S.F. public housing to be managed by private firms

Mayor Ed Lee (l to r) and Sandra Melchor shake hands after he handed the keys to her new apartment at 1180 Fourth Street on Thursday, October 2, 2014 in San Francisco, Calif. Mayor Ed Lee (l to r) and Sandra Melchor shake hands after he handed the keys to her new apartment at 1180 Fourth Street on Thursday, October 2, 2014 in San Francisco, Calif. Photo: Lea Suzuki / The Chronicle Photo: Lea Suzuki / The Chronicle Image 1 of / 3 Caption Close S.F. public housing to be managed by private firms 1 / 3 Back to Gallery

San Francisco’s much-maligned Housing Authority is getting out of the management business, with a new city-federal plan putting private companies in charge of the 4,584 units that house some 5,400 low-income city residents.

Mayor Ed Lee and Julián Castro, secretary of the federal Department of Housing and Urban Development, on Thursday announced an agreement that clears the way for more than $500 million in repairs and upgrades for the city’s public housing units over the next three years. It’s part of what the mayor calls the transformation of a system that both tenants and government officials agree isn’t working.

“We have a lot to celebrate,” Lee told a crowd of more than 100 at a public housing building on Turk Street in the Tenderloin. For too many years, he said, “we considered these residents not to be residents of San Francisco, but residents of the Housing Authority. Never again.”

The city is taking part in a federal demonstration project that will allow San Francisco to use a mix of public and private money to complete housing improvements in three years that would have taken 50 years under current Housing Authority rules.

By allowing investors to take out mortgages on the public housing buildings and using federal rental assistance payments for repayment, “it will spur millions in private investment to address long overdue capital repairs,” Castro said.

The Housing Authority will still own the land, which guarantees that the sites will continue to be used for low-cost public housing. But by replacing Housing Authority management with nonprofit and for-profit developers with a history of successfully running low-income housing projects, the city hopes to upgrade the service and reduce the number of tenant complaints.

Welcome news

The changes are welcome news for Supervisor London Breed, who grew up in San Francisco public housing. She talked about having to use neighbors’ bathrooms for weeks because of delays in getting a toilet repaired.

“This is amazing,” she said. “It’s going to change everything for people living in public housing.”

The city is putting up $52 million for the rehab work, which is expected to begin in October.

The changes aren’t so much about the brick-and-mortar repair work of public housing, but more for the people living in those units, Lee said.

“It’s about developing communities for our residents,” he said, “not just nice buildings.”

Almost a year ago, the mayor announced he was working with federal officials to have the city participate in the Rental Assistance Demonstration program, billed as a new way to finance public housing. By combining a variety of funds earmarked for various public housing uses into a single fund linked to individual units, the government provides a steady stream of guaranteed income, making the housing developments more attractive to outside managers. These groups would lease the properties under long-term contracts that would call for them to upgrade, manage and maintain the units.

It’s not a new idea for the city. The John Stewart Co., a for-profit developer, already is rebuilding and managing the Hunters View housing project, and another outside developer will manage the Alice Griffith site when it’s rebuilt. The city’s HOPE 6 properties, including Valencia Gardens, North Beach and Hayes Valley, are managed by outside groups, although the Housing Authority remains part owner.

One of the worst

As far as most tenants are concerned, change can only be an improvement. In 2013, federal inspectors ranked the Housing Authority as one of the two worst public housing agencies in the state. Lee ousted almost the entire Housing Commission, which oversees public housing, and Henry Alvarez, the authority’s director, was fired after numerous complaints about both his management style and continuing inability to keep the units in good repair.

“All (public housing residents wanted) was better elevators, and now they’re getting that and more,” the mayor said Thursday. Things like heat that works, pest control and quick repairs “are simple things. How come we’re not doing it?”

Both Lee and Castro have a lot riding on the project. If the plan works in San Francisco, it’s likely to spread to public housing projects across the country. If it fails, it’s a black eye not only for the city, but also for Castro and other federal officials, including President Obama, who are looking for new ways to make low-income public housing work for both tenants and the cities they live in.

The program “really is a trial,” Lee said. “We have to take a lot of risks.”

The rehabilitation work will take place in two phases, with work on the first 1,425 units beginning late this year and finishing by April 2017. The second phase, with 2,066 units, will start construction in July 2016, with completion set for December 2017.

The city already has reached agreement with its unions on the layoffs that will take place at the Housing Authority when the outside groups take over the property management. Negotiations are under way with the groups looking to renovate and manage the public housing developments.

John Wildermuth is a San Francisco Chronicle staff writer. E-mail: jwildermuth@sfchronicle.com Twitter: @jfwildermuth