Press | October 30, 2013

New Mayor Needs Answers to NYC Housing Conundrum

By Sarah Trefethen

Real Estate Weekly


With Bill de Blasio, the Democratic Party’s candidate for mayor of New York City, polling more than 40 points ahead of his nearest rival in next week’s election, it seems likely that the next mayor will be someone who, as a candidate, has made the creation of housing for low- and middle-income residents a central point in his campaign.


Affordable housing is not a contentious goal in theory, but it raises practical questions that tend to send blood pressures through the roof.


Issues of free markets, regulation, historic preservation, urban density, civic infrastructure, diversity and quality of life all come to the fore. The distinctly luxurious tone of the city’s most recent wave of housing development has been driven by basic economics, developers say.


With demand for Manhattan footholds high among the world’s wealthiest people and development land trading at a premium, large floor plans and high-end finishes mean the difference between a developer making a tidy return and the project never getting off the ground at all.


For those developers who choose to build for those with more modest incomes, government support is essential to making up the difference. At least one of those developers, Joseph Tahl, president of Tahl Propp Equities, is enthusiastic about a de Blasio mayoral administration.


“He will provide the political will as well as the financial resources to build and preserve affordable housing. It takes money,” Tahl said.


De Blasio has promised to invest $1 billion of city pension funds in affordable housing construction, which is expected to preserve 11,000 new units, according to his campaign.


He also proposes changing the tax code to increase the cost to speculators who are holding vacant land in anticipation of an increase in value.


But perhaps the most wide-reaching change de Blasio has proposed doesn’t have to do with allocating money. Mandatory inclusionary zoning would take the Bloomberg administration’s 80/20 program, which added a provision in which developers could gain additional development rights by including affordable housing, and make it non-optional.


Magnus Magnusson, of Magnusson Architecture and Planning, is familiar with this kind of deal, in which the city makes the inclusion of affordable housing a hard-and-fast requirement to taking advantage of new zoning at all, as opposed to a way to add FAR.


He’s working with a client on the rezoning of the old Rheingold brewery in Bushwick from industrial to residential use, which is going before the city council this month.


“The agreement was that 24 percent of all the units built there would be affordable housing, minimum, as a condition for rezoning,” Magnusson said. “I think that’s a very good model going forward, to require mixed income development.”


Magnusson also suggested that the requirements could be tiered further, to include a range of income levels in each development.


“New Yorkers do embrace that kind of model, of living in a building that’s probably very like the neighborhood that you live in, which is a mixture of all the income levels,” Magnusson said.


The cost of land and the cost of construction are the greatest hurdles to building affordable housing without government subsidies.


New York is the most expensive place in the country to get things built, according to Richard Anderson, president of the New York Building Congress. The reasons range from the cost of getting material to the site, to labor, to wading through the government bureaucracy.


There are things the private sector can do to make affordable housing more viable, he said, including signing project labor agreements with the construction unions and using modular construction — two techniques Forest City Ratner is using in the long-awaited housing units in Brooklyn’s Atlantic Yards.


Interest rate subsidies are another thing the government could consider, Anderson said. Tahl mentioned tax abatements.


Will the city ever have enough homes for everyone? Anderson thinks not. “New York City is too attractive,” he said. “People come here regardless of the housing availability, but if housing were even more available, even more people would come.”


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