Does Historic Preservation Limit Affordable Housing?

By Stefan Kühn - Own work, CC BY-SA 3.0, https://commons.wikimedia.org/w/index.php?curid=9413214

I answer that it can in CQ Researcher’s Historic Preservation:  Can The Past Escape The Wrecking Ball?

Many people fail to realize that land use policies like historic preservation involve big trade-offs. The most important one is that if you want to protect existing structures from demolition and modification, you can’t replace them with bigger ones that could house more people. Consider:

  • Historic preservation equals height and density restrictions. New building technologies (think steel girders and elevators) allow buildings to be built higher as time goes by. If a city landmarks a large percentage of its inner core, it restricts the ability of that core to go higher. This can lead to sprawl, as a growing population is pushed farther and farther from the city center.
  • Historic preservation favors the wealthy. Limited supply drives up housing prices and apartment rents, benefiting owners. And low-income and younger households are likely to suffer, as they are least able to bear the cost of the increases compared to other households. Future residents — think Midwesterners, Southerners and immigrants seeking to relocate to a city like New York for job opportunities — will also suffer.
  • It isn’t easy for historic preservation to be green. It feels environmentally responsible to protect older, low-density buildings in city centers because you have no dusty demolition, no noisy construction. But it actually comes at a big environmental cost. Denser construction reduces reliance on cars and thereby lowers carbon emissions. People living in a dense city have a much smaller carbon footprint than those in a car-oriented suburb.

Just because preservation comes at a cost does not mean it is bad. Much of our past is worth protecting. Some places benefit from maintaining their identities — think of the European cities that draw the most tourists year in and year out. But it is bad to deploy historic preservation indiscriminately, without evaluating the costs it imposes on current residents and potential future ones.

Cities that want to encourage entrepreneurship and affordable housing should deploy historic preservation and other restrictive land use tools thoughtfully. Otherwise, those cities will be inhabited by comparatively rich folks who complain about the sterility of their current lives and who are nostalgic for “the good old days” when cities were diverse and hotbeds of creativity.

If they fail to understand the trade-offs inherent in historic preservation, they won’t even understand that a part of the problem is the very policy they support to “protect” their vision of their community.

Skyscraper’s Future up in The Air

skyscrapers

The New York Law Journal quoted me in Upper West Side Skyscraper’s Future Uncertain After NY State Court Ruling. The story opens,

The development at 200 Amsterdam Ave. in Manhattan is slated to be the tallest building on the Upper West Side, with its 51 stories rivaling the skyscrapers located further downtown.

But whether this will ever happen has now become questionable, after a state court ruling that found city officials were wrong to follow an interpretation of city zoning law used by the developer to achieve the project’s awesome height.

Supreme Court Justice Franc Perry of Manhattan sided with local community groups looking to halt the building underway at the site. The plaintiffs—the Committee for Environmentally Sound Development and the Municipal Arts Society of New York—were joined by numerous local state and city elected officials in opposing what they say is not only an out-of-character monster development in the Manhattan neighborhood, but one that relied on a faulty zoning law interpretation to move forward.

“It is finally a declaration that zoning law means something and developers can’t make it up as they go along,” said Emery Celli Brinckerhoff & Abady name attorney Richard Emery, who represented the plaintiffs.

Since 1978, developers and city buildings officials have relied on the so-called Minkin Memo, named after the former head of the city’s Department of Buildings’ Irving Minkin, for guidance on what experts call an ambiguity in the city’s zoning law towards so-called tax lots. These are additional subdivisions of city real estate, which can overlap with or be included inside a zoning lot.

Under the Minkin memo, developers have been able to pull together extra vertical building rights that nearby property owners aren’t using, offering the opportunity to boost the size of a project such as 200 Amsterdam beyond what would normally be allowed.

“The zoning resolution is ambiguous about when a zoning lot can be formed from partial tax lot; it never deals with that problem,” said Stewart Sterk, the Mack Professor of Real Estate Law and director of the Center for Real Estate Law & Policy at the Cardozo School of Law.

