On August 1, 2023, Mayor Eric Adams addressed the community at the Nostrand Houses to discuss the Public Housing Preservation Trust. His speech shed light on the importance of preserving public housing and its benefits to the residents of the community. The Mayor’s visit was a significant event for the locals, as it highlighted the government’s commitment to improving the quality of life for those residing in public housing.
The photograph above shows an image captured by Ben Fractenberg for THE CITY.
Mayor Eric Adams is advocating for an increased budget to address the deteriorating state of New York City’s public housing. His argument is supported by a cost estimate of $78.3 billion, as announced by NYCHA in July.
The authorities have stated that an estimated 161,400 aging apartments require complete rehabilitation to be deemed fully functional and habitable.
According to recent estimates, upgrading a single public housing apartment would cost around $485,000 per unit. This estimate is ringing alarm bells, as it surpasses the median sales price of a co-op apartment in New York City, which is currently around $480,000. This finding is significant as it highlights the dire need for investment in public housing in order to provide safe and affordable housing for low-income families.
NYCHA’s physical needs assessment (PNA) has revealed that the cost to fully rehabilitate some developments is even higher. For instance, at the Edenwald Houses, the largest NYCHA development in The Bronx, the estimated cost to rehab 2,039 apartments is $1.1 billion, which amounts to $548,951 per unit. This means that each apartment’s rehabilitation will cost more than half a million dollars.
Upon investigation by THE CITY, it was discovered that NYCHA’s estimated per-unit cost, known as the PNA, is consistently higher than the actual cost when the agency focuses on a specific development for a complete rehabilitation. In fact, the actual cost usually falls significantly lower than the PNA estimate.
Some experts have raised doubts about the accuracy of the Public Housing Authority’s (PNA) estimate for fixing NYCHA’s deteriorating infrastructure. Critics argue that NYCHA uses the high cost estimate to justify delaying immediate repairs for tenants. However, THE CITY’s investigation suggests that there is a more realistic target for improving the living conditions of NYCHA’s 400,000 residents.
According to THE CITY’s investigation, the Rental Assistance Demonstration (RAD) program, in which private-sector developers manage NYCHA properties while NYCHA retains ownership, has resulted in per-unit costs ranging from $124,000 to $384,000 this year. This amount is significantly lower than the $485,000 per-unit cost estimate presented by the PNA.
The RAD plan for Edenwald is a prime example of how comprehensive renovations can be done at a much lower cost. The plan calls for $783 million in renovations with a per-unit cost of only $384,000, which is significantly lower than the $548,951 per unit cost estimated by NYCHA’s PNA for Edenwald. This is a clear indication that the RAD plan is a cost-effective solution that can help revitalize public housing and make it more accessible to those who need it the most.
In all nine developments identified for the RAD program, NYCHA’s PACT (Permanent Affordability Commitment Together), THE CITY’s investigation found that NYCHA’s PNA projections consistently exceeded the amount deemed necessary by NYCHA to carry out a complete rehabilitation of the development under RAD.
“An Excuse to Avoid Problem-Solving”
Concerns over the accuracy of the PNA surfaced on Friday, both within and beyond City Hall, coinciding with a two-hour hearing held by the public housing committee of the City Council to discuss the analysis.
As the 2023 PNA was completed, a group of tenants gathered outside to express their concerns regarding the biased narrative they believed was embedded in the report. They pointed out that NYCHA only sampled 30 out of their 320 developments and randomly examined just 10% to 15% of the units in the buildings they did evaluate. The tenants demanded an independent physical needs assessment to be conducted.
During the City Hall Committee meeting, Alexa Aviles, the Chair of the Committee and a representative from Brooklyn, highlighted that the Public Housing Authority’s (NYCHA) Physical Needs Assessment (PNA) had surged from $45.2 billion to $78.3 billion within the span of five years. The rise in costs for construction materials has been the primary reason behind this steep increase, as per NYCHA’s explanation.
