In May 2014, New York City mayor Bill de Blasio announced that he had a plan to bring much-needed affordable housing to the city. He would put together a $41 billion plan over 10 years that would designate development zones and spur residential development. On paper, de Blasio’s plan looked great. But as soon as it was released, housing experts began attacking the plan as unrealistic and too optimistic.
The Problem With The Administrative System Red Tape
The problem in New York City when it comes to the residential development of affordable housing is the red tape built into the administrative system. The Building Department is not issuing building permits fast enough, and development is getting bogged down. When the 421-a tax relief program expired, developers warned that costs for construction would rise so much that de Blasio’s $41 billion estimates will seem like only the beginning.
The problem in New York City is that residential housing is either for the very rich, or it is government subsidized housing. The demand for expensive skyscraper units is high while building residential housing for the middle class and poor families brings no profit. There was a time when developers would bristle at the idea of building affordable housing, but 421-a helped to change their minds. But with 421-a out of the picture, many residents of NYC fear that affordable housing is going to disappear.
Brooklyn: The Epicenter Of The Housing Problem
According to Bloomberg Pursuits, the housing problem is most evident in the borough of Brooklyn. The numbers indicate that Brooklyn residents are paying an average of 98 percent of the median income in the borough just on housing. This number represents an average, but it is a stark reminder that there is a strong need for affordable housing throughout NYC.
Brooklyn has seen a sharp increase in residential development over the years, and it is also enjoying a significant boost in commercial development as well. Brooklyn had more projects approved under the 421-a tax program than any other borough as the program reached its end. From February 1, 2016, to June 30, 2016, no borough had more residential building permits issued than Brooklyn.
However, most of those new permits were issued after the 421-a had expired, which means those projects do not have the 15 to 20 percent affordable housing requirement that came with the significant tax breaks offered by the 421-a program. While Brooklyn saw more than its fair share of affordable housing being developed thanks to 421-a, it is also seeing an increase in luxury construction that is putting rent prices out of reach for the very people who made the Brooklyn residential development boom a success in the first place.
Factors Involved In The Bureaucratic Back Log
While red tape throughout NYC government is a culprit in these matters, The Nation points out a couple of other factors that are not helping. There is only so much financial support the city of New York can offer to developers to spur affordable housing development. For years, federal subsidies have helped the city to reach some of its residential development goals. As those federal subsidies have been pulled back, the city has been left to either find new funding or cut the programs that spur affordable housing construction.
The other problem is income inequality. In 2010, 20 percent of the population of New York City generated 50 percent of the income. As that gap widens, developers are forced to build for their paying customers. In New York City, the paying customers for real estate development are the ultra-rich.
Choosing Between Affordable Housing And High-Rise Apartments
Republic 3.0 reports that construction of affordable housing in New York City cost as much as $50 per square foot in 2014. Those numbers make it almost impossible for developers to be able to build affordable housing, charge the rents that are mandated by the city, and still stay in business. That is one of the reasons why most developers opt to build the very expensive high-rise apartment buildings for the rich.
As more expensive residential properties are developed, the value of the land also goes up. In the private sector, real estate prices are a very touchy subject and significantly affect the cost of construction. When a developer wants to buy a private parcel of land that is located in an affordable housing development zone, that developer is forced to risk financial disaster just to meet the needs of the city.
But what about the public land?
If you fly over New York City, you will see parcels of undeveloped land that look like ideal locations for residential development. As the private land runs out, the public land starts to take the spotlight as the ideal place to build affordable housing. But the red tape involved in allowing public land to be developed is delaying the process, and the value of that land is slowly rising in the meantime.
The Brooklyn Army Terminal is a piece of public land that has been slated for residential development for a long time. But even city officials admit that red tape within the city’s offices has slowed the approval process for any affordable housing projects on that parcel. It was estimated that the city could immediately cut out at least 25 percent of the process required to approve development on a parcel of public land, and that would get that land developed before the value shoots up. But for now, the red tape exists and the projects are still in the planning stages.
The Tug-Of-War Continues
New York City is fighting a difficult battle when it comes to affordable housing. As the costs of construction continue to rise and the property values in New York City continue to push upwards, the ability for the city to mandate affordable housing becomes nearly impossible. Developers are not willing to take on projects that would benefit the 20 percent of the city’s population that live in poverty because they simply cannot stay in business building those kinds of properties.
In the meantime, New York City remains its own worst enemy by allowing red tape to strangle any development opportunities. The process for approving building permits takes so long in New York City that the costs for building these projects go beyond their budgets by the time the permits are issued. With the city running out of ways to offer incentives to build affordable housing, the gap between the rich and the poor threatens to get wider.
Rezoning Considerations For The City
Many in New York City fear that the days of ultra-rich high rise apartments set against the backdrop of tenements are going to make a comeback if something is not done soon. The problem with affordable housing in New York City is that it is a victim of government bureaucracy and approvals for useful projects are not happening fast enough.
As the amount of affordable housing continues to dwindle due to a lack of residential development for the poor, the problems of only catering to the rich are starting to show themselves. The city is being forced to consider rezoning neighborhoods to allow for luxury housing, and residents are starting to push back. The NYC red tape needs to be cleared if the housing problem is going to be solved.