Ethan Epstein is associate editor of The Weekly Standard.

For years, one of San Francisco’s worst public housing complexes sat just a stone’s throw from the home of one own of its most prominent citizens: Nancy Pelosi. Nestled in tony Inner Richmond, not far from the Presidio and Golden Gate Park, the low-slung building at 345 Arguello Street was a poster child for poorly maintained public housing.

Roaches and rats had long since colonized the building, which was built in 1973, when the city was in the throes of its “Dirty Harry” era of drugs, crime and rock and roll. Leaks sprung from the ceiling. The water would often be shut off, seemingly at random. Only one of the property’s two elevators was functional, a serious problem in a building populated by seniors and disabled people, many of whom can’t walk without assistance. And the people who lived there were all but neglected by the city of San Francisco, whose management of the property can only be described as absentee.

Today, things are quite a bit different at 345 Arguello. The decrepit apartments have been gutted, and the residents now have new kitchens, new floors, new windows and beautiful balconies. The infestations are over. No longer ignored, the residents now have access to services like backrubs and field trips. The building, freshly painted, looks fabulous from the outside as well. Indeed, the average passerby would have no idea that 345 Arguello even is public housing: Only a small placard next to the front door indicates that this is housing for the indigent, and not just another pricy Inner Richmond condo building.

1880 Pine is a sleek, 12-story high rise for low-income seniors. Inside, residents are offered programs like tai chi. Miles away, on 462 Duboce Avenue, other low-income seniors take an art class. | Mark Peterson/Redux Pictures for Politico Magazine

The 69-unit complex, like more than two-dozen others in the city, is emblematic of a new paradigm for managing public housing—one that may have profound consequences nationwide. Over the past few years, in collaboration with the U.S. Department of Housing and Urban Development (HUD), the city of San Francisco has turned over all of its heretofore publicly owned housing—345 Arguello was one such building—to private property management companies and developers.

This shift from public oversight to private management is one of the most dramatic and consequential reform efforts in the tortured, seven-decade history of public housing in the United States. The U.S. federal government got into the housing business after the Great Depression, when tent-city “Hoovervilles” teeming with homeless and destitute families sprang up all over the country. Now, public housing is in crisis nationwide, as the general disrepair of decades-old buildings accelerates faster than government can fix it. The estimated maintenance backlog now tops $26 billion; the annual budget for public housing repairs, meanwhile, does not even reach $2 billion. The urgency to solve this funding problem has only grown as the Trump administration pushes forward on billions of dollars of cuts to public housing programs. But turning over this housing to private entities has not come without controversy, with some housing advocates fearful that residents will be displaced once they’re left at the mercy of rapacious landlords.

Officials in San Francisco—a city that has always felt a polar tug between its wealth and its leftwing politics—have crafted an innovative approach that overcomes a one-size-fits-all federal program called Rental Assistance Demonstration, and in so doing have made the city a potential model for others. For one, the famously progressive city put in place strong protections against displacement. And San Francisco also ensured that non-profits, rather than for-profit real estate companies, took a lead role in the project, as well.

“We are going to make RAD succeed in San Francisco,” says Peter Cohen, co-director of the Council of Community Housing Organizations, a coalition of affordable housing groups that is powerful in setting local housing policy. If the city is going to use this federal program, he says, “We’re going to do it the San Francisco way: nonprofits have to be part of it.”


In the case of 345 Arguello, that nonprofit is Mercy Housing, a Denver-based national affordable housing developer with a long history in San Francisco, which assumed control in the fall of 2015. It’s one of six such San Francisco buildings that Mercy Housing is now managing.

Samantha Hogg, Director of Services at Mercy Housing, on the roof of 1880 Pine. The senior housing development has a penthouse laundry room with a soaring view of the city. | Mark Peterson/Redux Pictures for Politico Magazine

The need for a wholesale reinvention of how public housing was handled was obvious from the very beginning. “The first time we walked into the lobby, there was an argument”— one that involved hair pulling—between a resident and a city employee, recalls Barbara Gualco, Mercy Housing’s director of real estate development in San Francisco.

Dysfunctional as the relationship had been between the city and the occupants of the public housing, the residents were still skeptical of change. “There was an undercurrent of distrust” among the residents, says Samantha Hogg, Mercy Housing’s director of resident services for seniors in San Francisco. Moreover, many residents were highly suspicious when they learned that they would have to temporarily move from their apartments while renovations on the individual units were made. “People were afraid they were going to be displaced,” Hogg recalls. Displacement is a huge fear in San Francisco, where gentrification and a frothy real estate market have been pushing long-term residents out of their neighborhoods for years. Mercy Housing tamped down that concern with a series of meetings to explain the process to the residents and solicit their input.