According to Aviles, the analysis conducted in 2023 was during a period of high inflation. Therefore, Aviles proposes that NYCHA should investigate whether the cost has remained the same now that inflation has subsided.
During the hearing, Sophie Cohen, a lawyer representing the New York Legal Assistance Group, shared that several public housing residents they work with have expressed their concerns about NYCHA management using the PNA’s high cost as an excuse to avoid making minor repairs. Cohen’s testimony shed light on the frustration felt by many residents who continue to face numerous issues in their homes despite the large sum designated for repairs.
According to Cohen, NYCHA often uses the PNA as a justification for not addressing issues. She shared an example of a tenant who needed repairs for her sink, but was informed that NYCHA couldn’t accommodate her request. The reason given was that there was a reported deficit of $78 billion in unfulfilled needs, and the tenant would therefore have to wait.
During a conversation, Aviles inquired from Shaan Mavani, who is the chief asset and capital management officer at NYCHA, whether he thought that the 2023 PNA accurately represents the actual physical requirements of the organization.
Mavany agreed with the idea, but also included a warning: “It’s crucial to remember that the PNA serves as a planning and capital development strategy tool at its core. While it does provide guidance for project planning, budgeting, and more, it cannot replace the need for cost estimating and other necessary tasks when working on an actual project.”
What’s in the Bill
The reason for the significant difference in rehab expenses between NYCHA and RAD lies in the way they calculate the cost of construction materials. NYCHA uses market-rate unit pricing, which is essentially the retail cost, while RAD allows private sector developers to negotiate the price down through economy of scale on specific projects and pay wholesale prices. This approach enables developers to reduce costs and achieve better value for money.
According to NYCHA officials, when it comes to RAD/PACT costs, the estimates are generally lower compared to PNA estimates. This is because of the detailed analysis that takes place before transferring a development into RAD. This analysis helps in determining the accurate cost estimate for a comprehensive rehab.
The RAD program involves the authority hiring an engineering firm to conduct a thorough “critical needs analysis” that includes inspecting a larger portion of units, specifically 25% compared to the 10 to 15% under the PNA. This analysis also involves interviewing residents and creating a comprehensive report. Additionally, the RAD developer conducts an in-depth investigation that typically lasts six to nine months and goes much deeper than the PNA. Mavani shared this information with the committee.
According to the U.S. Department of Housing & Urban Development (HUD), it is advisable for all public housing authorities to conduct a comprehensive assessment of necessary repairs every five years. This analysis is aimed at determining the requirements to upgrade all apartments to meet the standard of habitability over a 20-year period.
During an interview with THE CITY, Vicki Been, who previously served as the deputy mayor for housing in the de Blasio administration and is now the Weinfeld Professor of Law at NYU’s Furman Center, shared her recollection of the PNA. According to Been, the PNA served as the initial estimate for the cost of a proposed PACT development when she was in City Hall. However, she acknowledged that there were significant variations in the actual costs.
According to experts, the elevated figures in the PNA can be attributed to the method it employs. Essentially, the PNA considers every cost as an individual one and does not factor in the distinction between renovating a single apartment versus renovating all the units in a building.
As we all know, economy of scale plays a significant role in reducing the price tag. The more developments done in a particular area, the more it benefits from economies of scale. Similarly, building multiple apartments or an entire development leads to cost savings due to economies of scale. However, the PNA doesn’t consider these factors while estimating the cost of PACT rehab.
It has been observed that the cost of renovating a NYCHA development is higher compared to a private sector rehab. This is due to the unique characteristics of NYCHA, such as its procurement and labor costs, which are generally higher than the private market. Additionally, the time it takes to complete renovations in NYCHA developments is also longer.
According to Been, despite the requirement for RAD developers to pay wages that are similar to union scale as set by the state, NYCHA still has a labor force that may not be as well-trained as a private workforce. This could result in higher costs for the organization.
It’s a tricky task to determine the exact amount required to improve living conditions for the 400,000 people residing in NYCHA. It’s a delicate balance that needs to be achieved.
