The entire project would become part of the federal Rental Assistance Demonstration program. | Getty Images City considers demolishing and rebuilding 2 NYCHA sites

Facing an insurmountable funding shortage that has plunged the city’s public housing stock into disrepair, the de Blasio administration is considering demolishing and rebuilding some of its New York City Housing Authority properties in partnership with private developers, according to five people familiar with the proposal.

City officials want to enact the concept at the Fulton Houses in Chelsea, where they believe the land is valuable enough to earn them a substantial profit that would pay for capital needs at the 11-building complex. Repairs at the development are estimated to total $168 million over five years.


The idea is to tear down two of Fulton’s smaller buildings and replace them with a larger one. During construction, residents would be relocated into two buildings the city would erect on an underutilized parking lot in the complex.

Seventy percent of the apartments would be rented to tenants paying market rates, and the remaining 30 percent would be affordable enough for the public housing residents, according to people briefed on the plans.

The entire project would become part of the federal Rental Assistance Demonstration program, which converts traditional public housing subsidies to Section 8 vouchers and turns over management of the sites to private operators. They make a profit, and in turn they renovate and repair the buildings much faster than the city would.

It is part of the administration's 10-year plan to generate $24 billion for the housing authority, whose five-year capital needs assessment totals $31.8 billion.

Kathryn Garcia, the interim NYCHA chairwoman, briefed Chelsea politicians at City Hall about a month ago. Several people familiar with the meeting said Council Speaker Corey Johnson, who represents the area, seemed open to the idea but has yet to formally embrace it.

Others were less enthusiastic.

“I have a lot of unanswered questions about NYCHA’s plan,” said Assemblyman Richard Gottfried, who attended the meeting.

He said he is awaiting further details and wants to assess how Fulton’s residents feel about the proposed changes. A tenant association leader did not respond to calls for comment.

“The city says that all of the rights and rent protections of the tenants will be preserved, but I think there is always concern about the strength of guarantees like that going forward,” Gottfried said.

State Sen. Brad Hoylman, who represents the area, said the Rental Assistance Demonstration program has proven successful elsewhere in the city. But he said he is nevertheless “very concerned about the movement toward privatization in New York City’s public housing stock.”

“The success of this approach is really dependent on the continued strength of the housing market,” he added. “What happens if a developer goes belly up?”

Under the tentative arrangement, the housing authority would retain an ownership stake in the development and would be able to reclaim control over the complex if the private operator bails out, said one source familiar with the plans.

"The administration has made an unprecedented commitment to renovating tens of thousands of apartments and improving residents' quality of lives," said Olivia Lapeyrolerie, a spokesperson for Mayor Bill de Blasio. "This is an ambitious plan, and we will work with local elected officials and residents to discuss different paths to achieve this."

The city employed the Rental Assistance Demonstration program for the 1,395-unit Ocean Bay complex in Queens. Residents there have spoken in favor of the initiative, which they say has sped up repairs to their homes.

But building market-rate housing on public land is certain to spark controversy. Just last week, THE CITY reported that the housing authority shelved a 14-year-old proposal for a private affordable housing project next to the public housing development called Harborview Terrace in the Hell's Kitchen section of Manhattan.

The income-restricted housing was intended to be a trade-off for the development of Hudson Yards, but last year the de Blasio administration shifted plans to a development that would be primarily market-rate apartments as a way to raise money for the beleaguered housing authority.

Residents and elected officials came out against the plan.

And Manhattan Borough President Gale Brewer is suing the city over a separate housing authority plan to turn public land over to a private developer, Fetner Properties, for a mix of market-rate and affordable apartments.