Excerpts from three New York Times articles on the city’s housing crisis
New York City’s Housing Crunch is the Worst It Has Been in Over 50 Years
By Mihir Zaveri Feb. 8, 2024
The portion of rentals that were vacant and available dropped to a startling 1.4 percent in 2023, according to city data released on Thursday. It was the lowest vacancy rate since 1968 and shows just how drastically home construction lags behind the demand from people who want to live in the city. High housing costs continue to force families and working class people out of the city, threatening the economy.
The scale of the problem is putting more pressure on officials to do something about it. A political stalemate. In 2023, it seemed like lawmakers in Albany were close to doing something big to help solve the housing crisis. Instead, they went home without doing much at all.
Preservation has become the Enemy of Evolution
By Binyamin Appelbaum January 7, 2024
Look around most neighborhoods in the city, and you’ll find that the physical city hasn’t changed much in a very long time. More than half the city’s housing is in buildings constructed before 1947. Between 2014 and 2021, the city added about half as many homes per capita as Boston, about a third as many as Washington and a quarter as many as Miami.
How to Make Room for One Million New Yorkers
By Vishaan Chakrabarti GUEST ESSAY January 7, 2024
There are many reasons homes in the city are so expensive, but at the root of it all, even after the pandemic, is supply and demand. My architecture firm, Practice for Architecture and Urbanism, previously worked with Times Opinion to imagine the future of the city’ rail infrastructure and streets. This time, we took a fresh look at housing.
There are many reasons it is so difficult to build new housing in New York City — including zoning, the under-taxation of vacant and underutilized land, the continuing rise of construction costs, the elimination of important tax incentives, and intense and often misguided anti-development sentiments.”
We found a way to add more than 520,245 homes, enough to house more than 1.3 million New Yorkers, near transit and away from flood zones, all while maintaining the look and feel of the city.
We started by looking at areas within a half-mile of train stations and ferry terminals. In the remaining areas, we identified more than 1,700 acres of underutilized land: vacant lots, single-story retail buildings, parking lots and office buildings that could be converted to apartments.
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Elaborating on the problems outlined by Zaveri and Appelbaum and the methods used by Chakrabarti’s firm, this paper proposes a uniquely Georgist approach to boosting housing production.
Eliminating Legal Barriers to Affordable Housing
“There are many reasons it is so difficult to build new housing in New York City — including [resistance to up-]zoning, the under-taxation of vacant and underutilized land, the continuing rise of construction costs, the elimination of important tax incentives, and intense and often misguided anti-development sentiments.”
Governor Hochul said, in a statement referring to the cited survey by Mihir Zaveri, that it was “the latest reminder that we can only build our way out of this crisis. There’s no time to waste.” Rachel Fee, the executive director of the New York Housing Conference, a nonprofit that favors more development, said in a statement: “We need our leaders in Albany and New York City to take immediate action on a coordinated plan that helps build up our housing supply.”
In New York City most residential land is reserved exclusively for single-family homes. It is illegal to build more housing on that land, and so it has become impossible to provide enough housing. In Suffolk County on Long Island single-family homes comprise over 81 percent of the housing stock, more than the other 30 counties in the New York metropolitan area. This proportion is similar to mid-sized cities throughout the Midwest and Western states. Gov. Hochul deserves credit for proclaiming the need for more housing, but she is still unable to build the political support to overcome the stubborn opposition of outlying neighborhoods in which many residents are fearful of change.
After about 1970 home ownership began to be viewed as a lucrative investment, more than just a “hedge against inflation.” Consequently, many homeowners and their financiers saw zoning that prohibited multi-family structures as a convenient tool for preventing the ‘invasion’ of undesirable inhabitants that could diminish their growing assets. Real estate brokers are also complicit in the scheme to make housing profitable. Why should you sell now and reap the benefits? “More than 80% of metro areas experienced home price gains with some markets posting double-digit increases!”
The single-family home became associated with higher socio-economic status, and hence was elevated to the top rung of the zoning hierarchy. But restrictive zoning is a barrier to increasing the housing supply. Exclusive single-family zoning, by blocking more affordable higher-density development, allows middle-class residents to live in homes they could not otherwise afford, and likewise few newcomers could afford.
Palisades Park, New Jersey is one of the few places in the New York metropolitan area where the zoning code makes it legal to replace a single-family home with duplexes. The population of this city has increased by 40 percent since 1990, as many more households have moved there. The higher density replacement units typically have higher value assessments than the homes they replaced, thus allowing Palisades Park to cut property tax rates even as its budget has increased.
Portland, Oregon’s 2021 amendment to the zoning code allowed duplex, triplex and four-plex units in single-family zones, a significant step towards increasing the supply housing units. Our own research has shown that this moderate density re-zone policy does not precipitate an upsurge of conversions; rather, the rate of redevelopment is much slower than what occurs in large-scale urban renewal projects in concentrated locations. Broad scale re-zoning covering the entire city of Portland, where nearly 80 percent of the residential land area is zoned for single family, allows land values to remain stable; it is building values that increase.
