by Max Weselcouch
As New York City heads into a new mayoral administration, residents of the city have an opportunity to reflect on what the last administration did well, where it missed the mark, what the city’s goals should be for the next four years, and how the city should achieve those goals. The Bloomberg administration famously touted its New Housing Marketplace Plan, which planned to finance the creation or preservation of 165,000 affordable housing units within 10 years. However, as Mayor Bloomberg’s term wraps up, it stands to question whether that goal was ambitious enough and how the next mayor could do better. In August 2013, the Furman Center for Real Estate and Urban Policy released a series of issue briefs on ten questions that next the mayor should consider, several of which will be addressed below.
The New Housing Marketplace Plan produced fewer than 60,000 new affordable units between 2004 and 2012. During the same time, nearly 200,000 market-rate housing units were developed. The sum total of all of this development, however, has left more New Yorkers struggling to pay their rent than when Bloomberg took office. Between 2002 and 2011, the median rent in the city rose by 19 percent while the median income remained stagnant. By the end of Bloomberg’s term, more than half of renters living in New York were rent burdened, paying more than 30% of their income toward rent.
The next mayor should aim to reverse these trends and, indeed, Mayor- elect Bill de Blasio has proposed an ambitious plan to build or preserve 200,000 units of affordable housing. To achieve this ambitious goal without sacrificing other priorities, he will have to be creative, especially when it comes to funding. Some of the major sources used to fund the New Housing Marketplace Plan are either shrinking or no longer available. By far the largest source of funding for
affordable housing is the city’s capital budget. The capital budget, however, is a fairly fixed pot of money and allocating more funds to affordable housing would require either diverting funds from other city agencies or taking on additional debt. The second largest source of funding came from HDC’s corporate reserves, which had higher than expected revenues during much of the last decade. These reserves will likely continue to be an important source, but it is difficult to predict exactly how much they will be able to contribute. Two large federal funding programs, HOME and CDBG allocations, have been cut in recent years and will likely suffer further cuts from the recent federal sequestration. And several smaller, one-time programs such as the Neighborhood Stabilization Program and the Tax Credit Assistance Program are no longer available.
Most current affordable housing subsidies expire after a set number of years at which time an owner can opt out of the subsidy program and convert their units to market rate. Preservation is a key part of De Blasio’s housing plan and during his first term, over 45,000 existing units of subsidized affordable housing will expire from their current affordability restrictions. While preservation is generally faster and cheaper than new construction, it isn’t without its challenges and it is unlikely that the city will be able to finance the preservation of all expiring properties. The last administration was sometimes criticized for overemphasizing preservation, with 65 percent of the New Housing Marketplace Plan units achieved through preservation. The next mayor must consider that although preserving properties alone will not increase the stock of affordable units, allowing these properties to opt out and instead focusing exclusively on new construction could leave the city with fewer affordable units overall.
One way that housing advocates have proposed to address the problem of attrition of affordable units is by requiring housing developers to keep their units affordable in perpetuity. This requirement may increase the cost of the development of affordable housing as developers demand a larger subsidy from the city at the outset. Furthermore, requiring permanent affordability does not guarantee that the existing affordable housing will remain in good condition without an additional subsidy in the future. If this is a policy that de Blasio pursues, he must first plan how to fund the higher upfront costs of such developments and second, figure out how to ensure that building owners properly maintain their properties going forward.
Finally, Bill de Blasio has included mandatory inclusionary zoning as part of his housing platform as a strategy to create 50,000 affordable units. Advocates of such a requirement claim that it could increase the supply of both affordable and market rate housing without any direct subsidy from the city. However, the mayor elect must carefully design such a program. If the requirements for a mandatory inclusionary zoning program are too strict, developers may decide that it is no longer worthwhile to build. Then, with little new housing coming online but continuingly increasing demand, housing costs could increase for all residents. On the other hand, developers may instead choose to build but pass on the increased costs imposed by the affordable units to market rate buyers, thereby increasing housing costs for anyone in the city unlucky enough to live in an inclusionary unit.
Bill de Blasio’s record and platform indicate that he thinks affordable housing should be a priority. However, with limited capital resources and no perfect solution, designing and implementing an affordable housing plan will be challenging.