Initially, city officials had no problem with the move. DOB issued a permit to the developers for a residential and community facility building at the site of the Lincoln Towers condos on the Upper West Side. The developers relied on the Minkin memo as the basis for the acquisition tax lots that combined partial and whole lots to provide the developers with the vertical building rights needed for their skyscraper.

Shortly after DOB green lighted the project, the Committee for Environmentally Sound Development challenged the DOB’s decision. The challenge snowballed, and soon seemingly every local elected official, from state Assemblyman Richard Gottfried to borough president Gale Brewer, were opposed to the plan. The project’s permit was appealed by both CESD and the Municipal Arts Society to the city’s Board of Standards and Appeals.

In March 208, DOB made an official about-face on the project. In a letter from assistant general counsel to the BSA, the department said the Minkin memo provided an incorrect interpretation and that zoning regulations did not in fact intend for zoning lots to consist of partial tax lots.

The BSA was not persuaded by the arguments and in July 2018 voted 3-1 not to grant the appeal, with one board member abstaining. The plaintiffs soon after pursued a review of the BSA’s decision in state Supreme Court.

In subjecting the developers’ permit to further review, Perry pointedly took issue with BSA view of the process.

“BSA found that the Subject Zoning lot is ‘unsubdivided,’ within the meaning of the [New York City Zoning Resolution], simply because Developer has declared it to be so,” the judge wrote.

Noting that the referenced law states that a zoning lot is defined by being “unsubdivided” within a single block, Perry said BSA’s interpretation would render the term “superfluous,” and run “afoul of elementary rules of statutory construction.”

Since DOB saw the light on the Minkin memo during the appeal process, the court said the department’s statutory basis for the issuance of the permit to begin with was undermined. BSA’s decision was nullified and vacated, and the board was directed to review the project’s permit application “in accordance with the plain language” of the zoning regulation and Perry’s order.

As Cordozo’s Sterk noted, the development at 200 Amsterdam was far from the first to use the Milkin memo to justify partial tax lot usage in a building plan. Perry’s decision has the ability to throw uncertainty around zoning and building issues into a business sector highly adverse to such things, Sterk said.

But just as important for Sterk is the question now of when a government agency becomes estopped from changing its mind after it’s already induced people to rely on its existing interpretation.

“That’s a big problem in this case, because clearly developers have put millions of dollars into this project in reliance on an existing interpretation,” he said.

Brooklyn Law School professor David Reiss, who is the research director of the school’s Center for Urban Business Entrepreneurship, said he saw the case as less of a “good guy vs. bad guy” dynamic as much as one of whether the assurances of government officials can be binding.

“There’s a reliance on government statements and government permissions,” Reiss said, while noting the project has already commenced.

Should the case stand, he predicted it would serve to rattle developers’ confidence in their dealings with the city going forward.

“It’s more uncertainty in a process that’s already pretty uncertain,” he said.

Luxury Rental Turned Into College Dorm

photo by Ann Larie Valentine (no changes made) https://creativecommons.org/licenses/by-sa/2.0/

Realtor.com quoted me in ‘Help! My Luxury Rental Was Turned Into a College Dorm’. It opens,

Finally! After years of scraping by in cramped apartments in sketchy neighborhoods, you’ve made it—into a luxury rental with a doorman, concierge service, gym, bike room, and other posh amenities. It seems perfect.

Then you meet your neighbors, sunning themselves on the roof deck. Topless.

Sound like the opening to a Skinemax flick? On the contrary, it’s a reality for residents at The Azure, a new high-end apartment building in Brooklyn, NY.

“There were girls sunbathing topless up there,” one tenant with a child told the New York Post. “My wife was, like, ‘WTF?!’ There are a lot of families [here].”

You see, The Azure was facing significant vacancies, so the management company decided to rent out 30% of its units to King’s College, a liberal arts school in lower Manhattan. The result? Families who paid top dollar to live in a building with a business center, cold storage space for grocery deliveries, and other luxe features suddenly found themselves in what felt like a college dorm. A “dormdominium”! And you know what that probably means: late-night parties with eau de weed wafting through the halls and, um, some awkward bump-ins during rooftop barbecues with bikini-clad (or unclad) residents. And noise. Lots of noise.