A year and half later, the renovations are done and the residents are thrilled. The fixes were significant, running to about $185,000 per apartment. And so were the improvements. “Everything is excellent,” gushes Viola Ryan, who has lived at 345 Arguello for a decade. “I have a new kitchen, a new sink, new windows, a new stove, new floors.” The building is much cleaner now too. “I haven’t seen a bug since the renovations,” beams Tom Towery, a 12-year resident of the building.

Image City of contrasts: San Francisco has one of the highest costs of living in the U.S., with expensive gourmet supermarkets like Whole Foods, ritzy golf courses like the Presidio, and trendy coffee shops cropping up to appeal to affluent residents. Meanwhile, public housing residents like Viola Ryan, bottom left, are left to navigate an expensive city on a low-income budget. Viola is 65, and walks half a mile to find an affordable grocery store. | Mark Peterson/Redux Pictures for Politico Magazine

But for the residents, it was the human touch that was even more important than the creature comforts. “The managers have been a life saver,” says Ryan, as she literally fights back tears. “Their attitude is different [from the city management],” Towery agrees. Ryan is thankful that there’s someone she can talk to at all times, as well as for the art classes, back rubs, field trips and walking groups Mercy Housing now provides. “It feels like a home now,” she says.



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At the end 2012, the Department of Housing and Urban Development labeled San Francisco’s public housing authority “troubled”—a HUD term of art for public housing agencies suffering from serious flaws. The department scored a failing-grade 54 out of 100 on a scale that measures matters like finances, management and building quality. San Francisco was one of only two California housing authorities—out of 114 statewide—to merit such a woeful score. (The housing authority is 100 percent federally funded but administered entirely by locals.)

The situation was indeed dire, recalls Lydia Ely, senior project manager at the San Francisco mayor’s office of housing and community development. Reductions in federal funding for housing had hindered basic maintenance on San Francisco’s public housing stock for years, she says. The data bear this out: According to a study from the Center for Budget and Policy priorities, HUD’s budget for public housing repairs fell 53 percent, in inflation-adjusted dollars, from 2000 to 2016. In 2000, the federal government set aside $4 billion (in 2016 dollars) for housing repairs; last year, just $1.9 billion.

Vasselisa Grounitcheva, 91, and Viola Ryan, 65, both live in the rehabilitated 345 Arguello Blvd. senior housing development. Vasselisa (L) hugs Linda Dowler (R), who helps connect residents with RAD services. Viola Ryan enjoys her fully functional appliances in her new kitchen. | Mark Peterson/Redux Pictures for Politico Magazine

As physical problems piled up, San Francisco’s public housing was “entering a death spiral for a lot of these properties,” Ely says. She cites a particularly telling example: One building, completed in 1942, was still using its original plumbing. “The status quo was not an option,” Ely says. If nothing was done, buildings would have eventually become uninhabitable, leading to a reduction in the total number public housing units. Indeed, this is already happening nationwide, where an estimated 10,000 public housing units are being taken offline annually because they have become literally uninhabitable.

San Francisco’s mayor, Ed Lee, sprang to action. Lee, a Democrat who took office in 2011, had made housing issues a centerpiece of his mayoralty—not entirely surprising given that most everyone involved in the issue here says, almost by rote, that San Francisco suffers from “the worst housing crisis in the country.” Moreover, Lee spent some of his early childhood living in public housing, up in Seattle. Later, as a young lawyer coming up in San Francisco, he focused on tenants’ rights issues, organizing a 1978 rent strike in Chinatown. In other words, the issue was personal for him.

San Francisco Mayor Ed Lee speaks at the Alice Griffith housing project in August 2011. Alice Griffith received $30.5 million in redevelopment grants from HUD in 2011. | Justin Sullivan/Getty Images

Lee began by firing almost the entire Housing Authority Commission. The newly installed commissioners in turn fired the commission’s director. Then, in 2013, Lee convened a four-month “re-envisioning” process, which brought together some 72 local housing organizations and interested parties. Eighteen public meetings were held, as well.

The result was an extensive document calling for a complete overhaul of the San Francisco Housing Authority’s governance and administration, financing, resident services, tenant leadership, Section 8 operations, and public housing operations. On the latter, what the city settled on was a HUD program known as Rental Assistance Demonstration (RAD), which was initiated by Congress in 2012. That year, Congress and HUD recognized that, nationwide, public housing suffered from a more than $25 billion maintenance backlog. With no prospect for increased appropriations on the horizon, a new solution was needed. Enter RAD.

