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Public housing: a private-sector alternative.

Public Housing: A Private-Sector Alternative Much of the rental housing stock in the United States is subsidized by state and federal programs. Because a substantial portion of those developments are privately owned by for-profit and non-profit groups, professional property managers, acting as agents for those owners, have gained considerable expertise in managing subsidized housing. Public housing (subsidized housing that is publicly owned by an arm of either the federal, state, or local government), however, is an arena in which private management opportunities have been scarce.

Housing authorities in the United States manage low-cost rental residences for 1.3 million elderly and family households. Most of those authorities have small, well-run portfolios.

But many larger housing authorities, particularly those in cities with portfolios abundant in family housing, appear to have difficulty managing their property operations.

Their problems are evidenced to the general public by frequent reports of residents that appear to be out of control and by physical plant maintenance problems that remain unattended and uncorrected. The public, alarmed and threatened by the spillover of problems into their neighborhoods and angered by the depreciating effect badly maintained public property has on the value of their own homes, is challenging authorities to find credible and financially feasible solutions.

In some cases, these calls for change have brought an unprecedented degree of state and federal intervention into the day-to-day operations of offending authorities and a concurrent loss of housing authority autonomy. Management-related issues are always at the forefront of these outside interventions. Proposed remedies have ranged from imposed management reorganizations or court receiverships, to the outright sale of public housind developments to residents.

A move toward privatization

Some local housing authorities are seeking solutions by inviting competent and experienced private property management companies to bid on the management of their portfolios.

The privatization of the public sector is not a new idea, nor is it one that is particularly popular in some segments of the public workforce. Nonetheless, it is a notion being viewed as a positive alternative today in some governmental forums, driven by the recognition that many public agencies have so often been unable to accomplish what legislators intended.

Speculation is rife on the direction federal housing policies will take during the Bush years, but there is a general consensus that the abandonment policies which characterized the past eight years will not continue under HUD Secretary Jack Kemp.

It appears the current administration in Washington will look favorably at attempts that permit public housing tenants to contribute to their own well-being. A growing awareness that some responsibilities in the domain of public agencies may be better accomplished by the private sector will also influence administrative policy. If experienced management companies are chosen with resident input, both those realities are recognized.

A management opportunity

For the management company, public housing management can be a viable property management opportunity. It can provide profits to the bottom line, enlarge a company's area of expertise, enhance the company's prestige in the community, provide employees with new and interesting challenges, and be an intrinsically rewarding experience for those involved.

Public housing management is more similar to conventional multifamily management than it is different. However, private management companies need to be aware that some of the differences are very significant and will have considerable impact on both management style and costs.

The image and the reality

When spoken, the words "public housing" often tend to conjure up miserable images in the minds of listeners. The picture is often one of barren, littered parcels, dotted with unimaginative and graffiti-laden buildings, with flapping steel doors, boarded-up windows, and dirty, unsafe hallways.

Although often a distorted picture, the image persists because it is informed by a reality obvious to anyone touring any major, older city. Public housing, particularly if it is housing for families with children, is often readily identifiable by its shabby disorder.

The critical observer typically attributes the obvious problems of public housing to problems within the tenant population. The observation is not wholly borne out by experience, however. While a disproportionate number of social problems are found in public housing populations, experience dictates that the persistent problems associated with public housing are rooted primarily in bad property management practices, not in "bad" tenants. Theexistence of bad tenants is one of the manifestations of these bad management practices.

The regulatory burden

Many housing management practices and policies in place within public agencies are the result of well-intentioned, but ill-conceived, regulations, particularly within areas of budgetary discretion, wages, job classifications, and tenant selection.

Designed to prevent fraud, abuse, and favoritism, these often overinterpreted and misinterpreted regulations mayserve to keep a housing authority at a standstill in its attempts to deliver services to residents and house the most needy. Funds available can go unspent as capital projects get delayed in a cumbersome and bureaucratic budget process. Centralization can cancel site management accountability. A mandated specialized workforce can keep the routine work from ever getting done. The unsophisticated applicant can lose out to the street-wise huckster.

It may also be argued that many management problems in public housing stem from practices well within the control of housing authorities. The problems are often the result of six different management failures:

* Low management expectations for both tenant behavior and the services to which tenants are entitled.

