Developer accuses Pittsburgh's housing authority of withholding funding

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A bid to fix up low-income apartments in Hazelwood and Squirrel Hill has exposed a rift between the Housing Authority of the City of Pittsburgh and the managers of the Hill District's largest community.

The authority board's vote Thursday to seek new funding for the Glen Hazel Family Community, Glen Hazel High Rise and Murray Towers High Rise -- but not for the Hill District's Oak Hill development -- also surprised advisers to Mayor-elect Bill Peduto, who said they weren't told of the panel's meeting.

Authority executive director Caster Binion said that the decisions he's making are entrepreneurial and sound. "The housing authority is a public agency, but to be able to survive we work as a business, and we make business deals," he said.

Oak Hill's developer accuses the authority of diverting $3 million annually from Oak Hill to other developments. Mr. Binion said that his decisions on funding are "for the public good in order to continue to build affordable housing."

"It sounds to me just like the pure greed of money," said Larry Blair Jr., 46, a car salesman who is president of the Oak Hill Residents Council.

The authority board voted to ask the U.S. Department of Housing and Urban Development to shift the two Glen Hazel properties and Murray Towers from low-income public housing to what's called project-based Section 8.

The 292 units in the three communities would still be owned and managed by the authority. But because they would be funded under HUD's Section 8 program, rather than its low-income public housing program, the federal subsidies would likely be insulated from budget cuts, authority executives said.

The funding would be guaranteed for 20 years, and could be renewed for another 20 years, allowing the authority to borrow against it to fund renovations. "It basically restores the units to make them long-term viable for the future," authority chief financial officer Ed Mauk said.

The shift is possible under HUD's new Rental Assistance Demonstration, or RAD, program. But HUD has authority to convert only 60,000 units nationally to Section 8, and the agency is already in receipt of applications for 76,000 units.

Considered for the application, but yanked from the board's resolution, was privately run Oak Hill, which has 475 low-income public housing units and 243 market-rate units. Oak Hill occupies the site of the former Allequippa Terrace housing project.

Mr. Blair said the Oak Hill Resident Council voted unanimously in September in favor of RAD status. Putting three other communities ahead of Oak Hill is "outrageous," he said.

For years, the authority met requests to help fund maintenance, security and programs like after-school child care with short arms and deep pockets, according to Miles Byrne, project director with Beacon/Corcoran Jennison, which runs Oak Hill.

"Every time we submitted a budget, you would think we were pulling money out of their own wallets," said Mr. Byrne, who has been pushing the housing authority to submit a RAD application since August. "They kept saying 'We don't have it.' "

In 2012, Mr. Byrne said, HUD gave the housing authority nearly $6.5 million in subsidies for Oak Hill's low-income housing units. The authority passed about $3.25 million on to Beacon/Corcoran Jennison, he said, and kept half of the money despite the fact that it is not involved in managing the property or even processing tenant applications.

Mr. Binion countered that the authority helped to secure up-front funding needed to build Oak Hill, and has spent "tens of millions" in support of it.

He said that there was nothing wrong with receiving more than $1,100 from HUD for each of Oak Hill's low-income units, and passing around $600 to that community.

"We understand the costs to operate a development," Mr. Binion said. He said that Beacon/Corcoran Jennison "probably" gets more per unit than other private developers of public housing in the city.

The authority spends the rest of the money on maintaining and building other low-income housing, he said.

Though the housing authority isn't "breaking the rules," it has misrepresented the amount of money it gets for Oak Hill from the federal government and is using it as a "cash cow," Mr. Byrne said.

If Oak Hill went through the RAD program, Beacon/Corcoran Jennison could raise money to repair porches, carpeting, cabinets, appliances and heating systems, Mr. Byrne said. He also wants to hire a mental health social worker to help residents, and more maintenance staff.

Without the RAD financing, Oak Hill will eat through its reserves in about four years, he said, jeopardizing its ability to lure market-rate tenants.

"We are slowly going down, not up," Mr. Byrne said at a residents' meeting last month.

"We both agree that there are some places in which they need improvement," said Mr. Binion. If the community is to shift to Section 8 status, allowing the developer to borrow much more money, he said there's one big question: "How does this benefit Oak Hill?"

He said the authority is "negotiating the final deal" governing whether to apply to get Oak Hill into the program.

Kept at arm's length from the talks, so far, is the incoming city administration, which takes over in January.

Valerie McDonald-Roberts, who is Allegheny County's manager of the Department of Real Estate and will be Mr. Peduto's chief urban affairs officer, met with Mr. Binion on Wednesday.

"He did give me some explanation about the pros, cons and nuances of Section 8 versus low-income public housing," she said, and he noted that three communities were slated to make the switch. "He did mention Oak Hill was not going to be one of them."

He did not tell her that the board would vote on the program the following day. "I didn't know there was a meeting on the following day," she said. "Absolutely, I would have gone.

"I also mentioned that large contracts and controversial issues should be put on hold," she said.

Mr. Binion said authority decisions are made largely based on HUD rules and time lines.

"So many things we're doing, the trains have already left the station," he said.

"This housing authority is in full support of the transition team," he added. "Everything they need, I'll give them."

Kevin Acklin, who is heading the transition and will be Mr. Peduto's chief of staff, called the housing authority "really the only authority that we haven't found any significant cooperation with."

Mr. Byrne worried that the authority may have already missed a chance to lock in funding for Oak Hill in the face of likely deep cuts in subsidies for low-income public housing.

HUD assistance to local housing authorities was cut by about 18 percent for 2013 and could take a bigger hit next year as a result of federal sequestration, Mr. Byrne says.

Mr. Binion said it's not too late. He said HUD may seek to expand the RAD program to 150,000 units, giving Oak Hill a shot -- if a deal can be reached.

"We will continue to negotiate," he said.

"We've done everything we possibly could to work with them," said Mr. Blair. "They're really working against us and I don't understand why."

Rich Lord:, 412-263-1542. Twitter @richelord. Robert Zullo: or 412-263-3909.

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