The future of a public housing complex in Newark is forcing city leaders to grapple with the reality of federal disinvestment in low-income housing: How can it remain safe, yet affordable?

For 196 families at the Millard E. Terrell Homes, the threat of closure is evoking fears of displacement while underscoring the consequences that come with years of neglect.

The Newark Housing Authority has fluctuated between seeking to demolish and wanting to save the property. New executive director Victor Cirilo vowed to do what he can to ensure residents who want to stay, can, while seeking capital money for much-needed improvements on the building, which opened in 1946.

Immediate fixes are estimated at $26 million.

The Newark Housing Authority hosted a meeting at Terrell Homes last week to discuss a potential redevelopment plan for the aging property. (Karen Yi | NJ Advance Media for NJ.com)

"As they are not building any more low-income housing, we have to keep, protect and fight for what we have," Terrell Homes resident Rosemary Horsely, 69, said at a packed community meeting last week. She's part of a core group of residents who have resisted efforts to close the complex.

As funding from the U.S. Department of Housing and Urban Development dries up, the onus has fallen on local governments to maintain affordable housing opportunities with its aging stock of public housing. In Newark, where 29 percent of its residents live in poverty, the Newark Housing Authority has lost about $6 million a year in federal funding for the last 12 years, officials have said.

Any plan to save Terrell Homes will most likely include market rate housing to offset the high costs of capital needs.

"This project in whatever form it takes will require capital," Cirilo told residents last week. "We've had some issues with this property starting with some neglect."

Cirilo maintained the buildings will remain under NHA ownership.

The Newark Housing Authority is the state's largest and oversees about 8,000 units. Jersey City oversees 2,400 and Camden 1,800, HUD records show.

NW Financial Group and Kitchen & Associates -- two firms hired by the NHA to help with the redevelopment plan for Terrell Homes -- met with residents last week. It was a first step in devising a plan to save the property; the plan will be released by March.

Demolition of all or part of the building remains on the table. NHA needs federal approval to do so and has not yet submitted an application to HUD.

In the meantime, NHA says it will work with residents eager to leave -- and find adequate housing to accommodate them.

Resident Dawn Sych said she doesn't feel safe leaving her home after dark, especially with her 7-year-old daughter. She showed a reporter photos of a rusty pipe above her toilet that is constantly dripping.

Community activist Louis Shockley, who is seeking a run for mayor, said the availability of affordable housing was a larger crisis facing the city.

"There is no housing stock, where are you gonna go?" he asked.

Already, housing is shaping up to be a key issue in the upcoming May election. At least three housing advocates seeking to throw their names into the nine open council seats or the mayor's race spoke at last week's meeting.

They said the planning process should have been done first, before residents were forced to fight the NHA's plans to demolish the complex.

Some residents in the meeting took the opportunity to vent about crumbling conditions, illicit drug activity and nearby shootings.

"What is the sense in keeping it open?" one resident asked. "This is supposed to be a place we're supposed to live. I'm not understanding why we're trying to keep it open. There's a bunch of shootings."

City leaders acknowledged the property had been neglected, but said residents and the city needed to work together to find a solution.

"If people move out, it takes more money from the property ... and you're making it less safe," Mayor Ras Baraka said. "It's necessary for us to move forward ... we can't divide ourselves between who wants to stay or who wants to go."

Terrell Homes has 275 units, 196 of them remain occupied.

[Editor's note: An earlier version of this story incorrectly identified the number of occupied units.]

Karen Yi may be reached at kyi@njadvancemedia.com. Follow her on Twitter at @karen_yi or on Facebook.