New York City Mayor Bill de Blasio has proposed what some have called the most ambitious housing plan put forth by any U.S. mayor. The city faces some of the biggest housing challenges in the country, so an ambitious plan is needed to overcome them. Among the most noteworthy aspects of the plan is that there is one at all, and that it has garnered the level of priority that it appears to have within the administration. While it’s not perfect, it is hard to be critical when New York’s effort is compared with the level of priority that housing receives—or does not receive—in other parts of the country.
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New York City is one of the least affordable housing markets in the United States, with the median rent for a studio apartment close to $1,200 and that for a two-bedroom apartment at $1,600. As in many other areas in the country, rents have been rising even while renters’ incomes are stagnating. The situation is reaching crisis levels for low-income renters (those earning less than 80 percent of the area median income or AMI), almost 80 percent of whom are considered to be “rent burdened” (paying more than 30 percent of their gross incomes for housing) in 2012, up from 70 percent in 2002. This is one example of a nationwide trend in rents and incomes that has resulted in half of all renter households experiencing rent burden—the highest level seen in decades.
The Harvard Joint Center for Housing Studies recently published projections showing that the annual growth in renter households nationwide over the next decade will potentially double the level seen in decades going back as far as 1960, with a total of 4 million to 4.7 million new renter households expected nationwide between 2013 and 2023. These renters will need a place to live, and New York is providing an example of the changes needed to help make room for more rental housing within healthy, thriving communities.
Bending the Cost Curve in New York
Within “Housing New York: A Five-Borough, Ten-Year Plan,” de Blasio presents a catalog of new and existing tools for the city to increase affordable housing, including subsidized housing for the lowest-income households as well as housing at rents affordable to moderate-income households (those with incomes up to 165 percent of AMI). Within the plan is a variety of tools to reduce the cost of housing development, many of which are consistent with the recommendations of the recent report issued by the ULI Terwilliger Center for Housing and Enterprise Community Partners, Bending the Cost Curve: Solutions to Expand the Supply of Affordable Rentals. The bottom line of the report is that many components of the planning, approval, funding, and development processes drive up housing costs. Reducing unnecessary costs can make subsidy dollars go further, creating more units to help meet the seemingly unending demand for affordable rental housing.
For example, de Blasio’s plan proposes to reduce parking requirements for affordable housing in transit-accessible areas, expand approvals of “compact units” (micro-units, which are those smaller than the current 400-square-foot [37 sq m] minimum in New York City), streamline interagency coordination to expedite the approvals process, create a “rehab code” to facilitate more affordable rehabilitation, and create an energy- and water-cost reduction program for affordable housing. These, together with many of the other efforts outlined in Housing New York, are some of the most promising practices for lowering housing development costs. The trick will be in seeing the plan through to implementation.
The plan also recognizes the need to come up with creative strategies to find new places to develop housing, such as increasing density, encouraging more infill development, and the adaptive use of commercial and industrial buildings.
Through de Blasio’s pledge to use infrastructure investment to unlock the potential for new housing development, the city will invest in areas in the outer boroughs that have land available for housing development but which need better infrastructure before this can happen. One example is Hunter’s Point South in Long Island City, which was started by former mayor Michael Bloomberg but supported in the de Blasio plan. A mixed-use development on previously underused industrial waterfront land, Hunter’s Point South will be the largest new moderate-income housing development in New York City since the 1970s. With the first phase of more than 900 units coming online by early 2015, the full plan calls for 5,000 new, primarily rental housing units, 60 percent of which will be affordable to middle-income families. Similarly, the city will be looking into how to make better use of underused city-owned and privately owned land as a way to expand the overall development capacity within the city’s boundaries.
Beyond New York
While reducing unnecessary costs is a fundamental strategy for creating more affordable housing, the simple rules of supply and demand can be the biggest drivers of cost when limited amounts of housing are being built in places where lots of people want to live. Housing markets are regional, and land use policies that unnecessarily restrict the supply of housing in one part of a region can drive up costs for everyone throughout the area.
