Let's Make a Deal

By: Cory OldweilerThe federal government broke its own rules when it approved Chicago’s sweeping public housing plan on Feb. 5, The Chicago Reporter has learned.

The U.S. Department of Housing and Urban Development authorized Chicago’s "Plan for Transformation" under a pilot program that has been closed to new applicants for nearly three years.

The program, called Moving to Work, allowed HUD to grant the Chicago Housing Authority waivers from federal regulations governing how public housing authorities spend money and run their developments.

But the CHA never submitted a formal Moving to Work application, and the agency fails to meet the program’s admissions standards, the Reporter found.

Moving to Work wasn’t the city’s first choice. Mayor Richard M. Daley wanted freedom to transform public housing, much in the way he has taken on the public school system. To that

end, the city asked HUD to approve its CHA plan under the Home Rule Flexible Grant program, which would give the city almost total autonomy.

Moving to Work and Home Rule are the only initiatives that allow HUD to grant many of the regulatory waivers Daley sought—without congressional approval.

City officials said HUD rejected their request, then suggested the Moving to Work program, which allows the federal agency to retain more control over how its funds are spent. But when negotiations stalled, a frustrated Daley turned to Congress for help. Soon after, HUD approved the city’s plan under Moving to Work.

But the Plan for Transformation does not meet Moving to Work’s goals, which aim to help families move into the work force, increase low-income housing choices and improve cost effectiveness.

And the arrangement may have broken the law, public housing advocates say, leaving the plan vulnerable to legal challenges.

HUD can’t set admission requirements and then ignore them later, said attorney Richard M. Wheelock of the Legal Assistance Foundation of Chicago, which represents the CHA’s Central Advisory Council, a group of elected tenant leaders.

Without the legislative waivers granted under Moving to Work, the "whole plan could be thrown out the window," he said. "Congress did not intend [the program] to bail out low-performing agencies."

Federal officials might have thought "maybe we can sneak it in under [Moving to Work], because that is the only possible authority," he said. "Other than that," he added, "Congress would have to change the law with respect to what happens in Chicago, which they have not."

Wheelock and other Chicago housing attorneys are closely examining the Moving to Work agreement. He declined to comment on possible legal action.

Julia Stasch, Daley’s chief of staff, said the city accepted HUD’s decision on faith, and she rejected suggestions that the CHA didn’t qualify.

"We’re in the program that HUD felt would be the appropriate vehicle [for what the city requested]," she said. Daley wants the CHA’s transformation to be a "signature initiative" of his administration, Stasch said, but she acknowledged the city did not look into the agency’s eligibility for Moving to Work. "When a governmental body says they have the authority to do this, I think that’s enough," she said.

Deborah Vincent, HUD’s general deputy assistant secretary for public and Indian housing, said the eligibility criteria for Moving to Work, established in 1996, are "not relevant issues today." Establishing guidelines "wasn’t anything we were legally bound to do."

Vincent said HUD’s lawyers had prepared a document supporting the department’s position, but later said the authorization was given verbally.

HUD’s official notice about the program detailed very specific application requirements, admissions criteria and a firm deadline for applicants.

In the 1998 Quality Housing and Work Responsibility Act, Congress even named two housing authorities—Pittsburgh and Charlotte—that could apply for Moving to Work after the deadline had passed. The CHA is not named in the law.

As its name implies, Moving to Work was touted as a welfare-to-work initiative when HUD Secretary Andrew M. Cuomo announced the 24 participating housing authorities on Oct. 30, 1997.

"We will give well-run housing authorities new flexibility from HUD regulations, so they can help more residents get jobs and become self-supporting," he said. "This benefits residents by giving them a chance to climb out of poverty and into the middle class under their own power."

Cuomo also said the three-year initiative would allow housing authorities "to help low-income residents become homeowners … to operate, produce, modernize and replace public housing," and to do a better job administering the federal Section 8 program, which provides rent subsidies for private market housing.

Vincent conceded that no other housing authority should expect the treatment Chicago received. Moving to Work "is not an option for others," she said. And HUD will not issue another Moving to Work invitation, she added. "It’s not our intention to do anything further [with the program]."