Cities across the country are gradually joining the trend to amend zoning codes to eliminate exclusive single-family zoning, sometimes with state mandates such as in California, Washington, and Oregon. In the New York region, however, politicians continue to delay progress on reform measures.
“There are many reasons it is so difficult to build new housing.” There are reverberations of this refrain in many North American cities, including Oregon. Over the last two legislative sessions Governor Tina Kotek has been attempting to change local zoning codes and remove legal barriers to the construction of apartments. Early versions of her proposed bill give housing developers outright approval for adjustments to zoning rules such as minimum on-site parking requirements.
Gradually, amended versions weakened the zoning bill in response to intense lobbying from local jurisdictions opposing planned apartment complexes and below-market homes. Leading opponents include the League of Oregon Cities, many of whose members—241 cities across the state—objected to the legislature impairing their painstakingly negotiated zoning codes.
Another barrier to affordable housing is rising construction costs. Portland’s inclusionary housing program requires 30 percent of homes in every new building to be priced at below market rate. But the cost of building these projects often exceeds the return on investment. The program had already been fully funded for projects of 20 units or greater in the city center where land costs are high. But in surrounding neighborhoods funding for tax abatements has been tightly limited. As a result, many developers avoided the program because of excessive costs.
Finally, the Board of Multnomah County Commissioners and Portland City Council voted to fully fund Portland’s inclusionary housing program for mixed-income rental projects. In most of the city, what had been an underfunded mandate will no longer be underfunded.
Another barrier to affordable housing is the high cost of buildable land. Historically, Oregon cities included an ample supply of multifamily buildings in mixed-use neighborhoods. Then, after about 1970 when home ownership began to be viewed as a profitable investment, the construction of “middle housing” such as courtyard apartments and townhomes plummeted. By the 2010s, the share of net new Oregon homes in multifamily buildings hit its lowest average in 60 years.
As part of a national trend, a major downzone excluded apartments from much of inner southeast Portland. City leaders said their goal was to attract middle-income families to the area. One thing the downzone definitely did was push up the price of land for all housing units. Today, it’s common to see the cost of land account for more than half the value of a single-detached house in Portland’s walkable, transit-rich inner southeast neighborhoods.
Making More Sites Available for Housing
Vishaan Chakrabarti’s article measures the extent of vacant and underutilized land that could potentially be redeveloped into higher density housing. “We identified more than 1,700 acres of underutilized land: vacant lots, single-story retail buildings, parking lots.” His article described his method for estimating the number of housing units that could be built if this underutilized land were brought into productive use. He claims that constructing moderate density attached units on these sites and others near transit stations is a more sustainable use of land, and is more effective at offsetting the existing carbon footprint than building energy intensive high rise buildings.
We at Common Ground OR/WA took a similar approach in two major research projects.
- Practice for Architecture and Urbanism (PAU) started by looking at areas within a half-mile of New York’s train stations and ferry terminals. We took the same approach. Back in 2008 Sound Transit in Seattle was planning an extension of its light rail transit system, including the location of Transit Oriented Development (TOD) near new transit stations. An expansion of Washington’s Growth Management Act was introduced in the 2009 state legislative session. HB1490 specified that land for new TODs must be designated at densities that support transit services. The allowed net density must be 50 dwelling units per acre.
The Broadway-John Street LRT station is the first stop on the northbound University LINK Extension. There are 458 parcels within a quarter-mile radius of the station. We classified these properties into underutilized and fully-utilized subsets, corresponding to their current utilization status. The criteria used to indicate underutilized status is a high ratio of land-to-total value (LTV) and a lower than average floor area ratio (FAR). An LTV ratio exceeding .66 and an FAR less than 1.21 indicates that a parcel is likely to be redeveloped within the projected growth period.
Using these criteria, the model assumes the 157 vacant and underutilized parcels identified as re-developable will be rebuilt within the project period of 15 years; it is assumed the fully-utilized parcels will not be converted. New rebuilds on the 157 re-developable sites will have to attain an average FAR of about 3.4 to reach the target density of 50 DUs per acre. The total amount of new building space on these redeveloped sites yields over 456,000 sq. ft. of rentable retail space and over 1,800 dwelling units. (A Value Capture Approach to Financing Transit Oriented Development, Thomas A. Gihring, Ph.D., February 2009 * Revised Dec. 2017.)
The Capitol Hill TOD project began construction in July 2018 and was completed in early 2021, exceeding its estimated growth potential. It is primarily zoned for multi-family dwellings and has over 15,098 total housing units within a half-mile radius; most units are renter-occupied, and roughly 17 percent of units are affordable to lower-income households.
- A parcel-level data set generated from a study by the Northwest Economic Research Center in 2018 was used to model the estimated number of single family dwellings that would qualify for redevelopment to moderate density housing types permitted under the new Residential Infill Project (RIP) zoning amendment allowing moderate density replacement homes. We extracted all of Portland’s Inner Northeast district parcels in use as single-family. The first step was to identify those parcels most likely to be redeveloped.
