Why Adams’ ‘moonshot’ housing plan needs private sector support

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Last fall, New York’s Department of City Planning (DCP) proposed ambitious zoning changes intended to break the regulatory logjam that stops the city from getting the housing it needs. That was followed by a flurry of additional announcements, including Mayor Eric Adams’ “moonshot” goal of 500,000 new housing units in the next decade, more than double the total in each of the past two.

In a new Manhattan Institute issue brief, I conclude the zoning initiatives could increase housing construction.  Adams and Governor Kathy Hochul also endorsed badly needed state legislation. However, what Adams hasn’t yet done is also important.  While his housing unit goal is sensible, he hasn’t supplied a credible path to attaining it.  Moreover, neither Adams, Hochul, nor the City Council or state legislature has begun dismantling the anti-private investment shibboleths that grip New York politics.

Let’s start with the good. New York City is beset by a housing supply shortfall, leading to record market rents and sales prices, and low vacancy rates. Compared with other economically robust, relatively dense American cities, the city’s new housing construction is anemic. Adams’ goal seems quite large, but it’s less than a seventh of the city’s current housing stock. Other cities, like Seattle and Washington, D.C., grew more between 2010 and 2020.  

Even Mayor Adams views his plan to dramatically boost housing starts ambitious, describing this goal as a "moonshot" during its recent announcement.
Even Mayor Adams views his plan to dramatically boost housing starts ambitious, describing this goal as a “moonshot” during its recent announcement.
WireImage

NYC could as well, were it not saddled with anti-housing regulations. DCP is on track towards alleviating some. For example, many communities nationwide are allowing “Additional Dwelling Units” (ADUs), second units on lots where only one is allowed today. These are usually constructed in basements and backyards. Despite its reputation as a dense city, NYC has a surprisingly large number of single-family lots where a second unit can’t be built today.

Another reform being pursued, both locally and nationwide, is repeal of minimum parking requirements, which encourage car ownership and use, and urban sprawl.  Despite having the nation’s best transit system (which is underutilized post-pandemic), the city forces new housing in many areas, and business establishments, to build sizable parking facilities.  These are often so expensive that new housing has to subsidize its own parking, making some potential projects financially infeasible.

One way to create more adequate housing would be to make it easier to install Additional Dwelling Units (like this one above) in New York City backyards.
One way to create more adequate housing would be to make it easier to install Additional Dwelling Units (like this one above) in New York City backyards.
dpa/picture alliance via Getty Images
Former New York City Mayor Bill de Blasio ushered in legislation that mandated minimum numbers of affordable housing units for rezoned development sites.
Former New York City Mayor Bill de Blasio ushered in legislation that mandated minimum numbers of affordable housing units for rezoned development sites.
Getty Images

DCP also takes inspiration from recent California legislation, permitting denser housing on currently commercial lots.  These lots should be less controversial for building, since existing houses won’t be redeveloped or tenants displaced.  In nearly all places in New York potentially affected by this reform, the city’s ubiquitous six-story apartment buildings were allowed until 1961, when zoning became radically more restrictive.  The city has since gained a million people, and many more would like to come.  It’s time to undo that sixty-year-old error.

Now, let’s look at what’s missing. Under former mayor Bill de Blasio, the city adopted “Mandatory Inclusionary Housing,” (MIH) a zoning policy requiring a substantial percentage of units built on rezoned sites to have below-market rents. That might sound good, but looking past the media hype we understand what this effectively is: a tax on badly needed new housing. Developers don’t pay this tax – they’ll just build elsewhere unless they get a comparable return on their investment.  Rather, New Yorkers pay for the affordable housing they get. One way was through a generous property tax exemption program called Section 421a. Sadly, it expired in June 2022 and needs new state legislation to be reinstated. Adams and Hochul have endorsed that, but the outlook in the legislature is uncertain.   

Affordable housing developments such as this one in the Bronx help politicians secure voters while providing developers with tax breaks. But the the city is still delivering far fewer low-cost units than promised (and needed).
Affordable housing developments such as this one in the Bronx help politicians secure voters while providing developers with tax breaks. But the the city is still delivering far fewer low-cost units than promised (and needed).
Christopher Sadowski

New Yorkers also pay for MIH affordable housing through cash subsidies, which were needed to supplement 421a in all but the strongest housing markets.  MIH effectively forces most new residential construction into a city regulatory agreement, in which subsidies are exchanged for a commitment for below-market units.  Our elected officials love this arrangement because it enables them to promise lots of affordable units to their constituents

The $2 billion QNS Complex in Astoria (above) will feature some 3,200 residential units— 800 of them at below-market prices. The project exemplifies the type of mixed market-rate and affordable developments aimed at solving the city's housing crisis.
The $2 billion QNS Complex in Astoria (above) will feature some 3,200 residential units— 800 of them at below-market prices. The project exemplifies the type of mixed market-rate and affordable developments aimed at solving the city’s housing crisis.
Courtesy Innovation QNS

The problem is twofold. First, the city can’t keep those promises in any reasonable timeframe. The city’s affordable housing spending is producing fewer units, not more, due to inflation and staffing shortages. Second, the city faces future budget shortfalls as tax revenues recover slowly post-pandemic. The city can’t meet Adams’ housing goal because it can’t afford to compensate developers for its own tax on new housing. My report proposes sensible steps to address this.

Also missing is reform of the draconian 2019 rent regulation law. That’s also hugely popular with New York politicians, who love to promise their constituents cheap rents.  However, it has run up against the reality that private landlords won’t invest at a loss. The 2019 law greatly limited rent increases to recover the costs of apartment renovations. As a result, thousands of vacant apartments can’t feasibly be fixed up and rented anew. State legislators need to allow owners to raise rents to reflect actual renovation costs.

New York would be wise to adopt a measure implemented in California that allows residential construction on one-time commercial lots.
New York would be wise to adopt a measure implemented in California that allows residential construction on one-time commercial lots.
AP

It’s good to see Adams’ rhetorical commitment to finding a path out of the city’s self-inflicted housing supply crisis.  But thus far, he’s unwilling to acknowledge the crisis won’t be resolved by promising New Yorkers cheap housing the government can’t supply. We’ll only get half a million new housing units by treating private developers and landlords as partners, not enemies.

Eric Kober is a senior fellow at the Manhattan Institute and former DCP official. He is author of the new issue brief New York City’s Far-Reaching Housing Proposals Are Still Not Ambitious Enough

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