Last March, the comptroller of the state of New York released a report highlighting the high cost of housing across the entire state, but particularly in the counties surrounding New York City. According to the report, the affordability challenge for renters in the state stretches north of the city beyond Ulster and Greene counties, and east to Nassau and Suffolk counties on Long Island. The level of cost burden—the share of renters paying more than 30 percent of their gross incomes on rent—in Greene County has reached 57.5 percent, the second highest in the state, and essentially tied with the Bronx at 57.6 percent. And a recent report by the Regional Plan Association concludes that “more than any other part of the New York region, Long Island is ill-prepared for the growing demand for rental housing.”
Regional housing issues can be challenging because of longstanding not-in-my-backyard (NIMBY) opposition to the more-affordable forms of housing in suburbs, particularly multifamily rental housing. Areas outside of older central cities were originally built to serve single-family homeowners, and most have not adjusted their land use patterns over time to account for population growth and the diversity of housing needs.
So, while cities such as New York are recognizing the need to increase the supply of housing for a range of incomes and household types, this is not happening in nearly enough places to account for all the housing that needs to be built in growing regions. Westchester County, just north of New York City, is a prime example of a community resisting calls to create more diverse housing opportunities. It has been locked in a fight with the U.S. Department of Housing and Urban Development (HUD) over the need to build more affordable rental housing. In question is whether the zoning policies in place throughout the county allow such housing to be built.
Like New York City, some areas throughout the region and across the country are modernizing their zoning laws to account for the need to create more diverse, livable, and walkable communities. Such communities recognize the benefits that come from providing diverse housing options. Rental housing provides opportunities for young and old alike to remain in communities during different phases of their lives. Employees of local businesses can find homes close to their places of employment, reducing the burden on transportation systems—and on families—of long commutes. Also, renters bring additional spending power to support local service businesses that benefit the entire community. Creating housing as part of a mixed-use community can create more vibrant and attractive neighborhoods that are magnets for economic activity.
Importantly, those who are thinking far enough ahead are also incorporating strong inclusionary elements into their plans, just as de Blasio is doing with his enhancements to the city’s inclusionary zoning policies. This is especially important when rezoning is being done to correspond with investments such as transit that will increase property values and drive up housing costs. For example, when Fairfax County, Virginia, officials created a higher-density, pedestrian-friendly, and mixed-use plan for the Tysons Corner area to go along with a new Metro rail line, they included a requirement that 20 percent of the units be set aside as affordable and workforce housing.
But there are far too many examples of communities where affordability was an afterthought, where transit and other investments have driven up the cost of housing, and where preserving or creating new affordable housing becomes prohibitively expensive.
A Race to the Top
Local governments are usually where the action needs to take place to create room for more rental housing, but municipalities and counties often do not have the incentive to allow it or the resources to encourage it. States have an opportunity to play a more proactive role in providing these resources and incentives, and they have a number of tools at their disposal.
Comprehensive planning laws can require communities to evaluate and plan for their local housing needs, particularly the need to provide a spectrum of options to meet the rising demand for rental housing. States can set meaningful statewide goals to create and preserve affordable housing, as well as goals for all communities to meet through fair share requirements that require municipalities to plan for their share of regional or statewide housing needs. In addition to allowing room for more rental housing development through zoning and permitting, states can play an active role in financing and subsidizing housing to make its development and preservation more financially feasible.
Not all communities, however, will have a plan like Housing New York, or a leader like de Blasio who makes housing a priority. Some observers have drawn attention to the attractiveness of the “race to the top” idea, a competition that was used by the U.S. Department of Education under the American Recovery and Reinvestment Act of 2009 to challenge states to come up with innovative strategies to solve decades-old educational challenges. The country’s affordable housing crisis has reached the point where such a race would be justified to create real incentives to break down barriers to the development of affordable housing and create more affordable, diverse, and livable communities.
Michelle McDonough Winters is senior visiting fellow for housing at ULI and president of Winters Community Strategies.