Mayor Richard M. Daley and Andrew M. Cuomo, secretary of the U.S. Department of Housing and Urban Development, sign the city’s “Moving to Work” agreement on Feb. 5. Observing are (from top left) Chicago Housing Authority Board Chairperson Sharon Gist Gilliam; U.S. Sen. Richard J. Durbin (D-Ill.); U.S. Reps. Bobby L. Rush and Danny K. Davis, both Chicago Democrats; and Mamie Bone, chairperson of the CHA’s Central Advisory Council. Flanking Daley and Cuomo are CHA Chief Executive Officer Phillip Jackson (left) and HUD Assistant Secretary for Public and Indian Housing Harold Lucas. (Photo courtesy of the CHA)

Seeking Waivers
In August 1998, Cuomo announced he was removing the CHA from HUD’s "troubled status" list and would soon turn control over to the Daley administration, ending three years of federal oversight.

City officials spent the next eight months preparing for the takeover, Stasch said, examining virtually every aspect of the CHA, from the number of residents and employees to the details of its budget.

The CHA needed "a radical, urgent, dramatic effort," requiring the kind of autonomy the "status quo federal regulation environment" did not allow, Stasch said. In the spring of 1999, the city asked HUD to consider the still-unwritten CHA Plan for Transformation under the Home Rule initiative, created by the 1998 housing act.

Home Rule seemed a good fit for the CHA. The program aims to reduce the concentration of public housing, and 55 of the 100 available spots are reserved for under-performing agencies. Home Rule turns over control of most public housing decisions to local governments. Federal funds come directly to the city, which in turn funds the housing authority.

But Home Rule was not a "path [HUD] wanted to go down," Stasch said. The reason, she speculated, was the program was "not an initiative of the Cuomo administration" and had been "crafted by Republicans." U.S. Rep. Rick Lazio of Long Island, N.Y., chairman of the U.S. House Subcommittee on Housing and Community Opportunity, authored the 1998 housing act.

Vincent said no agency has ever shown an interest in Home Rule, and it has never been implemented. Contrary to the city’s position, she said HUD never rejected Chicago’s Home Rule request because "there was no proposal on the table."

Instead, HUD told the city its plan could be approved under Moving to Work. "The CHA fit [Moving to Work] perfectly," Vincent said. HUD felt more comfortable because it had experience with the program.

Stasch said she had never heard of Moving to Work until HUD suggested it. One advantage, she found, was that federal funds would go directly to the CHA. Critics might raise questions if public housing funds were funneled through the city budget, she said.

On May 27, 1999, the city and HUD signed a Memorandum of Understanding that spelled out the terms for the CHA’s return to local control. Under the agreement, the CHA would submit its public housing plan within six months, along with any requests for waivers from federal regulations. And HUD promised a "partnership approach" with the CHA to assure the plan would be approved.

The Daley administration took control of the CHA on June 1.

But the partnership was not always amicable. On July 15, new CHA Chief Executive Officer Phillip Jackson called a news conference at a South Side warehouse full of laptop computers and bicycles. He said the warehouse illustrated HUD’s mismanagement of the housing authority.

"Today we are lifting the curtain on years of mismanagement and wasteful spending to assure the residents of the CHA and the taxpayers who support public housing that we will no longer squander their money," Jackson told reporters.

CHA Chief Operating Officer Bridget Reidy acknowledged the press conference was set up by bringing bikes and computers from other locations to one warehouse.

Howard Glaser, counselor to HUD Secretary Cuomo, was incensed. The next day, he sent a handwritten fax to Stasch and David Yudin, director of the city’s Office of Intergovernmental Affairs in Washington, D.C., asking, "What kind of bullshit is this?" Two-and-a-half hours later, he sent a second fax to Yudin: "Consider your deal cancelled. Howard Glaser."

Stasch found Glaser’s reaction surprising. City officials didn’t think HUD would be "so personally affronted" by Jackson’s warehouse press conference, she said, but HUD viewed the event as a repudiation of its partnership with the city.

