A new source of business is opening up through the privatization of public housing management. It may not be glamourous or exciting, but some of the largest private management companies are already entering into this challenging field.
The public/private partnership is not a new concept; it is the culmination of the vision of public housing leadership that has worked for long-term changes. Public housing management has always required a "holistic" approach to property management, merging the physical and social aspects of housing and resident needs. This requirement must remain a constant as the privatization of public housing management grows.
The Evolution of the Public/Private Partnership
The partnership between the public and private sectors of housing providers has been in existence since the Kaiser Commission Report of the late 1970s. This study concluded that in order to provide affordable housing for each and every American, the private sector had to be involved in property development and management. As a result, programs were developed to provide incentives for private industry to become involved in affordable housing. Hundreds of thousands of housing units have been developed as a result of this public/private partnership through programs including 221 (d)(3), 221 (d)(3)BMIR, and 236.
Although the original concept of the local public ownership of housing for lower income households was first introduced in the Housing Act of 1937, only a small amount of public housing was developed prior to World War II. Significant development started in 1949, at the same time resident income restrictions were first enacted. Preference was later given to those displaced during slum clearance. The concept of serving the poorest of the poor grew until strict restrictions forced housing authorities to serve very low-income residents almost exclusively.
As the resident base became poorer, the related social needs of the communities became greater. Court rulings during the 1960s made it more difficult for housing authorities to exercise judgment in admissions and evictions and hampered their ability to control the resident population. Additionally, the Brooke Amendment of 1969 limited rents to 25 percent of residents' income, greatly reducing the potential income for operations, renovations, and resident social programs. The combination of increased need and decreased cash flow made it difficult to maintain viable communities and, in extreme cases, made it difficult to simply maintain viable shelter.
There has long been recognition that change in public housing is needed. Many different attempts have been made using a variety of operating and modernization subsidies. Some of the most entrepreneurial work has been in the area of resident management. In 1971, the residents of Bromley-Heath public housing development in Boston formed the nation's first resident management corporation. Since then, public housing authorities (PHAs) have delegated control over a number of management functions to resident organizations. This movement has been viewed by resident advocates and policy makers as a pro-active means of solving some of the problems facing public housing today. Private companies that manage condominium and cooperative boards are well suited to step in and assist in the management of communities overseen by resident management organizations (RMOs). Technical assistance in maintenance, operations, marketing, and finance is needed by RMOs that want to learn and implement effective management practices.
In 1987, Congress amended the Housing Act of 1937 to permit the PHAs to use surplus funds for additional improvements or services (including technical assistance) for their properties. Between 1988 and 1992 the federal government provided assistance to almost 300 resident organizations.
In the Performance Agreement entered into on March 18, 1994, …