Time for a Public Option: Social Housing Is the Right Fit For the Mamdani Administration
Mayor-elect Zohran Mamdani has proposed an ambitious agenda, topped by plans for addressing housing unaffordability. His platform calls for a historic investment in public sector development, harkening back to New York’s trailblazing era as a “beacon of creative, public sector-led, affordable housing production.”
But what does a plan that embraces this history look like? In a new report, the Community Service Society of New York answers that question, laying out a blueprint for the next era of social housing.
Local US governments are embracing the idea of "social housing," a.k.a., a public option. Such publicly financed, democratically controlled housing is familiar to residents of the New York City Housing Authority (NYCHA) and Mitchell-Lama developments. Our new model includes permanent affordability and economic sustainability.
At its heart is a New York City version of a “revolving loan fund.” This NYC Revolving Housing Construction Fund (RHCF) would be a City-backed pool of low-cost, long-term capital to finance housing and replace expensive private debt. Instead of subsidizing private developers, the RHCF would make investments in City-built housing, recycling revenues back into the fund for future construction.
NYCHA and its subsidiary, the Public Housing Preservation Trust, are the perfect homes for RHCF investments. (The trust is a State-created public entity, akin to the School Construction Authority. It’s authorized to build and renovate housing using enhanced and flexible procurement procedures and with accountability to its NYCHA residents.)
While NYCHA's capital project backlog and troubled past give reason for pause, tasking the agency with creating new housing is part of the solution. For decades, the agency has managed a massive portfolio with low rents and dwindling subsidies. Adding new, mixed-income buildings with healthy cash flows would allow NYCHA to build a strong balance sheet, advance its preservation goals, and finally add to the city’s affordable housing supply.
We modeled three hypothetical scenarios showing how this financing would actually work.
Imagine that a market-rate project in Brooklyn stalls. NYCHA could come in and use the RHCF to finish the job and allow the private firm to responsibly exit the deal. The agency would then own a strong asset. Another example: A full overhaul of a NYCHA development that also includes building a combination of new subsidized and market-rate apartments on site, heavily leveraging federal Section 8 low-income housing vouchers. And finally, a deeply affordable project in the Bronx could be made possible thanks to revenues from the other two.
Key to this plan is cross-subsidization: rents from higher-income households and vouchers support deeper affordability for lower- and middle-income ones. This mix builds stability, social integration, and financial sustainability. However, this requires letting go of two notions: one, that government shouldn't compete in the real estate market; and two, that public housing investments must only serve low-income people.
Detractors may ask, why not just target more resources at the private market? The answer is: we must do both. The private affordable housing sector is necessary, and we should leverage all tools, like the expanded Low Income Housing Tax Credit (LIHTC) and recent approved zoning and land use review changes. The new administration should squeeze every ounce it can get out of the private sector.
But it’s also true that that will not be enough. Private real estate production is tied to the flow of credit and exposed to booms and busts. Existing programs help, but public development is crucial to truly smooth that cycle.
Additionally, increasing supply isn't the only reason to embrace social housing. The current system for building affordable housing rests on tax credits and complex deals, even as private equity demands high investment returns. Development fees for bankers, lawyers, and consultants eat up public dollars long before tenants move in. Social housing can move those kinds of costs into a public expense budget where technical experts can be used more efficiently.
Furthermore, democratic control is central to social housing. It eliminates the costs private developers carry in order to comply with necessary public oversight, Meanwhile, priorities like sustainability, resident health, and community needs are inherent, not add-ons. And most importantly, project cash flows don't go to investor trust funds; they go back into building more housing.
Of course, there is no silver bullet. This public option must be supplemented by a broad panoply of other housing policy reforms. That includes addressing racist, exclusionary zoning. Ending single-family zoning and allowing NYCHA to overrule odious restrictions is a start. The new administration must reorient housing agencies to find efficiencies and adjust NYCHA structure to take on this task.
Come January, the new mayor will have to confront the reality of a housing production system shot through with inefficiencies. It only gets into gear when credit is cheap and there is a profit to be made. It throws subsidies at and forgoes tax revenues from an industry that can almost always secure higher rents by other means. It relies on legal oversight to get landlords to behave with basic decency toward tenants. It rarely builds units in wealthy white areas, reinforcing patterns of racial and economic segregation.
Changing all that begins with believing that government can actually get things done. But if, using social housing strategies, Singapore, Vienna, Montgomery County (MD), Atlanta, Helsinki, and Shenzhen can do it, why can't New York City build again?
Iziah Thompson is a senior policy analyst at the Community Service Society of New York focused on housing. He writes a monthly newsletter about public housing issues called “NYCHA Needs to Know.”
Photo by: nychajournal.nyc