RAD allows cities to voluntarily transfer their public housing to private operators. The idea is that private managers possess the basic competence at operating housing that city governments all too often lack. The idea makes sense: Operating housing is literally what these companies do, unlike city governments, which have myriad responsibilities. Crucially, RAD was also predicated on the notion that the new operators would have access to private capital for physically rehabilitating the properties. That is, public housing would no longer have to rely on ever more paltry federal appropriations to provide basic maintenance.

With RAD, because the residents are no longer technically living in publicly owned housing, they are switched to rental vouchers under Section 8—the federal program that enables low-income people to rent from private landlords. That makes it a cost-neutral program. But the amount of rent residents pay remains the same as it was in true public housing: 30 percent of total income, whatever that happens to be. The program is still in “demonstration” phase—hence the D in the acronym—so the number of units nationwide that can be converted is capped at a little more than 200,000. (There are around 1.2 million total public housing units nationwide.) It will either be reauthorized or terminated in 2020.

Susie McAllister stands in front of her freshly rehabilitated unit in Hunters Point East. She's lived in the building since 2001, and says she loves her new home: she "hasn't seen a rat or roach" since it was remodeled. | Mark Peterson/Redux Pictures for Politico Magazine

RAD generated some grumbling on the left: The Nation magazine, for example, has written critically of it, fretting that RAD is in reality an attempt to “dismantle” public housing, and California congressman Maxine Waters has been a consistent critic, arguing that the program “may well do more harm than good in diminishing a crucial public asset.” Nonetheless, RAD found a big booster in Barack Obama’s HUD secretary, Julian Castro. “The affordable housing crisis is growing,” the secretary noted in 2014. “RAD is part of the solution.” The Trump administration, for its part, has proposed cutting spending on public housing. But because Section 8 has traditionally enjoyed bipartisan support, as it is a privatized solution to housing problems, the general consensus is that RAD is safe under the current president.

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“Privatization” is a dirty word in San Francisco, particularly among the largely left-wing affordable housing community. (I learned this first hand: Just about any time I used the word to describe RAD in San Francisco, I encountered furious pushback.)

Nevertheless, San Francisco went literally all-in on RAD: It decided to transfer 100 percent of its public housing stock to private operators. By contrast, some cities have embraced RAD on a piecemeal, building-by-building basis. New York City, for example, has so far only RAD-ified 5,200 of its more than 176,000 public housing units.

In total, San Francisco transferred 29 buildings, which contain around 3,500 distinct units. Twenty-two of those buildings, and 63 percent of the total units—like 345 Arguello—house seniors and the disabled. The remainder are reserved for families. The average annual income of the residents in RAD properties is $16,405—less than a quarter of this wealthy city’s median income.

But when the city decided to pursue RAD, it did it in its own way; call it “privatization with San Franciscan characteristics.” Federal RAD, for example, permits for-profit enterprises to assume total control over formerly public housing. San Francisco didn’t; all of the new owners would have to be at least partially not-for-profit, the city decreed. (In some cases, local nonprofits are simply too small to do the job entirely themselves, so they’ve partnered with for-profit developers.) Peter Cohen says this was key to making RAD succeed, because the nonprofits could be trusted to look out for residents’ best interests. For the program to work, “every site would need to have a local nonprofit,” he says.

San Francisco also demanded a 100-percent retention rate—that is, that no public housing units would be lost as a result of the transfers. “We wanted to make sure there was a bullet-proof, on-paper agreement that there would be a one-to-one replacement of every public housing unit,” Cohen says. “Because you’ve seen what’s happened elsewhere … you’ve actually had a net reduction in units.” There’s a bit of San Franciscan self-congratulation here—100 percent retention is a HUD requirement as well. But San Francisco ensured that residents returned to their original units, whereas RAD allows them to be moved elsewhere. (The city only ended up demolishing a tiny number of structurally unsound units.)

The apartments in 3859 18th St. are in the middle of their rehabilitation, managed by Mission Economic Development Agency. Some, like the top right kitchen and bottom left bathroom, are complete—but others are still awaiting construction to begin. | Mark Peterson/Redux Pictures for Politico Magazine

Another RAD-like program, HUD’s older Hope VI program, which turns public housing complexes into mixed-income apartment blocks, has resulted in a net loss of public housing units, dispersing many long-time residents who no longer met the new residency requirement. Cohen also points out that, while HUD talks a good game, it was imperative that the city get the retention requirements down on paper.

