Neighborhood Change and Public Housing

H.L.I.T.

The Effects of Neighborhood Change on NYCHA Residents, a report released to little notice in May, has received a lot of attention after the NY Daily News wrote a disparaging article about it. I will leave it to others to decide if this report was worth its six figure price tag, but I do think that there are some interesting findings. The report was prepared by Abt Associates and NYU’s Furman Center, two leading housing research entities. The Findings at a Glance state that

In this study, Abt finds statistically significant differences in earnings for NYCHA residents living in different neighborhood types. Annual household earnings average $4,500 higher for public housing residents in persistently high‐income neighborhoods as compared to persistently low‐income neighborhoods. Earnings are $3,000 higher for those in increasing income neighborhoods. Moreover, these findings are not attributable to any selection bias of residents choosing to live in either persistently high or low income neighborhoods. (1)

This is a pretty big deal, given that the average family income for NYCHA residents is $23,311. If this increased income is attributable to neighborhood characteristics, we would want to take that into account when formulating housing policy.

There were some other interesting findings that were also not highlighted by the Daily News:

  • Developments surrounded by persistently high‐income neighborhoods have lower violent crime rates (5.7 violent crimes per 1,000 residents) than those surrounded by persistently low‐income neighborhoods (8.3 violent crimes per 1,000 residents).
  • Developments in persistently high‐income neighborhoods are zoned for public elementary schools with higher standardized test scores than developments in persistently low‐income neighborhoods; 72% of NYCHA households in low‐income neighborhoods are zoned for schools in the bottom quartile for math proficiency (cf. 41% for those in high‐income neighborhoods).
  • Among public elementary and middle school students living in NYCHA housing, those living in developments surrounded by persistently high—and increasing—income neighborhoods score higher on standardized math and reading tests. (Findings at a Glance, 2)

Before this report is dismissed as a boondoggle, we should try to understand its implications for developing a housing policy that promotes socioeconomic diversity. This is a city of extremes of wealth and poverty and there has been a very negative reaction to policies, such as poor doors, that seem to reinforce that state of affairs. But it may turn out that public housing is a useful tool for creating the more equitable city that so many New Yorkers strive for. Let’s not shoot the messengers before we hear what they have to say.

Tuesday’s Regulatory & Legislative Update

  • Mayor Bill De Blasio’s new 10 year plan for New York City Housing Authority (NYCHA), entitled NexGeneration NYCHA, focuses on four goals to transform NYCHA: short-term financial stability and diversifying long-term funding; increased operational efficiency; rebuilding, expanding, and preserving the city’s public and affordable housing stock; and engaging residents in improved social services.
  • Representatives in the House ( Turner – R Ohio & Fattah – D Penn.) join forces in a bi-partisan effort to urge Congress to reauthorize New Market Tax Credits (NMTC), which expired in 2014 (their letter here). The NMTC was established by Congress in 2000 to spur new or increased investments into operating businesses and real estate projects located in low-income communities. The NMTC Program attracts investment capital to low-income communities by permitting individual and corporate investors to receive a tax credit against their Federal income tax return in exchange for making equity investments in specialized financial institutions called Community Development Entities (CDEs). Legislation to permanently extend the NMTC is pending in both the House (H.R. 855) and Senate (S. 591).

NYC’s Abandoned Public Housing

The Community Service Society issued an important report, Strengthening New York City’s Public Housing. Public housing has a terrible reputation in much of the country, but the New York City Housing Authority traditionally had the reputation, notwithstanding its real flaws, as the best large public housing system in the nation. This report makes a strong case that many of its current flaws are the result of systemic disinvestment at the federal, state and local levels in recent years. The report concludes,

the analysis confirms the reality of the appalling living conditions in NYCHA apartments reported by residents and the media for several years. But the Authority’s reputation or its competence should not be at issue; it performed relatively well until its resource base fell apart in the period following 2001. Government defunding was and is the root cause of the accelerating deterioration over the last decade. The state and city were major contributors to that decline, often at levels equivalent to the federal disinvestment. They should be open to a major role in restoring NYCHA.

Moreover, existing institutional arrangements that make NYCHA opaque to public scrutiny need to be changed—those that mask the Authority’s financial condition and its failures to comply with local housing and building codes—because they cloak the real consequences of government defunding and, as a result, deprive residents, advocates, concerned elected officials, and the interested public of the information they could use as ammunition to press for needed resources. The NYCHA Board also needs to be freer to act as a leading advocate for the Authority. Its governance structure should be reconsidered to assure the Board the independent voice it needs to better make the case for itself and its residents. (27)

The de Blasio Administration has made affordable housing a centerpiece of its agenda, so there is reason to think that this report will get its attention. Let us hope so — there is a lot of solid infrastructure which just needs its deferred maintenance issues addressed. But the report also highlights various operational changes that can lead to real improvements in the lives of NYCHA residents.  These reforms could provide many low-income households with decent homes.

NYC’s Housing Affordability Challenge

NYC’s Comptroller Stringer has issued The Growing Gap: New York City’s Housing Affordability Challenge. The report tells

a sobering story—of stagnant incomes, rising rents, and a deepening affordability crunch, especially for the working poor and others at the lower end of the income spectrum. This financial squeeze comes despite significant housing investments during the 12 years of the Bloomberg mayoralty. From 2000 to 2012, this report found:

• Median apartment rents in New York City rose by 75 percent, compared to 44 percent in the rest of the U.S. Over the same period, real incomes of New Yorkers declined as the nation struggled to emerge from two recessions.

• Housing affordability—as defined by rent-to-income ratios—decreased for renters in every income group during this period, with the harshest consequences for poor and working class New Yorkers earning less than $40,000 a year.