* Poor communication between residents and management.

* A lack of articulated rights and responsibilities for both management and residents.

* An authoritative interactive process, which demands gratitude along with the rent payment each month.

* The owners' failure to act on their rights to protect their property from destructive residents.

* The owners' failure to acknowledge their responsibility to provide a safe and peaceful environment.

Experience has shown that when those issues are addressed, family public housing is manageable.

At the same time, public housing management is not a job that should be undertaken by the private sector unless a management company is certain of an extraordinarily high level of commitment from both the housing authority and the residents. Absolute certainty of the resources available both within the company and within the community is also vital.

How it is different?

Public housing management needs are distinguished by certain critical, and sometimes unique, characteristics and issues that must be addressed by the authority, the property management company, and the residents if private management is to be successful.

Most notable of these distinguishing characteristics are the nature of the resident population, the nature of the relationship among the parties, and the chores that face the private manager.

Management intensity

and problem residents

The management of family public housing requires an intensity in excess of what is typical at conventional properties. Most prople would probably assume that problem residents are the cause of that intensity, and to a degree that assumption is correct. Yet public housing properties have a more important characteristic that sets them apart from conventional properties--a large number of families with children.

This is a demographic situation not typical of market-rate properties, where families with children are relatively scarce. Nor is it typical of privately owned subsidized properties, which generally have a smaller number of apartments and a more varied mix of family and elderly households.

Families require more management time wherever they are. Apartment living, by its nature, imposes restrictions that are often difficult for children and parents to follow. Apartment living can force a level of interaction among neighbors that can lead to conflicts.

A management company may also acquire a preponderance of problem tenants, in taking over the management of a troubled public housing development. Poor management practices in the past, combined with the difficulties facing all families at the low end of our economic scale, add to the problems of managing family housing.

Experience has shown a management company at a public housing property will have to face just about every criminal or nuisance problem you can name. The directions those actions take, however, and the outcomes of those actions will depend enormously on attitudes of all the people involved.

When precise policies that clearly spell out parameters of acceptable behavior are put in place, most problem tenants can be salvaged. With full resident support, our firm has not hesitated to pursue those unwilling to respect the rights of their neighbors.

Through a combination of agreements and court actions, the impact of disruptive tenants has been minimized. In Massachusetts, a state reputed to be the bastion of tenants' rights, our firm has yet to lose a public housing eviction case in court. Moreover, surprisingly few eviction actions were needed to get problems solved.

The relationship

In most private fee management relationships, the interaction between the management company and the owner and the residentS, if it exists at all, is usually very minimal. Public housing management, on the other hand, necessitates an involvement by owners and residents that extends broadly into the managing agent's domain. Owners and residents must become actively involved with the management company in deciding day-to-day procedures and policies.

How well the managers, residents, and owners work together is the single most important feature in determining the success of the undertaking. Directing the development of this relationship could prove to be a difficult challenge for a management company used to working within a context that typically provides more distance.

Forming a partnership

Public entities are often accused of being so "process" focused they fail to understand that the ultimate goal is to deliver a "product." The private sector engaged in commerce, often focused solely on the bottom line, seldom strives to enrich the dynamics of a process. Relationships, however, can only be formed by going through an interactive process.

The importance attached to having people work toward the desired and tangible goal of building the relationship cannot be emphasized enough. Everything else that happens during the management of the property by a private company will depend upon the quality of the partnership that develops between the management company and the residents, the management company and the housing authority, and the residents and the authority.

The vehicle for partnership

Because relationships will only develop through an interactive process, a means for structuring that process has to be identified. It needs to be a vehicle that allows for focused and purposeful communication, problem solving, and compromise between the groups.

The vehicle used by our firm to forge that interaction was an extensive process of having representatives of all three parties develop management plans for the properties. These plans were extraordinarily detailed agreements on how the properties would function under private management, with virtually no details of the day-to-day operations left undiscussed or unplanned. The plans covered policies and procedures for all administration and maintenance.

Using the task of producing a management plan as the vehicle to form the relationship produced some unexpected results. Residents gained substantial insight and understanding into the myriad of detail property managers face daily. Their increased awareness of property management as a business made their contributions to the management plans realistic and substantial.

