Tag Archives: affordability

Affordable Flood Insurance in NYC

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The Rand Corporation has posted Flood Insurance in New York City Following Hurricane Sandy. The report has a chapter on affordability issues that is worth a read, particularly as the de Blasio Administration undertakes its ambitious affordable housing plan. The report notes that

many New Yorkers will face substantially higher flood insurance premiums moving forward. Many more structures will be in areas considered high-risk than in the past, and premiums for many structures already in high-risk areas will be based on considerably higher flood levels.

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These substantial premium increases will reduce the disposable income or wealth (or both) of many households and may well be unaffordable for some. In the absence of intervention, the consequences may be foreclosures, turnover, and hardship for some of New York City’s more-vulnerable citizens.(63)

The book goes on to review a variety of approaches “for addressing the affordability issue.” (67) It reviews “tax credits, grants, and vouchers that could be applied toward the cost of flood insurance.” (63) It also notes that such interventions distort “the price signal that incentives property owners to invest in risk-mitigation measures in order to reduce premiums.” (67) It considers proposals to deal with such distortion, such as a means-tested voucher program that is coupled “with a requirement that mitigation measures be taken that make sense for the property.” (67) The book only scratches the surface of this topic, noting that more “information is needed to address the advantages and disadvantages of alternative strategies for addressing affordability.” (68)

As the de Blasio Administration considers the preservation portion of its affordable housing agenda, one could imagine that a concerted effort to incentivize risk mitigation while also promoting affordability could be a significant component of the final plan. Solutions could range from deferred payment, due on sale or refinance of a home, to outright subsidies as outlined by the Rand report. Whatever the ultimate solution is, the problem should be incorporated into the City’s planning now.

Housing Affordability in NYS

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The NYS Comptroller issued a report, Housing Affordability in New York State. The report finds that

The percentage of New York State households with housing costs above the affordability threshold, as defined by the U.S. Department of Housing and Urban Development (HUD), rose for both homeowners and renters from 2000 to 2012, according to U.S. Census Bureau data. As of 2012, more than 3 million households in the State paid housing costs that were at or above the affordability threshold of 30 percent of household income. Within that group, more than 1.5 million households paid half or more of their income in housing costs. Statewide, the estimated percentage of rental households with rents above the affordability level increased from 40.5 percent in 2000 to 50.6 percent in 2012. (1, footnote omitted)

The report suggest that “that many New Yorkers are feeling pressure from a combination of stagnant or declining real income and increasing housing costs. A combination of factors including comparatively slow economic growth over time, a rising real estate tax burden, and limited housing supply in many areas of the State contribute to the increasing challenge New Yorkers face in finding affordable housing.” (2)

A pretty consistent theme on this blog is that limits on housing production necessarily limit housing affordability. While this seems obvious to me (perhaps I hang around too many economists?!?), it certainly is not to other people. Many people with whom I discuss affordable housing policy acknowledge that in theory, limits on the supply of housing should effect the price of housing (they all took Econ 101 when they were in college). But they look around New York City, see new high rises going up while housing prices are going up at the same time. They then doubt that increasing the supply of housing will reduce the cost of housing. All I can say is who are you going to believe — your Econ 101 teacher or your own lyin’ eyes?

But of course that is not a compelling argument. So I tell my interlocutors that it is necessary to take into account the fact that NY is seeing a dramatic increase in demand. This demand comes from the increasing resident population as well as the inflow of the ultra rich who want a (fifth?) part-time home in NYC as well as a safe place to park some capital. This high demand masks a problem that NY has faced for decades — too little new housing construction to support the existing residents, let alone all of the new residents.

The de Blasio Administration has acknowledged the need for increased housing construction as part of its program to increase housing affordability in the five NYC counties. The Comptroller’s report acknowledges that a similar dynamic is occurring throughout New York State. Perhaps Governor Cuomo will identify ways in which the State government can take a leading role in encouraging housing construction in all 62 of New York State’s counties.

Reiss on Housing Affordability

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I will be speaking on the FHA and Housing Affordability on June 11th at the AALS Workshop on Poverty, Immigration and Property will be held June 10-12 in San Diego.

The workshop brings together three communities of scholars: poverty, immigration and property to address historical issues and recent developments in the intersection of these topics. The topics covered in this innovative workshop include plenary sessions on What Lies at the Intersection of Poverty, Property, and Immigration; After SB 1070: Exclusion, Inclusion, and Immigrants; Reconsidering State v. Shack; and Transnational Perspectives on Poverty, Immigration, and Property. A range of concurrent panels will be established based on proposed topics and a call for papers and presentations.

 I will be posting a version of my paper later this summer.