San Francisco also mandated that all units be replaced in-kind; that is, a three- bedroom unit could not suddenly be turned into a studio. The city enthusiastically embraced this approach. When deciding which company to turn the buildings over to, “all developers had to have retention standards in place,” Lydia Ely says.

San Francisco also wanted to ensure affordability well into the future. Therefore, while the new operators technically own the buildings, the land they sit on remains owned by the city, which grants the new owners a 99-year land lease. The condition of the lease? That the housing remain affordable for that entire 99-year period. That too is well beyond what HUD requires.

The contrast with a city like El Paso, Texas, for example, makes this plain. El Paso has the largest public housing stock of any Texas city. There, a single, massive for-profit real estate company has taken over much of the city’s public housing. Moreover, El Paso insisted that the new owners offer only 40 years of affordability, a stark contrast to San Francisco’s 99.

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San Francisco, a speck of only 47 square miles that is surrounded by water on three sides, has long suffered from housing affordability problems. Those problems, in some sense, are good ones to have: They’re a result of people really wanting to live here. The reasons for that are obvious, says Christopher Gil, a Brooklyn native who settled here decades ago and who works on affordable housing issues. “There are flowers blooming in January, yet you can ski three and a half hours away. The steep hills create incredible vistas few cities can match. You can venture to a world-class museum, enjoy innovative cuisine or stroll along a beach, all right in the city limits,” he says.

But San Francisco is already among America’s most densely populated cities, rivaling even New York City. Zoning restrictions preserve the city’s aesthetic, but an unfortunate byproduct of keeping buildings low is that rents stay high. And with the booming tech economy pushing rents ever higher, living in this hemmed-in town has become increasingly challenging for all but the dreaded 1 percent. As Peter Cohen puts it, San Francisco’s housing challenges are symptomatic of America’s current “gilded age,” with its yawning income inequality. And nowhere is that more evident than in this city of Zuckerbergian excess. To wit, the average rent for a one-bedroom apartment in San Francisco stands at around $3,500 a month.

Shared space: The city of San Francisco is sprawling, and public housing brushes shoulders with skyscrapers, parks, and private homes. Bottom left, 462 Duboce resident Julia Dunn walks her dog, Pepper. | Mark Peterson/Redux Pictures for Politico Magazine

Fortunately for those of more modest incomes, there’s an extraordinarily robust affordable housing movement here—one that’s been in place for decades. “The movement that was born here came out of the civil rights struggle in the 1960s,” says Cohen. It was then when displacement first became a hot-button issue. Today, those housing organizations—many of which are actually in the business of building and operating affordable housing—have blossomed. They also tend to focus on specific San Francisco neighborhoods, which they know well after having worked in them for decades. And, it turns out, they were perfectly placed to embrace—and indeed, to implement—RAD.

Unlike in many other American cities, where the poor have tended to be sequestered out of public view, public housing is widely dispersed throughout San Francisco. For political purposes, the city is broken into 11 districts, each represented by an elected supervisor; nine of those have at least one public housing building. And so, when it came time to solicit bids to take over public housing, it was extremely helpful that there were already community based affordable housing organizations in place. So Chinatown buildings were turned over to the Chinatown Community Development Center; the Mission Economic Development Agency, meanwhile, became a partner in RAD programs in the Mission district. Mercy Housing, a national affordable housing organization, stepped in at those properties, like 345 Arguello, that didn’t fit into a neighborhood that already had a local organization in place. In total, 11 operator teams ended up divvying up the 29 properties, which were divided into eight neighborhood clusters.

But there was still plenty of resident anxiety to overcome during the transfer of ownership. To allay these fears, Mercy Housing did a couple of things. For one, the nonprofit held six months of outreach “before [we] even owned the building,” Samantha Hogg remembers. “It started with one-on–one meetings with residents at the property. We would try to get inside the buildings two to three times a week for a few hours. We would be present in high-traffic areas, such as next to the mailboxes, and our staff would introduce themselves and say that they were from Mercy and as the soon-to-be new owners we wanted to get to know the residents and hear from them,” she recalls.