People who come together with a common goal and who have the opportunity to get to know each other as individuals will usually come to treat each other with respect.

After what seemed like endless meetings at which each of the parties voiced their ideas and fought energetically for the things most critical to them, we found that a relationship of mutual respect and trust began to emerge among the individuals who were taking part in the process. Eventually, that trust was extended to the organizations those individuals represented. It should be noted that this took months to develop.

As time went on, however, the process of compromise became easy. When one party asked for something, the other two no longer attributed the request to some capricious ulterior motive (an attitude that characterized early attempts at negotiation) and began to consider requests on their merits.

Two ingredients are essential to fostering those kinds of relationships--time and competent personnel.

Participants should be individuals who ahve personal characteristics that engender credibility in their audience, who understand the dynamics of the interactive process they are entering, and who have the confidence that developing both the partnership and the plan is worthwhile, interesting, and capable of being achieved.

The planning process

The development of the management plan and the formation of a partnership are not the only planning that needs to

be undertaken. Each of the parties in a public-private venture has a great deal to learn about how the other does business. Systems and operations within both the authority and the management company need to be assessed for adequacy and appropriateness.

This kind of planning demands a start-up time that will require a substantial financial commitment by the authority. The authority will have to make a commitment for participation by their senior, support, and site personnel for the time involved in the planning phase. It will also have to make a financial commitment to the management company for the hours its personnel will spend on this planning. The length of the planning process will be determined, in part, by the complexity of the job to be undertaken.

A management company should be strongly discouraged from taking on the management of any public housing property if there is not a commitment to finance a planning period. The longer the time, the more detailed the planning and the more solid the relationship. The more solid that partnership, the more lasting the success.

Understanding the residents

As a group, public housing residents are probably the most maligned group of tenats in the country. They are typically seen as the cause of their poor housing conditions, and when one misbehaves, they are all viewed as guilty. Property owners, their neighbors, and the press blame all of them every time something goes wrong.

Although there is evidence of serious resident abuse or neglect in many developments, in reality most of these properties are suffering to a far greater extent from the effects of poor maintenance policies. Delay in providing routine and preventive maintenance has created serious deterioration in the physical plants. This decay is ultimately the source of much of the tenant anger that produces property abuse.

Long before any rehabilitation or modernization was undertaken in the buildings we manage, our company found that when buildings began to be properly maintained, instances of resident abuse and vandalism almost completely disappeared.

The reality is that most residents of shabby, run-down properties do not like living that way, do not vandalize the buildings, would prefer trees and shrubs to acres of hard-top, try to supervise their childen, do not take drugs, and do not fight with or steal from their neighbors. In fact, most of them are as appalled at this behavior as any other group and sit in amazement as management allows such violations to continue in full view.

In public housing populations, there is little tolerance for owner promises or excuses and little perception of management competence. A management company should know that it is likely to find noting in the residents' frame of reference that will allow them to give a new manager the benefit of the doubt, regardless of the management company's reputation in the community.

If residents participated in choosing the management company (and they should), the company should not assume the residents have accepted the new management as competent. It only means they hope it is.

To gain resident trust, it is important that a company not make promise it cannot keep. When the policies and procedures that will govern day-to-day operations are being decided, management personnel need to be realistic in what they tell residents. Most of the residents are not looking for miracles; they are simply hoping for someone to be honest with them, to use good judgment on how resources are allocated, and to treat them respectfully.

Organizing the residents

Because the role residents play in this public-private partnership is critical, some special characteristic and considerations that pertain to them need to be addressed.

A management company involved in public housing has to be fully supportive of and cooperative with resident organizations. Managers will not succeed unless the residents sense a full commitment to working cooperatively with them. The attitude that management displays toward the resident organization will largely determine the direction the resident organizing effort takes. Managers need to know that resident organizations can be either productive or destructive to management efforts.

Most owners and management agents shudder at the though of tenant organizations. Historically relationship between low-income residents and property owners has been adversarial. Such organizations usually form in response to issue of management neglect or mistreatment. They are often started by vocal, but not necessarily well-organized, activists, who do not always have the skills necessary to lead a group of dissatisfied, angry residents to a productive resolution of problems.

