by Gehad Hadidi
Manufacturing jobs in New York City have shrunk from 150,000 to fewer than 75,000 in the past decade, according to a report issued in October by the NYC Economic Development Corporation. Real Estate prices in the City during that span have outpaced neighboring counties. Communities are less sanguine towards polluting factories in their backyards, and the diminished cost of transporting goods creates a hostile environment for traditional manufacturers to operate in America’s urban environments.
Given the declining economic and jobs outputs of the manufacturing industry to urban economies, it should come as no surprise that cities have responded by rezoning areas that have traditionally been industrial zones. In New York City under the Bloomberg administration, 1,100 acres have been rezoned from industrial to commercial or residential. This represents over 5% of the total area allotted to manufacturers.
Another zoning procedure that has grown in popularity over the past decade is MX, which refers to “mixed-use” zoning. As artists, residents, and tech companies have increased their desire for raw, open spaces with vaulted ceilings and exposed utilities, there has been a desire to maintain the aesthetic of manufacturing districts. The results of this policy have predictably led to landowners and developers using parcels zoned as MX in the most economically advantageous manner. This results in an increased push to convert formerly industrial spaces into residential lofts and tech offices such as the headquarters of Etsy in DUMBO or the projected redevelopment of the Domino Sugar Refinery in Williamsburg. As these types of uses crop up in industrial zones, the area changes its character and is no longer regarded as such by residents.
With the continued decline of their importance and the economic infeasibility of their operations in relation to competing uses, it should come as a surprise to some that cities have attempted to reverse these trends. While we typically view manufacturing as large, polluting factories with streams of assembly lines as can be seen in Diego Rivera’s mural commissioned by the Ford family in 1933, the reality is quite different.
Today, in New York City, the three largest manufacturing segments are pharmaceuticals, food, and electronics. Combined, they represent 33.5% of the industry. And unlike the assembly lines depicted in Rivera’s work, the typical manufacturer has fewer than 10 workers, 75% are family owned, and the majority lease their spaces. What these statistics elaborate is that, similar to other segments of the economy, manufacturers have been adapting. They are leaner, more nimble, and cater to a local audience. Instead of mass-producing vehicles or iPhones, they are assembling sets for Broadway shows, designing elaborate displays for high-end retailers, brewing their own beer, pickling locally grown cucumbers, and producing clothing for a localized market.
Urban manufacturers in the 21st Century have become an integral part of the larger eco-system around them. They are an important component for the theatre, architecture, design, fashion, and advertising industries. They provide middle-class wages for people that don’t necessarily have a Bachelor’s degree. According to the NYCEDC, the average manufacturing wage in the City is $70,640. In addition, the lesson learned from rust-belt cities such as Detroit, Pittsburgh, and Baltimore is that relying too heavily on a single industry can be devastating when that industry struggles.
New York, which relies on nearly 40% of its tax revenues from the financial industry, could face a similar catastrophe if the recession of 2007 were to repeat itself in the future. To protect itself against these adverse outcomes and in recognition of the positive externalities that are generated from maintaining a responsive and cleaner industrial presence, New York City has established Industrial Business Zones, or “IBZ’s”.
An IBZ attempts to rectify market failures that push otherwise profitable and successful manufacturers to leave the City. By designating an area as an IBZ, the City is effectively removing the possibility of rezoning it in the future. This directly targets land speculation, which has in many instances led to drastic increases in land value as developers anticipate future rezonings, in essence, smelling the bread before it’s been cooked`. Additionally, targeted tax incentives are put in place to attract manufacturers from outside the City to move in. These incentives work to reduce the cost of maintaining a property, which theoretically should transfer into lower rents.
While the evidence has supported a positive outcome, with lower vacancy rates and lower rents in IBZ areas, funding for the program has steadily diminished over the past few years. The proposed 2015 City budget does not provide any funding to the program. Reasons given relate to an ideological shift in City Hall, as affordable housing has taken center stage.[1]
Pressure for more affordable housing in the City is not unfounded, as anyone living in New York City can confirm. Increasing supply to relieve pressure on demand should be an important policy of any administration. However, by reducing the support for manufacturing, the City is depriving workers of good-paying jobs and of corollary businesses from the resources necessary to compete on a global scale. The current administration may be correct in focusing on affordable housing, but the manufacturing industry should be an important component of that policy. The Brooklyn Navy Yard highlights the significance manufacturers can have on revitalizing an area and on job creation. Furthermore, with the manufacturing industry in the midst of a holistic change from factory assembly lines to artisanal hummus producers, it is essential that they be encouraged to adapt in the City, as they benefit from urbanization effects. If manufacturers are left to wither or relocate, bringing them back could prove to be a much more costly policy in the future.
[1]http://www.crainsnewyork.com/article/20140218/SMALLBIZ/140219867/mayor-kills-funding-for-industrial-business-zones