In 2018, after decades of underinvestment and recurring management problems, the New York City Housing Authority (NYCHA) was on the brink of federal receivership. To avoid a takeover, in January 2019 the City signed a settlement agreement that placed NYCHA under a federal monitorship that requires it improve its operations, reinvest in its properties, and become more accountable to both residents and the federal government.¹

The agreement requires NYCHA to develop and implement action plans to address specific areas called out in the agreement and a new organizational plan to transform its operations. The City is required to provide additional financial support for capital investment and operations. The agreement tasks the monitor with overseeing the development and implementation of these plans and provides it the opportunity to identify contractual, legal, and regulatory obstacles to NYCHA’s improved performance. It empowers the U.S. Department of Housing and Urban Development (HUD), at the monitor’s request, to abrogate labor contracts and override state and local laws that impede NYCHA’s turnaround plans; HUD also is encouraged to grant regulatory waivers that would improve operations or provide fiscal relief.

The agreement and monitorship have resulted in some important, positive changes, including needed lead testing, improved quality assurance, and new plans for property-based management—improvements that likely would not have occurred absent the agreement. However, the federal government has not increased funding for implementation or delivered regulatory relief that could reduce costs, and the monitor has missed an opportunity to identify and advocate for regulatory changes or labor practices changes that would allow NYCHA to make its operations more efficient.²

Reviewing actions to date reveals that:

• NYCHA has developed and is implementing the six action plans, which have been approved by the monitor;
• The organizational plan is in process, with a transformation plan completed and implementation plans being developed in phases;   
• NYCHA reports spending $1.2 billion through calendar year 2021 on agreement implementation, primarily remediating lead, responding to heat outages, improving compliance with federal regulations, and addressing other immediate needs;
• City operating support totaled $933 million from City fiscal years 2018 through 2021, nearly the amount required over the whole ten-year agreement period;   
• HUD and the monitor have not leveraged opportunities to push forward changes that make improvements fiscally sustainable.
  • HUD has yet to deliver additional federal funding and regulatory relief;
  • The monitor has held NYCHA accountable for delivering required changes but has yet to identify and advocate for changes in collective bargaining agreements, broadening job responsibilities, or changes in State and local laws that would eliminate inefficiencies, boost productivity, or realize savings;
• Neither the monitor nor NYCHA have published consistent data on operational performance or the settlement’s required benchmarks for service delivery; and
• Fees for the monitor and its sub-contractors have totaled $32 million to date, but budget and actual spending details are not readily publicly available, although the agreement requires the monitor’s approved annual budget be publicly available.

The success of NYCHA’s turnaround plan and improving the living conditions of its residents depends on both fiscal sustainability and improved operations. While NYCHA has made progress in complying with the agreement, it is still in the early stages of implementation and still does not operate well enough to serve the needs of its residents. The result is poor living conditions for residents; for example, 42 percent of NYCHA households report three or more serious maintenance deficiencies compared to 15 percent of renters in privately-owned buildings and 6 percent of owner occupants.³

To assist NYCHA’s progress more actively, HUD should grant regulatory waivers that free up funding for NYCHA, such as permission to reinvest savings from reducing energy consumption, and that improve operations, such as waivers from onerous and outdated rules that prohibit the use of design-build, construction manager-build, or best value capital procurement for federally funded capital projects. HUD can grant these actions without advocacy from the monitor.

The monitor should continue to ensure the effective implementation of the action plans and the organizational plan, but to assist the implementation and NYCHA improvement more actively, the monitor also should:

• Appeal to HUD for federal regulatory relief that improves operations or frees up funding for implementation;
• Increase focus on identifying and advocating for long-overdue work rule reforms, broader job descriptions, fringe benefit savings, operational changes, and other actions that would boost productivity and bring NYCHA’s operations in line with other property managers;
• Publish data on NYCHA’s progress towards meeting specific benchmarks laid out in the agreement; and
• Publicly report its approved budget.