Using the same valuation and site utilization measures as cited in the Seattle TOD study, three categories identified are (1) fully developed: parcels with a high improvement-to-land assessment ratio, and a high ratio of building floor space to lot area; (2) underutilized: parcels falling below the two thresholds; (3) vacant parcels. The last two categories are combined, resulting in two development status categories: fully developed, n=7,748; vacant & underutilized, n=327.
Next, we computed the zoned development capacity for all single-family parcels. The new RIP regulations allow up-zoning for missing middle housing options on parcels zoned for R5 and R2.5. Eliminating parcels from the database that are fully developed and do not meet the minimum lot size threshold for conversion to permitted middle density housing types, 201 qualify for duplex conversions and 164 for triplex and 4-plex conversions.
If all these vacant & underutilized parcels were redeveloped to maximum capacity, the average total floor area on the 201 duplex qualified parcels would be 3,270 sq. ft., sufficient floor area for an attached dwelling unit exceeding 1,600 sq. ft. The mean building area of triplex & fourplex redevelopment sites is 4,106 sq. ft., allowing for 4-plex units of about 1,000 sq. ft. each.
Incentivizing the Development of Available Sites
Although Vishaan Chakrabarti’s essay specifically cites the under-taxation of vacant and underutilized land it did not progress beyond measuring redevelopment potential. Re-zoning of re-developable land for higher density development is the most expedient regulatory mechanism available. But experience has shown that desired development will not occur simply because of its classification as an allowable use. Financial inducements are needed to prompt timely development.
Using the property tax system as an incentive tool can be an effective market-driven approach to increase housing production. At Common Ground OR/WA, we advance this approach through advocacy and simulation studies. If market incentives are needed to convert re-developable sites into new housing units, then two variations of a land based tax can be employed: for TOD projects we use ‘value capture’; in the context of zoning changes we use a revised property tax system: land value taxation (LVT).
Here we expand on the above examples from our two research projects:
1. The Broadway-John TOD project
A Transit Benefit District (TBD) is a special assessment district circumscribing a transit station area designed to capture land value gain (land rent) that accrues to property owners, attributed to public investments in transit improvements. Capturing land value increments has a dual purpose: (1) to finance public works that support TOD; (2) to avert windfall gains and impede land speculation in station areas.
First, we need to project land value increments to be captured annually from all parcels within the TBD over a specified project period; in this case, ten years. This entails a dynamic model containing assumptions about growth in land rent, in addition to zoned development capacity within the district and the redevelopment potential of parcels, both having already been covered above.
In this case study the capturable value increment or uplift is the difference in land rent between the historic annual 10.75 percent district trend rate before the announcement of TOD and the projected 13.4 percent rapid growth rate due to the premium value of the rail station’s location.
Projected total land rent accruing to all 458 property owners in the Broadway-John TBD accumulated over a 15-year rapid growth period amounts to $436.5 million. Had the station not been located here, the trend growth in land values would have amounted to $282.8 million. The cumulative difference in land rent between the trend growth rate (without the station) and the rapid growth rate (with the station) amounts to $153.6 million. This amount supports a bond principal of $139.7 million to finance public works that support this TOD project.
2. The Residential Infill Project (RIP)
Now that we have identified the vacant and underutilized parcels available for redevelopment into middle housing types, the next step is to model a redevelopment scenario. We employ a simplified proforma to determine the new building values for all parcels in their hypothetically redeveloped status. For example, the mean building value for duplex conversions changes from $64,631 to $699,813. Land values remain unchanged, which is consistent with the expected slow rate of redevelopment.
The final step in the redevelopment scenario is to simulate property tax applications, comparing existing underutilized sites with the same sites redeveloped under the RIP zoning code amendment. The table below shows how tax burdens are shifted when changing from the conventional equal-rate tax regime and the proposed land value tax*.
DUPLEX SITES Equal rate tax levy: LVT levy:
Vacant & Underutilized status $3,062 $5,550
Redeveloped status $9,573 $7,176
*Both tax systems apply tax rates to true market assessments. The LVT version used is a split-rate tax where 90 percent of the total tax rate is applied to land assessments. Tax applications are revenue neutral, thus resulting in the same Multnomah County-wide total levy amount.
Here we see the incentive power of LVT. The land-based tax shifts tax burden from more efficiently utilized sites onto less efficiently used sites. Because this is an annual tax levy, it wouldn’t take long for owners to realize the tax penalty for leaving their lots vacant or underutilized, as well as the reward for investing in new buildings. As in the Palisades Park case, the higher density replacement units typically have higher value assessments than the homes they replaced. The high ratio of building-to-land assessments with land-weighted LVT results in a negative tax shift compared to the equal-rate tax, which taxes land and buildings at the same rate.
So here we have it. There are many reasons for why it is so difficult to build new housing in New York City, not the least of which is the under-taxation of vacant and underutilized land and the absence of incentive taxation. The evidence shows the land value tax will boost the rate of housing production, will help eliminate land speculation and will dampen housing price inflation. Lowering homeowner’s anticipation of “double-digit home price gains” from single-family home buying might just relax this same anxiety around exclusionary zoning too.
Tom Gihring, Research Director
Common Ground – OR/WA
commongroundorwa.org
