Why Minneapolis’ housing authority is selling 717 homes to itself

Minneapolis Public Housing Authority
Photo courtesy of Minneapolis Public Housing Authority.

The Minneapolis Public Housing Authority will sell 717 of its housing units to a non-profit organization it created and runs called Community Housing Resources — one of the largest transactions of its kind in the country.

MPHA’s Board of Commissioners approved the sale — at $1 per property — at its meeting Wednesday. And then the same people, who make up the nonprofit’s board of directors, approved the purchase.

The board is selling these units to itself for essentially no money.

People who live in these units won’t be displaced and they won’t see their monthly costs go up, according to the MPHA, but the board estimates this bit of bureaucratic gimmickry will bring in an additional $3 million in federal funding annually.

“It’s going to allow us over the next five years to do a comprehensive rehabilitation of these houses all across the city,” said Jeff Horwich, a spokesman for the agency.

How?

The federal government offers higher rental subsidies to private landlords than it does its own public housing agencies, so by transferring properties to a nonprofit, the MPHA will get more federal money to manage the same units.

Make sense?

“It doesn’t make sense, but that’s just how it is,” said Jim Grow, an expert on public housing and attorney with the National Housing Law Project.

For the past 30 years or so, the U.S. Congress has shown an antipathy toward public housing, illustrated by meager appropriations that have failed to cover basic maintenance costs. The national repair backlog has steadily ballooned to an estimated $50 billion. That’s even after the federal government shed some 200,000 units during this period — down to 1.2 million units — mostly by demolishing homes beyond saving.

As public housing has fallen out of favor with lawmakers, they’ve looked to replace it with Section 8 vouchers and other rental subsidies for the private market. Still, Congress has never appropriated enough money to meet the need: Just a quarter of people who are eligible for vouchers actually get them.

The MPHA estimates it has $150 million in deferred maintenance across its 6,000 units.* An outsized portion — $30 million — is needed to fix up the 717 homes it just approved selling to its nonprofit. That’s because this group of homes are mostly single-family houses, which cost more to maintain than apartment buildings.

Without enough money for repairs, the roofs leak, furnaces falter and windows stay broken.

“(The Congress) starves public housing authorities of the resources that are needed to operate,” Grow said. “So housing authorities are definitely in this pickle when it comes to continuing to provide the quality of housing that residents deserve and the law demands.”

The Department of Housing and Urban Development allows public housing authorities to sell homes deemed “beyond repair.”

When that happens, the people living in those units get a special voucher so that they don’t lose their housing assistance.

Under a typical scenario, a person would take that voucher and find a private landlord willing to accept it, which is extremely hard to do in a tight rental market like the Twin Cities.

And so the transition from public housing to voucher-based support chugs along.

But the MPHA has the option, with the agreement of the tenant, of applying that special voucher to a home rather than to a person. MPHA will apply a voucher to every home that it’s transferring to the non-profit, so anyone living there for the foreseeable future would only pay 30 percent of their household income.

When these 717 homes transition from MPHA to its non-profit, rents for tenants will be kept low through these project based vouchers while federal subsidies for MPHA will go up.

In doing so, MPHA is disrupting the public housing-to-private market transition Congress is trying to encourage.

“Which is a good thing in terms of keeping public control over affordable housing,” Grow said. “I don’t think Congress intentionally created these other avenues but housing authorities have to be creative to get the resources to do their jobs.”

Across the country, other housing authorities have made similar moves, although few, if any, at this scale.

“If we can go through those hoops and get more money, but continue our oversight and our mission and not have to displace a single family, we’re going to do it,” Horwich said.

*This has story has been updated to include the correct number of housing units owned by the MPHA.