A management company that understands the value of resident organizations in troubled properties can achieve a great deal. HAndling problem tenants and enforcing policies jointly with a resident organization can lighten the management company's burden.

The success of a resident association is ultimately dependent upon a vast contribution of time by a committed core group of volunteer individuals. The effectiveness of the group, however, will depend upon good leadership. It is an extraordinary burden to ask a resident volunteer to make the time commitment the venture demands. For that reason, a salaried leaderhip position, rather than a volunteer one, should be a focal point in planning for resident participation.

A paid organizer or director, who works full time to articulate the needs, ideas, and wants of the residents, can enhance the focus, commitment, organization, efficiency, and accountability of the resident association. Such a person can provide both management and the authority with a consistent and competent contact during both the planning period and the subsequent takeover of the property.

It is not imperative this leader be a resident; it must be someone, however, who has the unqualifies support of residents and the verbal and administrative skills the job will require. A management company should do whatever it can to get the authority to support paid resisent leadership financially. The presence of a paid director was a significant factor in our company's success at one development. And having experienced the lack of qualified resident leadership at another, we have seen how much of a handicap its absence can present.

If the resident organizing function has been successful, management can expect the bulk of the residents to demand a hard-line approach in dealing with those who violate the agreed-to rules. Managers of public housing have to be prepared to make a commitment to manage some of the people who live there, not just the buildings.

It is important to set administrative costs at a realistic level. On an ongoing basis, public housing management requires fairly intense management of a few households, and that is going to require more staff. In addition, legal expenses are likely to be far in excess of what the property now incurs.

Management needs to be sure of the commitment the housing authority is making in this area. If the housing authority is not going to back private managers when they take action that is necessary (and legal) against those who violate their leases, a manager will not be able to satisfy the demands of the other residents for a peaceful environment.

Understanding the

housing authority

Public employees do not often enjoy a reputation of competence among their private-sector colleagues or within the general population. Housing authority personnel are not spared in this assessment. It is an unfortunate stereo-type that can inhibit one's ability to be productive.

A housing authority may be faltering in its ability to manage its portfolio for a wide variety of reasons, including personnel problems. But within any housing authority, a management company will undoubtedly find, as we did, individuals whose abilities and commitments are outstanding. It is important to try to capitalize. on these individuals.

Should a housing authority get to the point where it is considering hiring a private management company, it is possible they have arrived at the decision under pressure from a state or federal administering agency or through court order. If that is the case, a manager should be aware that the decision to hire private management will be perceived as an insult by many of the employees at the authority. It may be touted in the press as evidence of failure and incompetence of the part of the authority, and the employees of that agency are not likely to respond well to that idea.

A management company stands to gain nothing by participating in housing authority criticism. In the process of forming the partnership, the management company will play a significant role in helping the authority forge a new relationship with the residents. While the agency must be willing to acknowledge past deficiencies, the residents will probably need reminding that the authority's presence and participation in the new venture as a partner is evidence of commitment.

It may fall to management personnel to keep the rehashing of past errors to a minimum and to demonstrate support for the individuals from the authority who are participating in the process. The authority needs to send its thickest-skinned troopers to the planning sessions if conflict is to be minimized.

A company should ensure its management personnel are capable of recognizing and not responding to the occasional displays of defensiveness they may encounter. If the management staff is sensitive to this issue and does what it can to reassure the authority people, cooperation from authority personnel will improve over time, and residents will learn to focus on the future. Private managers should also recognize that there are things to be learned from the authority, not the least of which are the idiosyncracies of the property.

Management is also going to have to learn to find its way through the maze of a public bureaucracy--no easy chore even for the most patient. During the formulation of the management plan, a management company can learn a great deal from housing authority personnel about how to participate in an interview process not typical of private-sector endeavors.

The management company will undoubtedly gain a measure of respect for the thought and planning that has gone into the authority's many efforts to improve. As taxpayers, we can be grateful for the rules and regulations that govern public spending, but as managers we quickly grasp a firm appreciation for how difficult it is to transact business efficiently under the regulative process that governs housing authorities.