“We bought into the luxury experience of the nice rooftop,” another tenant lamented. “We didn’t expect it to be packed with 18-year-olds.”

When luxury apartments turn into dorms: Why it happens

This rude awakening for well-heeled renters isn’t as unusual as you might think. It’s just what many luxury developers may find themselves doing now that the high-end rental market is softening, leaving empty apartments that must be filled to make ends meet.

“Building owners stuck with vacant properties will try to rent them to whoever they can within reason,” says Aaron Shmulewitz, a real estate attorney with Belkin Burden Wenig & Goldman in New York City. “When the economy goes bad, building owners have to scramble.”

Part of the problem is that a few years ago, the housing market was going so strong, developers got bullish on building—only to find themselves in a more sluggish market once their structures were complete.

“Opening a residential building is a many, many-year process,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “You have to acquire the site, you have to get financing, perhaps you have to get zoning approvals, you have to get your plans approved … then you have to build it and then you have to market it. You’re talking about years of work.”

Many of these builders were likely banking on the possibility that rental demand would just keep going up and up—but they bet wrong.

“We have a large amount of supply that came into the market within a fairly short period of time,” says Edward Mermelstein, a real estate attorney with One and Only Holdings in New York City. “At the same time, the demand has waned substantially.”

How do college kids afford a luxury rental, anyway?

While luxury rentals in any other city might be hurting right about now, New York is well-positioned to solve this problem, thanks to its high student population and limited dorm space.

“Renting to college students in Manhattan or Brooklyn has always been a trend, as there’s a total of almost 250,000 active students on this small island,” says Michael Jeneralczuk, a real estate agent with REAL New York. “With that said, luxury apartments are usually outside of student budgets.”

While a luxury rental might be outside of any individual student’s budget, a larger group of students can make it work. According to the Post, the King’s College students are paying a combined $6,000 per month for a two-bedroom apartment housing four people, which comes to $1,500 per person. This is more affordable than trying to rent alone; even a studio apartment at The Azure starts at $2,399 per month, according to the building’s website.

Meanwhile, the nonstudent rate for a two-bedroom apartment at The Azure starts at $3,391 per month. So by renting to King’s College students, the building is also making almost twice as much per apartment. So, at least for these two parties, it’s a win-win.

“It’s an opportunity to fill vacant apartments and collect rent,” says Becki Danchik, a real estate agent with Warburg Realty in New York City.

Given that the luxury rental market is slowing down nationwide, does this mean renters across the country might expect college-aged neighbors soon, too?

According to Reiss, it depends on development levels. In Los Angeles, construction has stalled, so apartments are filling up. Seattle, on the other hand, is facing similar issues as New York City.

“Seattle has had a construction boom, which means there are a lot of empty apartments,” says Reiss. “You face a similar situation where landlords are going to look to find some way to rent those out and make their money back.”

 

The Hunger Games: Amazon Edition

photo by SounderBruce

The New York Law Journal published commentary of mine, The Hunger Games: Amazon Edition. It opens,

Last week Amazon finally announced that New York and Northern Virginia would be the sites of its planned major expansion. While many are caught up in the excitement of Amazon bringing 25,000 high-paid jobs to both metropolitan areas, it is worth thinking through the costs that beauty contests like this one impose on state and local governments. Amazon extracted billions of dollars in concessions from the winners and could have extracted even more from some of the other cities courting them.

It is economically rational for companies to create such Hunger Games-type competitions among communities. These competitions reduce their costs and improve their bottom lines. But is it economically rational for the cities? As long as governments are acting independently, yes, it is rational for them to race to the bottom to secure a win. So long as they are a bit better off by snagging the prize than they would have been otherwise, they come out ahead. But the metrics that politicians use are unlikely to be limited to a hard-nosed accounting of costs and increased tax revenues. Positive buzz may be enough to satisfy them.