According to Been, it is essential to strike a balance between being too conservative and going too low when it comes to obtaining and spending money. In the PACT deal, there is a clear statement about the necessary actions that need to be taken, which helps to provide a more accurate estimate of the costs involved.
In every development that was placed under RAD this year, there was a noticeable difference between the actual costs and the inflated estimates produced by the PNA. This contrast highlights the advantages of RAD and its ability to efficiently manage costs and provide more affordable housing options.
- A $85 million PACT upgrade that includes “comprehensive repairs and upgrades” to all 523 flats in the Metro North and White Houses developments in East Harlem costs $162,000 per unit. This includes “common areas, public spaces, heating and cooling systems, elevators, security systems, and other building systems.” The PNA says that the buildings need to be fixed up to the tune of $124 million, or $238,000 per unit.
- A PACT repair of 598 units at the West Brighton Houses in Staten Island costs $100 million, or $174,216 per unit. Under PACT, NYCHA said, “Every apartment will be completely remodeled with new kitchens, bathrooms, flooring, windows, paint, doors, and other changes to improve the comfort and quality of life for residents.” On the other hand, the PNA calls for upgrades that cost $289,000 per unit and cost $172 million.
- The $174,528 price tag for each of the 1,272 flats in Harlem’s Manhattanville Houses is part of a $222 million plan to fix them up. This plan also calls for every unit to be completely remodeled and for major changes to be made to public and shared areas. The PNA has another, more expensive take: $280,597,320 in fixes at $220,595 per unit, for a total of $280,597,320.
- PACT will pay $135,000 per unit to make “comprehensive upgrades” to 952 units in three Bronx developments: Boston Secor, Boston Road Plaza, and Middletown Plaza. This will cost $128.5 million. NYCHA’s PNA estimate for these projects is $216 million, which means that each unit will cost $227,000.
- Moore Houses and E. 152nd Street, both in the Bronx, were chosen for PACT two weeks ago. NYCHA is still using the original PNA estimate, which said that 684 units would need $246 million in upgrades, or $359,000 each. They think that will change, though.
According to Michael Horgan, NYCHA’s spokesperson, they are currently relying on the PNA to determine the cost of repairs for the two developments. However, this estimate will be revised once the partner team has conducted investigations and inspections throughout these developments. Horgan assures that they will share the updated cost estimate upon closing.
Conservation Trust
NYCHA management and Mayor Adams often reference the $78 billion PNA estimate to garner support from Congress for additional federal funding and to persuade tenants to back the placement of developments into RAD/PACT. Recently, they have been leveraging this estimate to gain tenant approval for a new program, the Preservation Trust, which was approved by Albany last year and is aimed at generating funds.
NYCHA has proposed a plan to raise billions of dollars by issuing bonds through a non-profit trust established by the authority and City Hall. However, tenants must agree to the use of the trust in their respective developments. This trust is expected to bring in substantial funding for the NYCHA, but its success depends on the approval of the tenants.
Most recently, the $78.3 billion dollar figure was cited at an announcement held last month, where Nostrand Houses in Sheepshead Bay, Brooklyn was named as the trust’s first test case. During the announcement, Mayor Adams addressed reporters in an unshaded Nostrand playground, stating that NYCHA buildings are in need of $80 billion worth of repairs. He emphasized that the repairs required are not in millions, but in billions of dollars.
NYCHA management has stated that if tenants of Nostrand agree to participate in the trust, they plan to raise a whopping $600 million to upgrade the development’s 1,148 units. The estimate comes directly from the PNA, which has calculated that the development needs $606,873,755 worth of upgrades, which amounts to $528,635 per unit.
NYCHA’s initial estimate of raising $3.4 billion to repair 25,000 units through the Preservation Trust has drastically fallen short. In reality, the trust has only secured $52 million so far, a significant difference from the original estimate.
According to a report by the City Independent Budget Office, the cost per unit averages at $136,000. This office is responsible for monitoring municipal spending in the city.
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