ClockThe public housing program, our nation’s first investment in housing, is 77 years old this week. Although for most of the last 20 years much of the funding for revitalizing public housing has come from private sources, in the minds of the average American, public housing is a government program that should be accountable solely to the U.S. taxpayer. Congress has accelerated its effort to pull back from public housing over the last 3 years by cutting the capital fund by over 25 percent, reducing operating assistance below needed levels and cutting HOPE VI/Choice Neighborhoods to a fraction of its former self. These changes, coupled with the use of the new Rental Assistance Demonstration program (RAD) to convert more units from housing authority to private ownership  means that more and more lenders and investors have an increasing amount of proverbial “skin in  the public housing game”. This fundamental shift in the source of funding for this program begs the questions: Can we legitimately call  it “public housing” anymore? At a minimum, given the shift in funding sources, shouldn’t there be a fundamental change in the relationship between the Federal government and the local housing authorities that are now not functioning solely as the administrator of a government program, but rather as a public-private enterprise?

Unfortunately, it seems that Congress is at best, schizophrenic on this topic. At worst, some argue that HUD and our lawmakers are taking positions that directly undermine the success of the public housing program. One area where this is apparent is in the debate around capping the salaries of housing authority executives and tying them to the HUD pay scale. For several years, Senator Charles Grassley has decried the salary levels of just a handful of housing authority executives. As of last week, at Senator Grassley’s request, HUD agreed to publish on its website by May 2014 the salaries of each of the top two highly paid executives at each of the over 4000 housing authorities in America. Over the last two years, Senator Grassley and others in Congress have succeeded in passing legislation requiring that Federal funds not be used to support housing authority employee compensation in an amount that exceeds that of HUD Office of Public and Indian Housing employees earning at the top of the government scale (approximately $ 155,000 per year). Notably, a National Association of Housing and Redevelopment Officials (NAHRO) public information request found that certain certain HUD employees are paid in excess of this cap. Putting aside the false comparison between the job requirements of HUD Office of Public and Indian Housing employees and those working at local housing authorities, HUD is a 100-percent publicly funded organization that has no responsibility for leveraging private investment. At the small number of public housing authorities where the executive compensation reaches or exceeds the $ 155,000 level, the employees are answering not only to HUD, but to the private lenders and investors who are putting millions into their portfolios. Lenders and investors look very carefully at the qualifications and credibility of the housing authority staff in deciding whether to make such investments and at what interest rates. In other words, being able to attract and retain talented people at housing authorities is critical to Congress’s goal of encouraging more private investment and less public investment in public housing. Salary caps, especially the poorly thought out ones that have been proposed, completely undermined this goal.

The Public Housing Authorities Directors Associate (PHADA) has done an excellent analysis of actual executive salaries in public housing. As the PHADA piece points out, not a single dollar of tax payer funds is saved by the salary cap policy and it is clearly counter-productive to the goal of ensuring that housing authorities have quality management staff with the skills and experience to best leverage this important and diminishing resource. The salary caps are already encouraging some talented people to choose to retire, leave for other opportunities, or even worse, not choose to become involved in public housing work at all. If Senator Grassley’s effort is truly to help ensure housing authorities are good stewards of the Federal dollars that are invested in this program, shouldn’t he welcome a policy that incentivizes smart, creative minds to choose this work? If the Federal government wants to offload some of its financial responsibility for public housing to the private sector, should it not also provide commensurate flexibility to private actors to mitigate their risk by ensuring that housing authorities can attract qualified people at the helm of these organizations who can protect their investment?

Public housing is also being singled out for this and other types of over regulation for many reasons, not the least of which is that “public” is in the name. Congress has not chosen to impose similar salary restrictions on other housing operators that use HUD funding under the Section 8, multi-family, CDBG, HOME and others programs, even though many of other organizations may be even more dependent on HUD funds that some housing authorities. Even more egregious is the fact that the Federal government invests infinitely more in universities, hospitals, and at one point, banks, but the compensations structures are not tied to the salaries of their Federal regulators. Many non-profit players participate heavily in government programs and use reasonableness guidelines for executive compensation issued by the IRS that consider multiple factors.    

So why create a strict salary structure for public housing authorities? Other than perceived political benefit of its proponents, it’s hard to understand. In my less cynical moments, I like to believe that some of this is really all a misunderstanding of what public housing is and isn’t.  Public housing has not been a traditional government program in many, many years. At Ballard Spahr, we have had the opportunity to assist a number of housing authorities as they outgrow the old model and transition their business practices to better reflect what they are today – sophisticated, non-profit housing and service providers that rely on a variety of sources – government, private, and philanthropic – to assist low income households. A Federal regulatory structure that allows housing authorities to maximize opportunities in the private market, rather than be undercut by them, like the salary cap proposal does,  would go a long way toward protecting and preserving this important housing resource.  Unless or until the Federal government provides full funding to the public housing program, perhaps it has lost the right to call it “public housing”.