Estimating the Cost to Preserve the Nation’s Public Housing

A new report, “Estimating the Cost to Preserve the Nation’s Public Housing,” calculates the baseline cost to preserve the nation’s existing 899,047 units of public housing. Authored by the 10 Year Roadmap for Public Housing Sustainability and the Public and Affordable Housing Research Corporation (PAHRC), the report provides the first nationwide public housing capital needs assessment since 2010, when HUD estimated the total baseline cost at $26 billion. This new study used actual cost data from 741 public housing properties (117,699 units) that underwent Rental Assistance Demonstration (RAD) conversions between 2018 and August 2024:

• Total Baseline Cost: $169.1 billion to preserve the nation’s public housing portfolio.
• Average Per-Unit Cost: This translates to an average of $188,090 per unit.
• Annual Accrual Costs: $3,597 per unit to address ongoing aging of building systems.

Key Drivers of Rehabilitation Costs

Examining RAD conversions, researchers found that pre-conversion building characteristics resulted in a wide range of hard construction costs for conversion:

• Property Age: Compared to properties under 20 years old, conversions in properties 60 years or older cost an average of $135,923 more per unit.
• Physical Condition: For every 10-point increase in a property’s REAC score, hard costs were $8,225 lower per unit.
• Occupancy: For every 10-point increase in a property’s occupancy rate, hard costs were $29,431 lower per unit.
• Per Unit Preservation Cost by Census Region: West ($284,271), Northeast ($259,515), South ($138,059), US territory ($133,392), and Midwest ($116,301).

The Role of LIHTC in Public Housing Preservation

The 10 Year Roadmap’s interim report identifies the Low-Income Housing Tax Credit (LIHTC) as an essential financing tool for public housing rehabilitation.

HUD data from 2020-2024 show that of the 86,987 units converted under RAD, just about half of them made use of either a 4% or 9% LIHTC award. If you exclude transactions in NYC (which tend to be larger, and much higher cost), that percentage rises to 60%. Among projects with construction costs exceeding $100,000 per unit, over 90% relied on 4% credits.

The authors call for state Qualified Allocation Plans (QAPs) to prioritize public housing preservation projects and for increasing the LIHTC eligible basis by 50% for extremely low income units. However, addressing a capital backlog of $169 billion in a timely manner will require more than just LIHTC, which is already routinely oversubscribed. 

In 2024, roughly $28.9 billion of investor equity was invested into LIHTC projects between the 4% and 9% credits, meaning it would take years of every dollar of LIHTC equity being leveraged for public housing preservation to meet the assessed need. 

Expanding the Financing Toolbox

The 10 year working group will be preparing a second report on potential financing options; here are a few that might be considered: 

RAD & Section 18 blends 

RAD & Section 18 blends have become a crucial part of public housing rehabilitation as they enable PHAs to increase the rental assistance subsidy at the time of the RAD conversion to allow for greater leverage. In a blend, some units in the project convert under RAD while others go out under the Section 18 demolition/disposition program, yielding tenant protection vouchers (TPVs) that can be project based and often provide higher revenue than RAD converted units. In RAD’s first five years, the average per-unit investment was about $55,000; by 2023, it exceeded $250,000 in large part due to the introduction of RAD & Section 18 blends in 2018. Any large-scale rehabilitation of the public housing portfolio will likely have RAD at its foundation. The transition to more stable, long-term project-based Section 8 contracts has proven successful in leveraging over $18 billion in construction investment over the past decade. Identifying ways to streamline and enhance the blend process, while ensuring adequate funding of the TPV account will be essential.  

Capital Fund Financing Program

Since 2010, HUD’s Capital Fund Financing Program (CFFP), has allowed PHAs to borrow private capital to fund large-scale modernization projects. The capital is usually accessed through a bond issuance or bank loan with the PHA pledging up to 50% of its combined future capital funds to make the debt service payments, subject to HUD approval. Despite its potential, the program has struggled to see large-scale utilization. The National Association of Housing and Redevelopment Officials (NAHRO) found that CFFP transactions raised under $40 million in new funds between 2019 and 2023, in part due to the growing adoption of RAD and its greater predictability of funding. 

Policymakers could consider modernizing CFFP through multi-year capital appropriations and a state-led pooled bond model. Congress could elect to provide separate multi-year capital fund appropriations for the purposes of rehabilitation to provide a more stable stream of income for PHAs to borrow against. PHAs could pool these funds to be used by state Housing Finance Agencies (HFAs) to issue bonds that are backed by the future flow of all participating PHAs’ capital funds. PHAs would then be able to access predictable, affordable loans from the participating HFAs. This could be particularly useful for small-to-medium sized PHAs who struggle to access capital markets and finance RAD conversions.

Comparable risk-pooling already exists in the U.S. through EPA’s Clean Water and Drinking Water State Revolving Funds. These programs provide federal appropriations to state governments to capitalize State Revolving Loan Funds (SRFs). These agencies can then blend this federal seed money with their own financing, allowing them to borrow against their capitalization to issue revenue bonds backed by the pooled risks of loans made on favorable terms to local borrowers.

An HFA-led model draws from the principles of the Netherlands’ Waarborgfonds Social Woningbouw (WSW). The WSW is not a direct lender but acts as a centralized fund that pools risks across non-profit housing associations. This fund operates with a “triple backstop,” backed first by the housing associations themselves, then by the WSW’s own capital, and ultimately by the Dutch central government. This model allows Dutch social housing providers to access capital at exceptionally low interest rates. In the Dutch model, housing associations’ real estate assets are part of the collateral in the initial guarantee. Since American public housing properties are under a declaration of trust that prohibits this, this type of model might work best with RAD-converted properties and/or substituting the pledged future capital funds for direct asset collateral. HFAs or the federal government could then provide additional backstops on top.

Risk Share & Federal Financing Bank Loans 

HFAs are already supporting public housing preservation using HUD’s Section 542(c) Risk Share Program, which pairs a federal credit enhancement to HFA borrowing with liquidity provided by the Federal Financing Bank (FFB). Risk Share provides an additional source of senior capital for preservation and could be used to support transactions both with and without LIHTC. Boston Housing Authority, for example, is moving forward with the renovation of the St. Botolph Street Apartments, a 132-unit public housing community serving seniors and individuals with disabilities. The property will convert to a project-based Section 8 contract under RAD with BHA retaining ownership. The project is being funded in part with an HFA Risk Share and FFB loan from MassHousing alongside funding from the City of Boston and AFL-CIO Housing Investment Trust. 

Conclusion

The scale of need revealed in this latest estimate makes clear that preserving and improving public housing will require collaboration across multiple sectors and different levels of government. Short of major direct appropriations, progress will depend on assembling and adapting a mix of financing mechanisms old and new, federal and state, public and private, that together can help fill the gap and help preserve and maintain our public housing for current and future generations.