Glaser would not comment for this story, but Vincent said HUD "was disappointed that one of [the CHA’s] first actions was to criticize the department." She added, "We all are responsible for the management of the [Chicago] housing authority."

On Sept. 30, the CHA released a draft of the Plan for Transformation, a dramatic program that would give the city 10 years of federal funding—$1.5 billion—to spend in the next five to seven years, tear down all 52 high-rises and slash the family public housing stock by 47 percent. The plan also would relocate about 6,000 families into Section 8 housing.

Tenant leaders immediately criticized the plan, saying it failed to adequately protect residents. At the Central Advisory Council’s request, Wheelock presented the group’s objections to the CHA and HUD.

By the fall, negotiations with HUD, already strained because of the warehouse incident, had stalled. Daley turned to Lazio, the Long Island Republican, for help. "They felt discouraged about the level of assistance they were getting from HUD," Lazio said. "My perception was that [the city] didn’t feel HUD shared their [vision]."

On Jan. 20, Lazio wrote to Daley and invited him to testify at congressional hearings because HUD "continues to be a barrier to your reform efforts." The hearings, scheduled for early February, were canceled when HUD approved the plan.

On Saturday, Feb. 5, Jackson, HUD Assistant Secretary for Public and Indian Housing Harold Lucas, Daley and Cuomo signed the Moving to Work agreement in Chicago.

Bad Match
Moving to Work allowed HUD to waive regulations in the 1937 Housing Act. It allows applicants to bundle their capital, operating and Section 8 budgets, permitting them to move funds from one budget to another, as needed.

Many housing authorities also sought waivers of federal lease and rent guidelines. For example, an agency could help residents move into the work force by holding down rents even as tenants’ incomes rise. Public housing residents normally pay a percentage of their income as rent.

Moving to Work regulations directed HUD to choose applicants based on the department’s rating system and other factors.

In December 1996, HUD extended a "one-time" invitation to apply for the program, setting a deadline of "4:00 p.m., Eastern Time, on March 18, 1997." And HUD’s Web site states "no new applications will be accepted."

The Moving to Work invitation listed 11 specific submission requirements. They included an authority’s management ratings scores for the past three years and "incentives proposed by the [authority] to encourage self-sufficiency."

Forty-five housing authorities submitted applications. HUD officials evaluated them and assigned scores in six categories—with 110 points possible. Twenty-four agencies won approval.

Vincent said the CHA’s Plan for Transformation constitutes the agency’s Moving to Work application. But the plan comes up short in at least four of the six categories, the Reporter found:

1. Management performance. According to HUD’s invitation, if an applicant’s current Public Housing Management Assessment Program score was not "at least 80, then its application will not be considered further." The score is based on several factors, including how housing agencies handle vacancies, collect rents and make repairs.

The CHA’s current score is 69.96, placing the authority 3,001 out of 3,165 agencies whose scores are reported in HUD’s Housing Authority Profiles database. In fact, the CHA has never scored close to 80, agency officials acknowledge.

In the Plan for Transformation, CHA officials asked for a five-year exemption from future evaluations. HUD turned down the request but agreed to exclude from evaluation all vacant units and those scheduled for modernization.

That concession changes little, the CHA’s Reidy said. "We will never pass [the evaluations] with the condition of our buildings."

2. Capability. To qualify for Moving to Work, housing authorities had to be well-managed and offer examples of success.

The CHA had a series of management problems that led to HUD’s takeover in 1995. And many changes have come through the courts. The 1969 Gautreaux judgment order established the scattered-site program, which required the CHA to build public housing throughout the city. In 1995, a federal judge dictated renovations and replacement housing at the West Side’s Henry Horner Homes.

And even with Gautreaux in place, U.S. District Court Judge Marvin E. Aspen in 1987 found the CHA incapable of running the scattered-site program and appointed a receiver, The Habitat Co., to oversee construction of all new public housing.

After HUD’s takeover, department officials found the CHA had mismanaged Section 8 housing and hired CHAC Inc., a private firm, to administer the program.

3. Quality and feasibility of Moving to Work plan. Since the CHA did not submit a formal Moving to Work application, it is impossible to evaluate this category. But the Plan for Transformation raises many questions about its likelihood of success. [See related story on page 6.]

