Why is New York City’s public housing about to collapse?
The pending collapse is literal as well as physical: hundreds of thousands of New Yorkers are living with mold, water, and broken elevators throughout the city’s 2,600 New York City Housing Authority (NYCHA) buildings, and resident Roxanne Reid is “afraid the whole building might fall." Today’s Times reports that the agency is in financial crisis, from free-falling federal and state disinvestment, and urgent needs for repairs and capital improvement.
How can we save public housing? According to the Community Service Society, NYCHA needs $7 to $15 billion to deal with the estimated backlog in improvements to the housing stock. The de Blasio administration may be pursuing offering lucrative contracts to private developers for unused land, as well as attempting to persuade New York State to reinvest (forget Congress, they’re about as unlikely to reinvest as they are to move to Mars).
But other options exist to raise public funds for NYCHA—one need only look downtown to Wall Street. According to the Wall Street Journal, today’s banks are on a roll: "U.S. banks posted $40.24 billion in net income during the second quarter, the industry's second-highest profit total in at least 23 years, according to data from research firm SNL Financial. The latest profits are just below the record $40.36 billion recorded in the first quarter of 2013.”
And yet, according to New Day New York, New York City provides subsidies to banks worth about $300 million per year. How could the city’s relationship with Wall Street be recalibrated to keep public housing alive?
One option would be to take a fresh look at the vast amount that we, the taxpayers of New York City, pay to Wall Street to manage our public money. We only need to look to Detroit for an example of how risky financial deals can play a major role in public fiscal crises.
According to New Day New York, New York City and its associated entities also pay $160 million a year for bad deals with banks, along with those $300 million subsidies. The MTA alone pays $105 million annually to service the interest-rate swaps that turned out to be a windfall for Wall Street in the Great Recession. The de Blasio administration could take on in-housing management of bonds and pension assets, and save an estimated half-billion a year in fees to banks—that alone could take a substantial dent out of NYCHA’s deep financial hole.
Another policy option is a full or partial repeal of the rebate of New York’s City stock transfer tax. New York City and State had a small tax on all stock transactions in place for most of the last century, and contrary to conservative rhetoric about financial transaction taxes, the stock market and financial sector managed to grow quite well during this time. My research shows that a small tax on stock transactions would have raised nearly $1 billion annually during the last decade in revenue for New York City, assuming a tax rate of 2 basis points. The tax, crucially, remains on the books as a statute that is rebated at 100%—reinstating it and making its revenue available to the city would not require starting from scratch. The tax may also have the twin effect of stabilizing the financial sector by reducing speculative trading, and could in theory be applied beyond stocks, as it is in Europe, in order to raise increased revenue and avoid arbitrage between financial instruments.
We cannot let NYCHA go the way of Chicago’s public housing, where wrecking balls provided the final answer to fiscal crisis. New Yorkers already suffer from too much inequality in our city. Appropriate policies to levy a small tax on financial transactions, and to reduce funds transferred from taxpayers to Wall Street, can help keep public housing standing strong.