In the late 2010s, NYCHA came under the scrutiny of both HUD and federal prosecutors. A Southern District of New York (SDNY) investigation found that NYCHA officials had made false statements to federal officials about NYCHA’s compliance with lead paint regulations and conspired to deceive HUD officials during HUD’s inspections of NYCHA properties. HUD determined that NYCHA had failed to provide decent, safe, and sanitary housing to its residents and was in “substantial default” under the public housing law, putting it at risk of receivership.

NYCHA and the City signed a consent decree in June 2018, which was rejected by a federal judge that November. Ultimately the City reached a settlement agreement with federal prosecutors and HUD in January 2019.⁴ (See Appendix for agreement responsibilities.) Satisfied with the agreement, SDNY dismissed the complaint.

The agreement requires NYCHA to develop six corrective “action plans” to address long-standing management failures, most of which developed and persisted for years due to NYCHA’s poor management and declining federal funding, and to fix immediately hazardous conditions.⁵ The plans identify specific actions that NYCHA will take to address “pillar areas” (lead-based paint, pests and waste management, HUD inspections, mold and leaks, heat, and elevators) with benchmarks and timelines for meeting certain service levels. For example, in the heat action plan, NYCHA is required to develop a plan to respond to heat outages with a goal of restoring 85 percent of heat shortfalls within 24 hours and 100 percent within 48 hours, increasing to 100 percent within 24 hours by 2024.  

Separately, the City, in partnership with the monitor, is required to hire a management consultant to conduct an organizational review. NYCHA must use the consultant’s findings as the basis for a new, long-range organizational strategy. This organizational plan is supposed to identify property management best practices that NYCHA should adopt and provide a roadmap for implementing a new management system. The organizational plan is intended to fix the root causes of the mismanagement and poor conditions identified in the original complaint.

NYCHA must also create new departments of Compliance, Environmental Health and Safety, and Quality Assurance to help oversee these efforts and verify that work is meeting expectations.

The federal monitor oversees the development and implementation of these plans as well as NYCHA’s ongoing compliance with the agreement. The monitor’s primary responsibility is to approve NYCHA’s action plans and to issue quarterly reports that track NYCHA’s progress towards the required benchmarks. The agreement also empowers the monitor to help NYCHA cut through bureaucratic obstacles that inhibit its turnaround plan. The agreement gives the monitor the right to ask the HUD Secretary to override State and local laws or abrogate labor contracts if they are impeding compliance and reasonable efforts to renegotiate or amend them have failed

To date, NYCHA has completed, and the monitor has approved, the six “pillar area” action plans required under the agreement, and NYCHA is now implementing the action plans.⁶ To fulfill the organizational plan requirement, NYCHA released a transformation plan in March 2021 and is now working with its federal partners on developing comprehensive implementation plans.⁷ (See Appendix for a timeline of actions under the agreement.) The transformation plan proposes an ambitious overhaul of NYCHA’s operations, including a shift to property-based budgeting and operations, revised work schedules, a new system for assigning and tracking work orders for repairs, new procurement rules and systems, information technology upgrades, a new income recertification process, and other changes to central office functions. These actions are intended to bring NYCHA’s operations in line with best practices, increase accountability and transparency, boost productivity, improve living conditions, and reduce costs.

In February 2022, NYCHA produced the first phase of the implementation plan, which involves shifting to property-based budgeting and operations, rolling out a new work order tracking system, and revising work schedules and deployment plans for skilled trades.⁸ The second phase will entail implementation of the remaining organizational reform strategies outlined in the transformation plan.⁹

These proposed changes are long overdue. NYCHA continues to struggle to maintain its properties due to poor management and worsening physical conditions, leading to poor living conditions for residents. As of April 2022, NYCHA had over 610,000 outstanding work orders with an average response time of 310 days to complete repairs; only 80 percent of emergency work orders are resolved within 24 hours.¹⁰ According to the 2021 Housing and Vacancy Survey, 80 percent of NYCHA residents report at least one major maintenance deficiency compared to 43 percent of households in privately-owned rentals, and 39 percent of homeowners. Forty-two percent report three or more deficiencies compared to 15 percent of other renters and 6 percent of owners.¹¹

The plans developed under the agreement are beginning to deliver much needed improvements to NYCHA’s operations. However, they have come at a significant cost and have not necessarily been designed with cost-effectiveness as a critical criterion.