It is also imperative that a private management company planning to take over the management of a public property recognize the rather inflexible obligations a housing authority has in its reporting requirements to other governing agencies. It is very likely a management company will have to adapt some of its own systems to allow the authority to meet its obligations. This change will require the full cooperation of the company's accounting and computer departments.

Service personnel need to participate in the planning process from the beginning to ensure there is the in-house capability and willingness to produce the information the housing authority needs on schedule.

Getting through the bereaucracy

Public authorities and agencies appear to function somewhat differently than private-sector corporations, in that there appears to be a degree of autonomy and terrortorialism within various departments that can make it difficult for the outsider to find an answer to a question or to solve a problem. For that reason, it is strongly recommended the authority appoint, or hire, a single individual within their organization to act as the liaison between private management contractors and the various departments of the authority.

This individual needs to have the skills to bring together whatever departmental resources and individuals are necessary to help the management team do its job. It is critical that the individual have both a through knowledge of property management and the capacity to win the respect of important employees in the housing authority's departmental domains.

The importance of this position should not be underestimated. The presence of such individuals at each of the housing authority properties our company manages continues to help us through the routine and unexpected problems of daily operations.

Understanding the community

Assuming the development slated for private management is a troubled one, management can expect to have some public relations work ahead of it with both the neighbors and the local police department. In many instances, public housing developments exist in a totally isolated fashion within neighborhoods. The development is probably blamed for any neighborhood problems involving break-ins, drugs, or muggins, and, in fact, might well be the source of these community ills.

Getting the support of local civic groups, religious leaders, businesses, and the police is vital to the success of public housing management. Without that support, a manager's job is fraught with obstacles that will keep appearing, eroding into the vital, limited time the manager has. If the larger community is not brought into the revitalization of the development, the neighborhood will continue to work against it.

A management company will need to put in place a manager who is not timid--someone who will get out into the community, introduce him- or herself, ask to be a speaker at local meetings, tell the community what is happening, and ask for its help.

The police, often the most skeptical group, need to be nurtured carefully. Their cynicism, based on a reality few have experienced, can be a terrific obstacle. Management's ability to control and, if necessary, evict problem residents will be in no small way dependent upon what kind of response it gets from the police. The police need to know they will be supported by management when the time comes to go to court. The police also need to know that management will help them, whenever appropriate, to keep trouble out of the development.

Management also will be instrumental in defining the attitude the residents and the resident organization will have toward the police. That attitude will determine whether or not the majority of residents who want to live decently in safe housing will cooperate with the police in letting them know, through both formal and informal channels, when someone is breaking the law. This piece of the public housing mosaic needs to be thoughfully attended to; without resident cooperation, success is not possible.

Developing relationships with the police and the neighborhood, relationships that must be built on personal friendship and trust, is one of the manager's most important tasks. A company should be careful not to underestimate the number of employees it will need at the site to do this job properly. Much of the manager's time will be spent on things that are not typically required at conventional properties.

Is it worth it?

Our company's ventures into the public housing domain have been both financially and intrinsically satisfying. Our successes have been due in large part to the commitment of the individuals who worked both for us and with us, to the quality of the personnel the housing authorities put in charge of the changeover, and to the determination of the residents.

Some of the salient features of this success have been noted here--the significance of the relationships among all those involved, the importance of a detailed management plan, the critical role of good resident organizations, the depth of commitment made by the housing authorities, and the importance of community participation to the success of the venture.

If managing public housing seems too much like work, a company may not yet be ready for a challenge this big. But if your company is intrigued by the prospect of becoming involved in a venture that holds out a promise of very significant rewards, consider public housing management. What you find may surprise you. Under the right circumstances, public housing is very manageable, and its management can be quite profitable.

Mary C'Connor, Ph.D., CPM[R], now a property management consultant, was the site manager at the first of Corocan Management Company's public housing jobs. She later became a multisite manager and senior property manager for all types of properties in the CMC portfolio. Her present firm, O'Connor Associates, offers consulting services to properly managers, owners, investors, government agencies, asset managers, developers, lending institutions, and condominium associations.
COPYRIGHT 1990 National Association of Realtors
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Author:O'Connor, Mary (Canadian writer)
Publication:Journal of Property Management
Date:Mar 1, 1990
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