Image Mark Peterson/Redux Pictures for Politico Magazine

Mercy Housing also held regularly scheduled community meetings, so that the residents felt like they had some agency in what threatened to be a jarring process. When residents were moved from their apartments, meanwhile, they were moved to vacant units within the same building. (Each relocation lasted about 10 weeks per resident.) And while construction was occurring in the building—stressful for just about anybody, let alone older people and the infirm—Mercy Housing beefed up the services it provided to the residents; think amenities like massages and art classes. Another one of the nonprofits, Mission Economic Development Agency (MEDA), involved residents as much as possible in the transition, asking them to vote on what art to put on the walls and what plants to seed in the garden, Leslie Palaroan, a MEDA project manager, tells me.

Once transferred, the buildings underwent triage—determining what physical issue needed to dealt with, and at what level of urgency. The city says it ensured that the fundamentals were addressed first—the matters it calls “critical life safety issues.” Those included implementing seismic upgrades, removing mildew and mold, dealing with dry rot, fixing faulty elevators and installing fire alarms and sprinkler systems. The kind of maintenance, in other words, that should have been done a long time ago. One building I toured in the Mission District was basically entirely gutted; residents actually had to be moved off site, so extensive was the work that was needed to return the place to basic livability. This particular building’s condition was so terrible, in fact, that it featured what one person described to me as a “wall of roaches.” After those urgent matters were dealt with, the operators got on to the business of putting in amenities like new kitchens and planting gardens.

When it’s all said and done, about $700 million in repairs will have been made, for an average of about $199,000 per unit. (As of mid-July, the RAD overhauls are around halfway complete.) The city of San Francisco is putting up about $100 million of its own money. The rest of the funding comes from a mixture of HUD dollars and private loans for the operators. All told, the RAD project transferred about $2 billion worth of real estate from the city over to the nonprofits.

But the preparation appears to be paying off. Julia Dunn, a resident of a recently rehabbed MEDA home in the Mission, gushes about the property. Dunn was homeless for seven years, but now says, “I am so thankful to be here . . . I feel like I won a million-dollar lottery.” And, in a sense, she did: There’s a waiting list and a lottery to access public housing in San Francisco. In particular, Dunn loves the neighborhood that her apartment is in. After enduring years in the seedy Tenderloin district, she likes the amenities—particularly a dog park a stone’s throw from her pet-friendly apartment—that the Mission offers, and the fact that she can walk around safely at night. That’s of a piece of San Francisco’s general strategy for public housing. As Lydia Ely put it to me, the city strives to have its affordable housing integrated into neighborhoods, even the higher cost districts. (Basically, the nice parts of town.) The Mission District, with its beautiful parks and homes, and thriving restaurant scene, certainly qualifies.

Murals brighten up streets in the Mission District, where many MEDA-managed housing is located. Multi-language fliers advertise art workshops at 462 Duboce. Colorful windows peek out behind scaffolding on John F. Kennedy Towers in the Fillmore neighborhood. And a sleek new stove is installed in a unit at 25 Sanchez. | Mark Peterson/Redux Pictures for Politico Magazine

Despite their operations now being administered privately, both HUD and the San Francisco Housing Authority maintain oversight of the program. HUD, for example, continues to perform annual inspections of the properties under RAD. And the San Francisco Housing Authority not only continues to own the land that RAD properties sit on, but also determines who gets access to public housing through the lottery system it operates. The city is also working to set up a RAD oversight committee, which will bring together residents, managers and owners to make sure the program is operating effectively.

RAD is of course just one part of a larger constellation of affordable housing initiatives in San Francisco. Those include programs that mandate that new apartment buildings set aside a certain number of units be sold or rented at below-market rates; rent control; Section 8 rental vouchers; and the “small sites” program, in which nonprofits acquire small apartment buildings that are at risk of being sold and their residents displaced. On the lower end of the scale, there are homeless shelters and single room occupancy “hotels.” (In reality, people live in them semi-permanently.) And sadly, a walk through the city reveals that a disturbing number of people in San Francisco are simply living on the streets. It’s little wonder that Peter Cohen likens the work of affordable housing activists here to Sisyphus’s grim task in the Underworld.

The Headspeth family lives together in Holly Courts | Mark Peterson/Redux Pictures for Politico Magazine

Ultimately, save some sort of horrific disaster, San Francisco will probably never be truly affordable. From the top floor of RAD property in the Mission, one has a spectacular view of the city’s downtown, and slightly to the west, City Hall. A massive dome, one that’s even taller than the U.S. Capitol, tops San Francisco City Hall. On a sunny summer day, the dome literally glistens, as it is accented in gold leaf. It’s a reminder of the original San Francisco boom: the gold rush, which saw hundreds of thousands of prospectors light out for California. But now the city’s modest amount of affordable housing has a little luster of its own.