Since 2018, NYCHA has spent $1.2 billion in operating funds implementing the agreement’s mandated action plans.¹² Last year, costs related to the developing and implementing “pillar area” action plans were $359 million, or 12 percent of NYCHA’s operating budget. Some of the spending is for one-time, long overdue, remedial improvements, but much of it supports recurring needs that reflect the true efforts necessary to operate NYCHA’s aging public housing portfolio well. These spending levels are due to both NYCHA’s high labor costs, as well as the cost of maintaining buildings that are in a state of disrepair.

Some of this work has delivered immediate benefits, such as investigations by NYCHA’s Quality Assurance Department that uncovered overtime abuse among its skilled trade workers or a successful pilot of the proposed work order reform project.¹³ Other examples illustrate how the proposed changes will add to NYCHA’s already high costs without identifying additional funding to pay for them. For example, the organizational plan proposes redesigning the work order process to increase productivity and speed up repairs, but its citywide implementation requires NYCHA to hire up to 500 additional staff to provide an adequate level of service.¹⁴ While this may reduce the need for overtime, the wages and benefits for the 500 new staff will be costly. Another example of a redesign lacking consideration of cost-effectiveness is the pest management plan. In contrast with norms of privately-owned developments that manage garbage until periodic pickup by the Department of Sanitation, NYCHA has chosen a costly strategy–purchasing garbage trucks for daily trash pickups at small developments without space for containerized trash storage.¹⁵

These compliance costs increase NYCHA’s operating budget above and beyond what HUD’s operating subsidy formula considers to be the baseline costs to operate NYCHA’s public housing portfolio; these additional costs are currently borne entirely by NYCHA and the City.

Thus, to support implementation, NYCHA has either reduced spending elsewhere or identified additional revenue sources, such as operating support from the City or State, to offset higher costs. The City’s increasing operating support has helped cover some portion of these expenses, but the $1.2 billion in costs incurred by NYCHA in less than four calendar years has already exceeded the $972 million in operating support the City is required to provide under the agreement over ten years.¹⁶ (See Figure 1.) NYCHA also has diverted federal capital subsidies and used non-recurring revenue sources like real estate transaction proceeds and reserve drawdowns to balance its budget in recent years, demonstrating a long-term structural fiscal imbalance.

The agreement is beginning to deliver needed changes that may not have occurred otherwise and provides much needed accountability for NYCHA.  However, HUD and the monitor have missed opportunities to push forward funding or regulatory relief to make these necessary improvements and organizational changes fiscally sustainable.

The agreement anticipated that HUD would support NYCHA by granting waivers and other regulatory flexibility that would relieve NYCHA of costs or free up funding that could be used to help advance the goals of the agreement. For example, in the agreement, HUD pledged to create a working group on regulatory relief and promised to facilitate “prompt response” to waiver requests but has no obligation to grant them. HUD’s ability to provide additional funding is limited, and likely would require Congressional appropriations.

To date, however, HUD has not granted NYCHA any waivers, flexibility, or additional funding specifically to support implementation. For example, HUD recently rejected an energy cost savings waiver that would have freed up $53 million for NYCHA’s operating budget in 2022. HUD also could grant waivers from the Section 9 public housing capital subsidy program’s onerous and outdated procurement rules, which requires NYCHA to accept the lowest responsible bidder instead of the bidder that offers the best value. The Section 9 rules also prohibit the use of alternative contracting methods like design-build or construction manager-build. These changes alone would not improve NYCHA’s operations or capital planning, but if used well, would give it more flexibility to allocate funding efficiently and to attract higher quality construction and design firms to bid on public projects.