Consider Wisconsin Governor Scott Walker’s deal with Foxconn. Just over a year ago, he was touting the $3 billion state subsidy for FoxConn’s manufacturing plant. This was the year leading up to his hard fought election fight, a fight he ultimately lost. His public statements focused on Foxconn’s promise to create 13,000 jobs. While that was a lot of jobs, it was a hell of a lot of subsidy—more than $230,000 per job, more than six times the largest amount Wisconsin had ever paid to subsidize a promised job. Walker got his campaign issue, FoxConn got its $3 billion and Wisconsin residents got … had. The $3 billion dollar subsidy has grown to over $4 billion at the same time that Foxconn is slowing down its investment in Wisconsin. So now taxpayers are subsidizing each job by well over $300,000 each. Nonpartisan analysts have determined that it will take decades, at the earliest, for Wisconsin to recoup its “investment.”

Likewise, hundreds of millions of dollars are thrown at stadiums and arenas even though economists have clearly demonstrated that those investments do not generate a positive financial return for the governments that provide these subsidies. Fancy consultants set forth all of the supposed benefits: job creation, direct spending by all of the people drawn to the facility, indirect spending by those who service the direct spenders. This last metric is meant to capture the increase in restaurant staff, Uber drivers and others who will cater to the new employees, residents and visitors to the facility. But as has been shown time and time again, these metrics are vastly overstated and willingly accepted at face value by politicians eager to generate some good headlines. They also ignore the opportunity cost of the direct subsidies—monies spent on attracting a company is money that can’t be spent on anything else. While we don’t know what it would have been spent on, it is likely to have been public schools, mass transit, roads or affordable housing in many communities.

 

Noise Pollution and Property Values

photo by Luis Miguel Bugallo Sánchez

Realtor.com quoted me in What Is Noise Pollution and How Does It Affect Property Values? It opens,

When it comes to a home’s value (and your sanity), noise pollution can be a major downer. But what is noise pollution exactly? Most people have different definitions of what noise pollution actually is—anything from sirens to a barking dog, or the noise of traffic on the street outside.

While outside noise isn’t totally escapable (even the prairie has ambient noise), home buyers will want to be on the lookout for excessive noise pollution, because it could affect a property’s value. After all, you don’t want to live in (or have to eventually unload) a place that requires a lifetime supply of earplugs.

First, let’s define what noise pollution actually means.Re

What is noise pollution?

In defining noise pollution, there are several variables in the mix.

“Noise pollution is basically any noise that you don’t like, but I guess we would define it as noise that most people generally don’t like,” says Brooklyn Law School Professor David Reiss, research director for the Center for Urban Business Entrepreneurship. “When governments regulate noise, however, it is usually based on how loud a noise is.”

For example, Reiss explains that according to A Guide to New York City’s Noise Code, in that city, “Noise that exceeds the ambient sound level by more than 10 decibels (dB) as measured from 15 feet from the source as measured from inside any property or on a public street is prohibited.”

Of course, the ambient sound level in NYC is considerably louder than in a rural area.

How to measure noise pollution near a home

Although decibels are used to measure the intensity of a sound, there are more accurate ways to identify noise pollution around a particular house. When it comes to getting ballpark figures for typical noise levels, Tom Davies, Co-Founder and Manager of the property buying company Accelerate Homes, suggests that most buyers figure out the day-night average sound level (Ldn) or the day-evening-night average sound level (Lden), which are measurements that can help assess the impact that road, rail, air, and general industry has on the local population. Either of these measurements give a potential buyer a much more accurate assessment of overall noise pollution near their home. To measure these levels, get a regular decibel meter, take hourly readings, and plug those numbers into this online noise calculator.

You can also check this interactive national transportation map created by the U.S. Bureau of Transportation Statistics to get a general idea of noise pollution levels created primarily by interstate highways and airports in your area. Just type in your address (or the address of any home you’re considering) and get a general reading. Red means loud—think vacuum cleaner (like 60dB-80 dB), and purple means even louder, like the constant sound of a garbage disposal (80 dB and up).

Identifying noise pollution culprits

It’s not always easy to figure out what’s making all the noise, but it is possible.

“While some of the main factors could be easily spotted—like the proximity of highways, stadiums, airports, train, and bus stations—other factors like specialized traffic (regular truck deliveries or rubbish removal), or the presence of neighbors with loud dogs, are far less likely to be spotted at first sight,” says Davies. The only way to get to the bottom of it is to talk to the neighbors.

