Only One Home Sold to Low-Income Resident in 1st Year of Program : Public Housing Plan Seen Failing

Only one home has been sold during the first year of a three-year government experiment in selling public housing to low-income residents, and one community has pulled out of the program, according to witnesses testifying recently before congressional subcommittees.

The program is showing signs of unraveling, chiefly because few low-income families can afford homeownership, even with generous financial aid, critics said. Reagan Administration witnesses contend that preparations for sales are on schedule, however, with purchases of an estimated 300 housing units to be completed by the end of the year.

The Lowell, Mass., housing authority has withdrawn from the program, and the St. Louis authority refused even to apply, despite the insistence by the Department of Housing and Urban Development that St. Louis was being “actively considered” for participation, according to officials of both agencies.

While the Lowell housing agency has not been replaced in the experiment, a HUD spokesman said, there are about 2,000 units across the country that are scheduled for sale by 17 public housing agencies.

Merrian G. Snyder, a 17-year employee of the McKeesport, Pa., Public Housing Authority, became the first, and so far, the only, homeowner in the experiment in January when he bought the three-bedroom house he and his family have lived in for the past three years for $25,000. The Snyders, with an annual income of $20,000, make monthly payments of $400, according to a HUD announcement. HUD Secretary Samuel R. Pierce Jr. attended the ceremony marking the sale of the first of 10 homes the McKeesport housing agency plans to sell.

Restrictions Too Lax

Critics of the program also told the House employment and housing subcommittee that resale restrictions designed to keep the houses within the range of low-income buyers are too lax in several communities, that inadequate provisions are being made to replace the low-income rental units to be sold and that the ownership programs will result in displacement of tenants who cannot afford to buy the units in which they live.

An attorney representing two tenants of the Brooks-Sloate public housing project in Paterson, N.J., told the subcommittee in a letter that her clients’ incomes are too low to qualify them for the homeownership program. As a result, the tenants will have to move out because “there is no provision to allow” nonpurchasers to remain in the project.

Although the Paterson Housing Authority is required to offer them apartments in other public housing projects, “my clients both waited many years to get apartments (in the Brooks-Sloate housing) and do not want to move,” said Peggy Earisman of the Passaic County Legal Aid Society. Brooks-Sloate is “one of the nicest, if not the nicest project in Paterson.”

The 242 units of public housing scheduled for sale as a cooperative in Paterson “are being lost as housing for those who desperately need shelter,” Earisman wrote. She said some of her clients have been on the waiting list for eight years, and the housing authority has not accepted new applications since 1983.

Won’t Be Forced Out

June Q. Koch, HUD assistant secretary for policy development and research, said the Paterson tenants would not be forced out of their homes. “They will not have to move unless the housing authority finds a way of working with them and they will want to move,” Koch said in answer to questions from Rep. Barney Frank (D-Mass.), the subcommittee chairman, who read portions of Earisman’s letter during the hearing.

Lowell officials pulled out of the program because “we found that even if we gave them the housing, for a dollar, or a very low down payment,” public housing residents “couldn’t have supported the cost over the next few years,” James M. McCarthy, executive assistant to the agency director, said in an interview this week.

A study by Boston development consultant Emily P. Achtenberg, which was submitted to the subcommittee, said only five of the 14 families living in the Lowell units that would have been sold as a cooperative could afford to pay the required $350-a-month fee. The monthly charge would be too much for the residents to handle even if they were required to pay only a token purchase price and if property taxes were abated, according to Achtenberg’s report.

The St. Louis housing authority decided not to apply for the program because all its units are needed for families who must rent, Michael Jones, the authority’s director, told the subcommittee. With more than 5,000 people on the public housing waiting list, St. Louis officials felt “it is incumbent upon us to increase the number of rental units, not decrease them,” Jones said. “Every unit placed in any homeownership program is no longer available to rent to other low-income Americans.”

Left With Costly Units

HUD rules specifying that only housing in good condition can be sold meant that the St. Louis agency would be left with the units that are the most expensive to maintain, and at the same time would have its income reduced, Jones said. When a unit is sold, the housing authority loses the rental income and federal subsidy for it.

The Denver Housing Authority was more enthusiastic about the experiment, welcoming it as a chance “to test the viability of the conversion of old, densely populated, row-type public housing stock into a cooperative homeownership,” according to the testimony of John Helms, deputy executive director of the agency. The Denver authority plans to demolish 20 of 64 housing units in a rundown, high-crime area of the city and renovate the remainder for sale to low-income families, according to Helms.

In about half of the cities where public housing is to be sold, including Denver, the units are “located in an appreciating or revitalizing area,” according to Hilary Silver, assistant professor of sociology and urban studies at Brown University.

Strong safeguards will be needed to keep the units within reach of other poor families when they are sold, but only a few of the participating agencies have made “provisions to keep the properties . . . in the low-income housing stock: Denver and Paterson have some form of limited-equity cooperative and Reading (Pa.) requires that all future sales be to the (public housing authority) so it can recapture the unit for low-income families.”

Most of the other agencies, however, “have resale restrictions limited to five or 10 years,” while “one extends to 15 years,” Silver said. “These restrictions were designed to prevent windfall profits, not keep the unit in the low-income housing stock.”

In a November, 1985, letter to Frank, HUD Secretary Pierce said the Administration believes that the issue of windfall profits “is being successfully addressed” by the participating authorities “without unduly restricting one of the benefits of homeownership--to anticipate an appreciation in value of the property.”

Replying to a recommendation from Frank that HUD provide replacements for the housing units sold, Pierce wrote that the participating housing authorities “are taking suitable measures to ensure that replacement needs are met.” Several local agencies plan to use the sales proceeds to replace units that are sold, he said.