While the monitor has identified many individual management failures and held NYCHA to account for implementing the terms of the settlement agreement, it has not significantly focused on identifying, analyzing, and advocating for collective bargaining changes, broadened job descriptions, or changes in State and local laws that would help NYCHA implement the transformation plan or realize savings or efficiencies. Prior research has shown some of NYCHA’s high costs are due to the City’s generous fringe benefits, expensive shift differentials, and outdated and rigid work rules and schedules.¹⁷ Given the intensity of its involvement and oversight of NYCHA’s daily operations, the monitor has a significant opportunity to understand these issues at a granular level and to propose changes that would control costs or increase productivity by bringing NYCHA’s labor provisions in line with industry standards. Lower costs would help facilitate NYCHA’s turnaround and fiscal stability.

The monitor publishes quarterly reports that consist of observations by its team and outside contractors. The reports lack clear, consistent metrics for evaluating success, even though the settlement agreement establishes benchmarks and timelines for determining compliance and requires that the quarterly reports include “objective data showing NYCHA’s progress toward achievement of the requirements” in the action plans.¹⁸ Tracking against these benchmarks and timelines should be the basis of assessing NYCHA’s compliance. Absent it publishing adequate and consistent information to assess NYCHA’s performance towards compliance with the agreement, it is not clear how the monitor judges success. Furthermore, public reporting of the data is essential for transparency and accountability.

There is limited transparency into the monitorship’s operations or budget. The settlement agreement requires the City to pay for the monitor’s staff and any consultants deemed necessary to oversee NYCHA. The monitor is required to submit its budget and any amendments to HUD, SDNY, NYCHA, and the City, with disputes settled by the HUD Secretary.

The City has registered two contracts with the monitor for a total anticipated cost of $39.2 million through February 2024.¹⁹ Through May 6, 2022, payments to the monitor have totaled $32.1 million, including $16.3 million so far in City fiscal year 2022.²⁰ (See Table 1.) These payments cover the monitor’s expenses and the direct cost of consultants and subject matter experts hired by the monitor to assist its oversight work. The total cost to date likely would have been higher if the City and monitor had not agreed to reduce costs temporarily at the start of the pandemic in 2020.²¹

The agreement requires that the monitor’s approved annual budget be made publicly available, but, to date, it has not been publicly released. Without this transparency, accountability is lacking; it is not possible to determine how the monitor is using the funds and to what extent the monitorship is advancing the goals of the settlement agreement.

CBC’s March 2019 blog, Six Guidelines for NYCHA’s New Federal Monitor, noted that the settlement agreement presented an opportunity to deliver long-overdue changes that would benefit the 400,000-plus New Yorkers who live in public housing, but warned that it came with significant risks for both the City and NYCHA. Without a clear focus on the financial impacts of making NYCHA’s operations more efficient, the settlement agreement had the potential to become an open-ended burden on both NYCHA’s operations and the City’s treasury.

The experience thus far has been a mix of successes and missed opportunities. NYCHA is proceeding with initiatives to address its shortcomings, although it is difficult to evaluate progress. Despite some notable improvements, NYCHA’s operations still are not serving residents well enough, and the costs of implementation and long-run improvement will be significant, especially if HUD and the monitor do not deliver additional funding or regulatory relief.

To assist NYCHA’s progress more actively, HUD should grant regulatory waivers that free up funding for NYCHA, such as permission to reinvest savings from reducing energy consumption, and that improve operations, such as waivers from onerous and outdated rules that prohibit the use of design-build, construction manager-build, or best value capital procurement for federally funded capital projects. HUD can grant these actions without advocacy from the monitor.

