Thousands of public housing employees and residents gathered earlier this month in front of City Hall to protest budget cuts. NYCHA is facing about a $200 million shortfall this year.

As the rest of the country deals with the continuing fall-out from the subprime mortgage crisis, the city's vast network of public housing is facing a widening budget gap that could affect living conditions for more than 400,000 residents.

“Residents are scared,” said Council Member Rosie Mendez (D-Manhattan), who chairs the Council's Public Housing Committee. Mendez said the lack of apparent solutions makes calming residents’ fears increasingly more difficult.

“You see the conditions they're living in and the problems they're going through,” she said, “and you're sort of helpless in trying to rectify the situation.”

The New York City Housing Authority (NYCHA) is facing about a $200 million shortfall this year, almost one-third higher than last year’s $168 million deficit. In other words, NYCHA is reimbursed by the federal government around $0.83 for every dollar that the authority spends.

Critics charge that the Bush administration is simply trying to find a way out of the public housing business. But the city and state share a responsibility too, Mendez said.

While most of New York's 343 public housing developments were built with federal money, 16 were constructed by the state and five by the city. NYCHA manages the whole system, which employs about 13,000 full-time workers and has a total budget of $3.4 billion.

Over the years, the city and state have zeroed out their commitment to NYCHA's operating budget—about $62 million from the state and about $25 million from the city.

Mendez's attempt last year to modify the budget to include more money for public housing failed. She said she will try again this year.

“If we here at the city and state don't take responsibility for those units we created, you know, it's going to have dire consequences for residents of public housing,” said Mendez, who herself lived in public housing for more than 20 years and whose district includes many public housing projects.

Mendez's fellow public housing warrior (and another former tenant) is NYCHA Chairman Tino Hernandez, who agrees that the state needs to restore its commitment to the 16 developments it used to operate.

Last year, the state provided a one-time, $3.4 million subsidy for NYCHA, a mere “pittance,” according to Hernandez. Mayor Michael Bloomberg (Unaff.) also dished out a one-time $100 million allocation last year. But neither the city nor the state are expected to reaffirm those commitments next year.

When Hernandez meets with Gov. David Paterson (D) in the months ahead, he plans to petition the new governor to restore state subsidies.

“We're going to go back to the state and say that the state really has the obligation to restore that $62 million to operate those 16 developments,” Hernandez said.

The NYCHA chief said that whole funding streams have been dried up by the federal government.

“They've either been zeroed out or cut pretty significantly,” Hernandez said.

Hernandez has responded by cutting almost $500 million from the authority's budget, reducing staff by almost 2,500 positions and introducing technology to reduce inefficiencies. The signing of the shelter allowance bill last year by then-Gov. Eliot Spitzer (D) also will free up about $47 million when it is fully phased in, Hernandez said.

The move to convert 8,400 units to Section 8 housing will also save some money, he added.

“Over the long term we've had some victories that will result in added funding,” Hernandez said. “We still try to grapple with the short-term problem.”

Advocates see areas of other savings that have yet to be approached by either the City Council or the mayor.

NYCHA pays the city about $73 million for police services, $30 million to the Department for the Aging for senior services and around $130 million for payments in lieu of taxes, or PILOTs.

“There is a good reason for the city to think of NYCHA as a cash cow,” said Victor Bach, a housing policy expert at the Community Service Society, a 160-year-old anti-poverty organization.

The city does not have any more reason to continue to milk NYCHA for these funds, Bach said.

“NYCHA is in serious deficit,” he said. “These payments should be reconsidered, renegotiated, waived.”

Hernandez said the payments are issues that would have to be settled between the mayor and the City Council.

While city and state officials work to streamline NYCHA's budget, the union that represents the majority of the authority's 13,000 employees is laboring to make the issue of public housing heard above the chorus of other housing and economic concerns.

At a May 1 rally in front of City Hall convened by Teamsters Local 237, thousands of public housing employees and residents gathered to protest the budget cuts. With a JumboTron projecting the action behind them, a four-piece R&B band led the multitude in the chant, “Save our jobs, damn good jobs!”

Days before the rally, George Floyd, president of Local 237, said that while he expected Paterson to fight for more funding, there was little that could be done in the near future.

“Does he have the economic base, the tax base, to deal with this problem—as well as education, as well as other things he has to fund in this state?” Floyd asked. “The answer, probably, today is no.”

In the search for solutions, rumors of privatization have fueled fears among housing activists that New York could soon follow other cities in selling off its public housing to private owners.

Nicholas Dagen Bloom, an assistant professor at the New York Institute of Technology and author of Public Housing That Worked: New York in the Twentieth Century, said despite the rumors, privatization was unlikely.

“It's not likely the program will be privatized,” he said, “but there will be structural changes in the way it operates to reflect current conditions, which is higher costs.”

Currently, rent in public housing averages at $320 a month for residents who earn on average $20,000 a year, or about 1.6 percent of their annual income. Bloom said restrictions on rent ceilings could be loosened.

Whatever happens with the privatization effort, Council Member Mendez said residents are still fearful of developments being sold and demolished to make way for high-rise luxury condominiums.

In New York's competitive and volatile housing market, public housing often gets lost in the conversation, Mendez said. But most people fail to realize that public housing is essential to New York's entire housing equation, she said.

“We’re losing rent-regulated apartments at an alarming rate,” Mendez said. “If we don't do something about stabilizing public housing, for many that's the housing of last resort, that's their last hope, and we could in the future lose that as well.”