Tag Archives: ten year plan

Housing out of Thin Air

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NYU’s Furman Center has posted a policy brief, Creating Affordable Housing out of Thin Air: The Economics of Mandatory Inclusionary Zoning in New York City. It opens,

In May 2014, New York City’s new mayor released an ambitious housing agenda that set forth a multi-pronged, ten-year plan to build or preserve 200,000 units of affordable housing. One of the most talked-about initiatives in the plan was encapsulated in its statement, “In future re-zonings that unlock substantial new housing capacity, the city must require, not simply encourage, the production of affordable housing in order to ensure balanced growth, fair housing opportunity, and diverse neighborhoods.” In other words, the city intends to combine upzoning with mandatory inclusionary zoning in order to increase the supply of affordable housing and promote economic diversity. (1)
Inclusionary zoning, “using land use regulation to link development of market-rate housing units to the creation of affordable housing,” is seen by many as a low-cost policy to support a broader affordable housing approach. (2) There is a limit to the reach of such a program because developers will only build if the overall project pencils out, including any units of mandatory inclusionary zoning.
The policy brief’s conclusions are important:
In many neighborhoods, including some that the city has already targeted for the new program, market rents are too low to justify new mid- and high-rise construction, so additional density would offer no immediate value to developers that could be used to cross-subsidize affordable units. In these areas, inclusionary zoning will need to rely on direct city subsidy for the time being if it is to generate any new units at all regardless of the income level they serve.
Where high rents make additional density valuable, there is capacity to cross-subsidize new affordable units without direct subsidy, but the development of a workable inclusionary zoning policy will be complex. The amount of affordable housing the city could require without dampening the rate of new construction or relying on developers to accept lower financial returns or landowners to be willing to sell at lower prices will vary widely depending on a neighborhood’s market rent, the magnitude of the upzoning, and, to a lesser extent, on the level of affordability required in the rent-restricted units. Where developers must provide the required affordable housing, and whether they can instead pay a fee directly to the city, also bears heavily on the number of affordable units a mandatory inclusionary zoning policy has the potential to generate, but raises other difficult issues. (14-15)
The de Blasio Administration’s housing and land use team is very sophisticated (including the Furman Center’s former director, Vicki Been, now Commissioner at the Department of Housing Preservation and Development), so the City will be well aware of these constraints on a mandatory inclusionary housing program. Nonetheless, it will be of great importance to design a flexible program that can adapt to changing market conditions to ensure that such a program is actually a spur to new development and not merely a well-intentioned initiative.

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.