The monitor should continue to ensure the effective implementation of the action plans and the organizational plan, but to assist the implementation and NYCHA improvement more actively, the monitor also should:

• Appeal to HUD for federal regulatory relief that improves operations or frees up funding for implementation;
• Focus on, identify and advocate for long-overdue work rule reforms, broader job descriptions, fringe benefit savings, operational changes, and other actions that would boost productivity and bring NYCHA’s operations in line with other property managers;
• Publish data on NYCHA’s progress towards meeting specific benchmarks laid out in the agreement; and
• Publicly report its approved budget.

Turning around NYCHA requires an all-hands-on-deck effort from the Housing Authority, City, State, federal government, and the federal monitor. NYCHA and the City should not bear the substantial, open-ended cost of delivering change on their own. HUD should provide what support and relief it can, and, working with NYCHA’s federal partners, the monitor should identify and advocate for funding and reforms that can help facilitate that change.

Structure of the Settlement Agreement

The agreement assigns responsibilities, rights, and tasks to four organizations:

• NYCHA: The agreement requires NYCHA to develop and implement six “action plans” with specific benchmarks and metrics to correct issues with lead-based paint, pests and waste management, HUD inspections, mold and leaks, heat, and elevators. NYCHA also must develop and implement an organizational plan based on the organization review procured by the City, and create new departments of Compliance, Environmental Health and Safety, and Quality Assurance to guide these efforts.
• Monitor: A federal monitor oversees the development and implementation of these plans as well as NYCHA’s ongoing compliance with the agreement. The monitor’s primary responsibility is to approve NYCHA’s action and transformation plans, and to issue quarterly reports that track NYCHA’s progress towards the required benchmarks. The agreement also empowers the monitor to ask the HUD Secretary to abrogate labor contracts or override state and local laws if they are impeding compliance and reasonable efforts to renegotiate or amend them have failed.
• HUD: HUD’s day-to-day role is minimal. HUD pledged to create a working group on regulatory relief and promised to facilitate “prompt response” to waiver requests but has no obligation to grant them. HUD agreed not to offset federal operating or capital subsidies with funding that the City provided under the agreement. Instead, HUD’s primary role is enforcement: HUD retains the right to take over NYCHA or to place the Authority into receivership if it fails to live up to the terms of the agreement. Furthermore, HUD also has the power to abrogate labor contracts and to direct NYCHA to ignore State or local laws that impede its turnaround plan. 
• New York City: The City’s primary role is to provide funding: it funds the annual costs of the monitorship, must commit an additional $2.2 billion in capital over ten years, and provide $972 million in operating support over ten years. It also is required to hire a management consultant to conduct an organizational review of NYCHA that serves as the basis for a new organizational strategy. The City also lost the ability to appoint the Chair and CEO of NYCHA; while the agreement is in place, HUD and SDNY must approve of the hiring and firing of the NYCHA CEO.

Timeline of Actions

• Settlement Agreement Ratified in 1/31/19
• All Pillar Action Plans have been approved
  • 12/4/19: Heat Action Plan Approved
  • 1/30/20: Elevator Action Plan approved
  • 3/9/20: Mold and Leak Action Plan Approved
  • 12/9/20: Annual Inspection Action Plan Approved
  • 1/20/21: Lead-Based Paint Action Plan Approved
  • 1/26/21: Pest/Waste Management Action Plan Approved
• Additional Action Plans Approved
  • 10/30/19: Public Housing Assessment System Action Plan Approved
  • 5/8/21: City Capital Action Plan Approved
• New Chair hired on 8/12/19
• Consultant Organizational Review and Transformation Plan approved
  • 12/16/19: Final Management Consultant Reports Accepted by Monitor
  • 3/8/21: NYCHA releases Transformation Plan as part of the Blueprint for Change
  • 2/22: NYCHA releases the Phase 1 Implementation Plan for the organizational plan.