None of the other housing authorities under Moving to Work plan to tear down units; in fact, all seek to preserve or expand their existing housing stock. One purpose of Moving to Work is to increase low-income housing choices, and Vincent said "the whole [CHA] plan is about choice."

Yet the CHA’s plan reduces the number of families living in public housing and relies on an already tight housing market to absorb the rest, critics say.

4. Self-sufficiency. Moving to Work’s other participants had specific programs, ranging from High Point, N.C., which requires one member of each family housing unit to work at least 32 hours per week, to Minneapolis, Minn., which provides five years of Section 8 assistance to 50 eligible families to help them purchase homes.

The CHA plan states that all public housing families "should be working towards economic self-sufficiency" but offers few specifics to promote this goal or to help tenants find work. "Before we can deal with the jobs directly, we need to deal with our housing," Reidy said.

The plan sets aside money for resident apprenticeships to work on construction and rehabilitation projects, Reidy said. But that program is a requirement of the 1968 Housing Act, not a CHA initiative.

The agency also cut the fiscal year 2000 budget—from $4.4 million to $348,000—for its Office of Policy, Services and Programs, which funds education and training. Instead, it plans to hire "service connectors" to direct residents to existing services in their neighborhoods. Reidy said the CHA is eliminating most services to residents because the agency is "not qualified" to provide them.

One victim of the cutbacks is the welfare-to-work program at the Charles A. Hayes Family Investment Center, at 4859 S. Wabash Ave., near the Robert Taylor Homes. When the CHA announced the project on Aug. 8, 1997, it called the future center "the authority’s most powerful welfare-to-work tool." The center’s 2000 budget is $442,000, down from $1.5 million last year.

5. Resident and community support and involvement. The CHA submitted a draft plan for public comment on Sept. 30, 1999. Prior to its release, the agency consulted 15 times with a Resident Advisory Board, made up of Central Advisory Council members and Section 8 representatives, according to the CHA plan. During the ensuing three months, the CHA held 23 town meetings to get public comment on the plan and continued to meet with the advisory board, the plan states.

The Advisory Council eventually backed the plan but opposed the "massive demolition and insufficient replacement housing for very low-income families," according to a council statement.

6. Local and national impact. Successful or not, the plan will make an impact, since it will decide the fate of more than 40,000 residents in family public housing.

Nothing New
The Moving to Work deal is not the first time politics has influenced HUD’s decisions, said Lawrence Vale, associate professor of urban studies and planning at the Massachusetts Institute of Technology.

In August 1993, HUD awarded the first HOPE VI grants on a competitive basis after evaluating 41 applicants, including the CHA. The federal grant program has awarded about $500 million a year since then for demolition and revitalization.

Eight authorities received full funding; seven others got partial funding. Failed applicants included the Housing Authority of Baltimore City, although Sen. Barbara A. Mikulski (D-Md.) was a key sponsor of HOPE VI legislation; the San Antonio Housing Authority, home town of then-HUD Secretary Henry Cisneros; and the CHA, whose executive director at the time, Vincent Lane, was co-chairman of the National Commission on Severely Distressed Housing, which recommended HOPE VI legislation.

The CHA applied for a HOPE VI grant for the Frances Cabrini Extension North, on the Near North Side. The application placed 25th out of 41 applicants.

Getting turned down, despite Lane’s close ties with HOPE VI, was "embarrassing for Chicago," as well as for Baltimore and San Antonio, Vale said.

He said Congress felt the political pressure and in 1994 directed HUD to continue "funding right down the list."

The CHA received $50 million of that year’s $755 million in HOPE VI grants. Only one other recipient, the Puerto Rico Housing Authority, received as much money. Baltimore and San Antonio got their grants, too.

But when it comes to their Moving to Work arrangement, HUD and city officials don’t see what all the fuss is about. There is a plan now, and it doesn’t matter how it came about, they say.

Stasch said an attempt to "derail" the CHA plan would be "stupid."

"We need to keep our eye on the ball here," Vincent added. "It doesn’t matter how we got here."