• There was a dramatic shift in the distribution of affordable apartments, with a loss of approximately 400,000 apartments renting for $1,000 or less. This shift helped to drive the inflation-adjusted median rent from $839 in 2000 to $1,100 in 2012, a 31.1% increase. In some neighborhoods – among them Williamsburg, Greenpoint, Ft. Greene and Bushwick in Brooklyn, average real rents increased 50 percent or more over the 12-year period.

• The elderly and working poor are making up a growing portion of low-income households with 40 percent of the increase tied to households in which the head is 60 years or older.

• In 2000, renters earning between $20,000 and $40,000 in inflation-adjusted dollars were dedicating an average of 33 percent of their income to rental costs. Twelve years later that average jumped to 41 percent. Their housing circumstances became more precarious even though their labor force participation rates soared.

It is clear that affordable housing remains one of New York City’s most pressing needs. Mayor de Blasio has laid out a goal of creating or preserving 200,000 units of affordable housing over a 10-year period, an ambitious increase over the 165,000 units pledged under Mayor Bloomberg’s 12-year New Housing Marketplace Plan.

Now, with the winding down of one major housing initiative and the launching of another, it is appropriate to take stock of the City’s housing circumstances, to evaluate the changes that have taken place in the city’s housing ecology, and to outline strategies for future housing investment that are informed by the city’s evolving housing landscape. (1)

While the report diagnoses many of the problems in the housing market, it does much less in terms of proposing solutions to them. It also fundamentally misunderstands the role that new housing plays in the housing market (see page 24). The report only focuses on the high rents for the new units without taking into account the fact that those new units reduce the pressure on rents for older units of housing, a process that housing economists refer to as “filtering.” There is no question that the CIty needs to increase the supply of housing if it wants to reduce the cost of housing overall. The de Blasio Administration understands this. We will have to wait and see how the Mayor’s housing plan, to be released in May, will tackle the under-supply problem head on.

Unsexy but Essential: NYC’s Infrastructure Needs

The Center for an Urban Future has released a much-needed report, Caution Ahead: Overdue Investment for New York’s Aging Infrastructure. The report finds that

too much of the city’s essential infrastructure remains stuck in the 20th Century—a problem for a city positioning itself to compete with other global cities in today’s 21st Century economy.

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This report finds that city agencies and authorities will have to invest approximately $47.3 billion to maintain the safety and functioning of New York’s infrastructure—leaving a $34.2 billion capital funding gap at the city, Port Authority, New York City Transit, Housing Authority and CUNY over the next five years. This funding gap includes only the replacement and repair of existing infrastructure—not new structures or increased capacity. (3)

Good government reports like this are often heeded for a day or two in the press and then filed away with other examples of wishful thinking. The fact is that it is hard for politicians to fix the old when it is so much more noteworthy to do ribbon cuttings for the new. But given that Mayor de Blasio has placed housing construction at the top of his agenda, a report like this might gain more traction than usual.

The report highlights work that is needed to be in the following areas, among others:

  • Roads
  • Subways
  • Natural Gas
  • Electricity Distribution
  • Water Mains
  • Sewage Pipes
  • Stormwater Management
  • Parks

All of these infrastructure needs are integral to large scale housing construction. Large, new buildings need to be supported with investments across these areas. This is a cost. But large scale housing construction also provides the opportunity to upgrade infrastructure more broadly. Concentrated development makes it more cost-effective to upgrade and modernize the infrastructure that supports new developments as well as their surrounding areas. There is no question that the de Blasio Administration should integrate infrastructure improvement with its ambitious affordable housing agenda. It may not be able to get two for the price of one. But with proper planning, it certainly could get two for less than the price of two.

Affordable Housing in the De Blasio Era

Mayoral candidate de Blasio’s position on affordable housing policy can be found here. The key points include:

  • Require developers to build some affordable housing when they build in neighborhoods that have been upzoned (mandatory inclusionary zoning)
  • Direct $1 billion in city pension funds to affordable housing construction

  • Apply the same tax rate to big, vacant lots as applies to commercial properties and earmark the increased revenues for affordable housing

  • Ensure that affordable housing subsidies meet the needs of lower-income families and are distributed equitably throughout the City

As I had mentioned previously, NYU’s Furman Center (and its Moelis Institute for Affordable Housing Policy) ran a great series of ten conversations on the big housing issues facing New York City’s mayor. Since then, the Furman Center has posted ten policy briefs about those issues.The ten issues are

  1. Should the next mayor commit to build or rehabilitate more units of affordable housing than the Bloomberg Administration has financed?

  2. Should the next mayor require developers to permanently maintain the affordability of units developed with public subsidies?

  3. Should the next mayor adopt a mandatory inclusionary zoning program that requires developers to build or preserve affordable housing whenever they build market-rate housing?

  4. Should the next mayor seek to expand the use of city pension funds to develop affordable housing?

  5. Should the next mayor provide a rental subsidy for moderate- and middle-income households?

  6. Should the next mayor permit more distant transfers of unused development rights to support the development of affordable housing?

  7. Should the next mayor support the New York City Housing Authority’s plan to lease its undeveloped land for the construction of market-rate rental housing?

  8. Should the next mayor allow homeless families to move to the top of the waiting list for housing vouchers or public housing?

  9. Should the next mayor offer to cap the property tax levy on 421-a rental properties in order to preserve the affordable units within those buildings?

  10. How should the next mayor prioritize the preservation of existing affordable housing units?

Mayor-Elect de Blasio and his team will have to struggle with all of these issues. There are few easy answers in New York City when it comes to housing policy.