Reiss also suggests taking it a step further.

“Visit at different times of the day. For example, if there is a bar across the street, drive by on a Saturday night,” he says. “Also, ask local government officials, like community board district managers, about noise complaints.” Basically, it’s up to you to do your due diligence on sound.

How noise pollution affects property prices

High noise levels don’t automatically correlate with lower prices, Reiss says. Some of the most expensive homes in New York City are located in midtown Manhattan, a busy area that’s home to the theater district, the tourist magnet Times Square, and many major corporate offices.

“But within a certain market, there will be those who value quietness and those who value being in the middle of the action,” he says.

To get a true reading on how noise pollution will affect the value of a property, “you would need to distinguish short-term noise—like a neighboring construction site—from permanent noise—like from a neighboring firehouse,” says Reiss.

Cities With the Worst Rent

photo by Alex Lozupone

Realtor.com quoted me in Cities With the Worst Rent: Is This How Much You’re Coughing Up? It opens,

Sure, rents are too dang high just about everywhere, but people living in Los Angeles really have a right to complain: New analysis by Forbes has found that this city tops its list of the Worst Cities for Renters in 2018.

To arrive at these depressing results, researchers delved into rental data and found that people in L.A. pay an average of $2,172 per month.

Granted, other cities have higher rents—like second and third on this list, San Francisco (at $3,288) and New York ($3,493)—but Los Angeles was still deemed the worst when you consider how this number fits into the bigger picture.

For one, Los Angeles households generally earn less compared with these other cities, pulling in a median $63,600 per year. So residents here end up funneling a full 41% of their income toward rent (versus San Franciscans’ 35%).

Manhattanites, meanwhile, fork over 52% of their income toward rent, but the saving grace here is that rents haven’t risen much—just 0.4% since last year. In Los Angeles, in that same time period, rent has shot up 5.7%.

So is this just a case of landlords greedily squeezing tenants just because they can? On the contrary, most experts say that these cities just aren’t building enough new housing to keep up with population growth.

“It is fundamentally a problem of supply and demand,” says David Reiss, research director at the Center for Urban Business Entrepreneurship at Brooklyn Law School. “Certain urban centers like Los Angeles, San Francisco, and New York are magnets for people and businesses. At the same time, restrictive local land use regulations keep new housing construction at very low levels. Unless those constraints are loosened, hot cities will face housing shortages and high rents no matter what affordable housing programs and rent regulation regimes are implemented to help ameliorate the situation.”

Micro Apartments and The Housing Crisis

photo by BalazsGlodi

The NYU Furman Center has posted 21st Century SROs: Can Small Housing Units Help Meet the Need for Affordable Housing in New York City? The policy brief opens,

Throughout much of the last century, single-room occupancy (SRO) housing was a commonly available type of low-rent housing in New York City, providing housing to people newly arrived in the city, low-income single New Yorkers, and people needing somewhere to live during life transitions. SRO units typically consisted of a private room with access to full bathroom and kitchen facilities that a renter shared with other building occupants. As the city fell onto hard times, so did SRO housing. During the second half of the last century, many SROs came to serve as housing of last resort, and policymakers enacted laws limiting their construction and discouraging the operation of SRO units. Many SROs were converted to other forms of housing, resulting in the loss of thousands of low-rent units in the city.

New research and analysis from the NYU Furman Center addresses the question of whether small housing units (self-contained micro units and efficiency units with shared facilities) can and should help meet the housing need previously served by SROs. In this policy brief, we present a summary of the paper, 21st Century SROs: Can Small Housing Units Help Meet the Need for Affordable Housing in New York City? We provide an overview of the potential demand for smaller, cheaper units, discuss the economics of building small units, analyze the main barriers to the creation of small units that exist in New York City, and suggest possible reforms that New York City can make to address these barriers. (1)

The policy brief makes a series of recommendations, including

  • reducing density limitations for micro units near transit hubs
  • permitting mixed-income and market-rate efficiency units
  • creating a government small unit program to promote the construction of micro apartments

There is no doubt that the lack of supply is a key driver of the affordable housing crisis across the country. Small units should be part of the response to that crisis, not just in New York City but in all high-cost cities.