said. “If this plan is to remove 60 units of public housing, then I’d like to see where they’re planning on replacing them.”

Octavia Rainey – a Southeast Raleigh neighborhood leader and vocal critic of the housing authority – said the loss of public housing at Capitol Park would be a “disgrace.” She says she suspects the goal is to “create more upscale housing in downtown and move the poor people on out.”

She said Beam should not be allowed to charge exclusively market-rate rents at a complex that was built with federal money.

“What Steve Beam’s doing is a rip-off to the taxpayers,” Rainey said. “Pay me back my $29 million.”

New approach in Durham

Poethig says housing authorities around the country have found other ways to address funding cuts while maintaining the same number of homes and apartments. Some are using a new federal program called Rental Assistance Demonstration.

The program allows housing authorities to transfer public housing properties to a private entity – often affiliated with the public agencies – while still providing federal funding to subsidize rent payments. The private entity could borrow money or seek tax credits to upgrade aging housing complexes, which housing authorities can’t do.

“RAD is a strategy to preserve and improve the quality of public housing but use the private marketplace as leverage to do that,” Poethig said.

The Durham Housing Authority is among the agencies joining the program. Director Dallas Parks said he has federal approval to convert the 224-unit Morreene Road elderly community and the 102-unit Damar Court town house property.

The housing authority’s nonprofit arm will borrow money and obtain tax credits for much-needed renovations of the buildings, which are more than 50 years old. The apartments will no longer be traditional public housing, but they’ll have the same income requirements and subsidized rents.

“The bottom line is we’re looking at ways and means to modernize our apartment complexes to preserve the assets for 20 to 25 years down the road,” Parks said. “The key is to provide the housing regardless of the format. I don’t think we have a choice.”

In Raleigh, however, Beam said he doesn’t think RAD is a good fit for any of the housing authority’s properties. He said that participation would mean “locking in a historically low funding amount,” and the Capitol Park plan would make it “easier to maintain the property.”

Council has questions

McFarlane and others on the City Council will question Beam about the Capitol Park proposal when he presents his annual report at 1 p.m. Tuesday.

The mayor says she has asked city attorneys to explain what – if any – authority the council has over the housing agency’s plans. She’s responsible for appointing board members, but the city doesn’t oversee day-to-day operations, nor does it provide any funding. The housing authority board approved the Capitol Park plan on Dec. 5.

In years past, the annual report has been approved unanimously with no discussion. That isn’t likely to happen Tuesday.

In addition to the Capitol Park changes outlined in the written report, council members say they’ll ask about Beam’s $240,000 annual salary and his use of comp time to attend magic conventions.

The questions follow a series of News & Observer stories showing that Beam has been taking up to 11 weeks off each year, using a combination of vacation, sick and comp days.

Some of the comp time was accrued by working beyond the standard 7.5-hour work day. Comp time is unusual for a manager at his level.

Beam, whose total annual compensation has reached as high as $280,000 with bonuses and other incentives, has full support from his board. He is one of the highest-paid housing directors in the country.

Rainey says she’ll call on McFarlane on Tuesday to dismiss the entire housing authority board and appoint new members. She’ll also ask council members to join U.S. Sen. Chuck Grassley and U.S. Rep. George Holding in calling for an investigation of the agency.

“There’s no checks and balances,” she said.

Campbell: 919-829-4802; Twitter: @RaleighReporter

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