The Manhattan Institute’s
Center for Rethinking Development
Ideas that shape the city’s planning, housing, and development
A Monthly Newsletter by Julia Vitullo-Martin, MI Senior Fellow

The False War between Housing & Jobs

Julia Vitullo-Martin, April 2005

Can New York City hold on to its 240,000 industrial jobs, down from a peak of over one million in 1947? The Bloomberg administration thinks so. It's set up the Office of Industrial and Manufacturing Businesses, to manage the creation of new Industrial Business Zones, and to oversee job-retention initiatives, like relocation tax credits and employee-training programs. The IBZs, which will replace out-dated and frequently forlorn "industrial parks," will include Bathgate in the Bronx, Long Island City in Queens, and sections of Red Hook and Gowanus in Brooklyn. The administration also wants to rezone formerly industrial waterfront property to permit residential and mixed-use development in what are now derelict areas.

Industrial advocates oppose the administration's plans. In a letter to the New York Post, Adam Friedman, executive director of the New York Industrial Retention Network, denounced what he called the "aggressive rezonings" that have "put at least 14,000 industrial jobs at risk" by needlessly pitting "housing against jobs." To keep these jobs in the city, he argues, "We must develop new industrial space equivalent to the floor space of three Empire State Buildings—an impossible task if land set aside for industrial uses continues to be whittled away."

Advocates argue, in other words, that the city should retain the zoning that now prevents development on most of the waterfront, because restricting the waterfront's use to manufacturing will save jobs, while permitting residential development will cost jobs.

In fact, the one obvious asset that is available to industry in New York is space, which is downright plentiful. Just over 15% of the city's parcel land area, or 22,550 acres is zoned "M," for industrial use. Sixty-five percent of that M land is occupied by buildings devoted to manufacturing, transportation, or utilities.

At occupancy ratios of 400 square feet per worker—typical for inner-city industrial space—the available industrial and manufacturing floor area would accommodate over 625,000 manufacturing workers, according to a forthcoming study by Urbanomics, an economics consulting firm. This is a stunning two-and-one-half times the number of current manufacturing jobs.

So if the problem isn't space, what is it? Actually, there are three problems.

First, New York's space is often the wrong space—old, deteriorated, multi-story, inaccessible, and with poor wiring and plumbing. Much of it is in dirty, dangerous neighborhoods. Manufacturers don't want to be in bad neighborhoods any more than anyone else does. One proof of that dynamic is the failure of the old industrial parks, which the Bloomberg administration hopes to replace. Renovating these dilapidated spaces requires huge capital investments. No owner is going to invest, however, without an assurance of a financial return—which means the promise of long-term, financially viable tenants, willing to commit before an expensive rebuilding is undertaken. Yet, just like their residential counterparts, many successful small manufacturers want to buy—not lease.

Second, technological innovations will continue to eliminate jobs in New York, as everywhere. New York's immense losses in manufacturing jobs have been caused by many factors, but an important one has been the increases in productivity through technology. Many of the manufacturers now flourishing in glass, furniture, and tools rely on very expensive machinery, such as $80,000 Italian lasers, that require only one highly trained technician rather than several skilled workers.

Finally, many residents don't want certain industrial concerns setting up shop anywhere near their own neighborhoods. Friedman and other advocates misleadingly highlight boutique-ish, feel-good industries, like handicrafts, that everyone likes. But the 240,000 precious industrial jobs also include industries people don't like so much—like the nuclear waste facility in Williamsburg , Brooklyn, or an electrical utility almost anywhere. Furniture makers can and do fit into mixed-use neighborhoods like Red Hook and Greenpoint, but waste facilities are universally unwelcome—and usually need individual attention from government officials to locate at all. Such facilities present special difficulties of their own. Even likeable industrial uses that are in any way unpleasant, that pollute or are noisy or even just work around the clock, can find themselves attacked or sued by residents, who expect serenity and peace at home, even when they've just moved into an industrial neighborhood.

Given all these factors, the future of industrial space and jobs in New York City is opaque. If zoning permits industry, commerce, and residences to exist side-by-side—which was New York's historic development pattern until the 1961 rezoning—will industry be able to flourish? Or will industry gradually be pushed out by political and legal pressures from upscale new residents?

The difficulties endured by barge companies show just how hard it is for some businesses to function alongside residential development, at least under current political rules.

"In the abstract, people like us," says Robert J. Hughes, whose family company, Hughes Marine Firms, has worked the waters of the New York and Brooklyn harbors since the mid-19th century. "They have a romantic attachment to waterfront uses. But we operate 24 hours a day, working under bright lights and making a certain amount of noise. If a residential development goes up next to me, it won't be long before they'll be suing to get rid of us."

Hughes says this while sitting in his office overlooking the Red Hook waterfront and gesturing at an immense barge tied up below. "That belongs to my tenant, a family that's been in business as long as we have," he says.

When residents of the upscale Port Liberté development started to complain about noise from barge activity, Jersey City used eminent domain to take the barge company's property. This is happening in many cities, says Hughes, with the result that he gets "calls every day" from barge owners hoping to tie up. Since a Jersey City barge company won the recycling contract bid out by New York City last year, these problems may worsen.

Even though Hughes Marine owns the land on which their own business as well as the NYPD's impoundment garage sit, Hughes is apprehensive of upscale neighbors. He supports the Ikea that is to be built on a pier immediately to the north and within eyesight of his property—"those customers aren't going to be complaining about us in the middle of the night"—and opposes residential development on the water. But he says he would support residential development if he could be guaranteed that his business would be protected against suits.

Hughes would like a state law similar to one protecting upstate farmers from suits brought by new residents objecting to existing practices, such as fertilizing soil or operating a carbine. His idea is that new condo or co-op owners would be notified about the barges, the cement factory, the glass-makers, etc. in their contracts—and would be barred from suing any current business. Nuisance law would still govern, prohibiting illegal uses. But legitimate businessmen would be protected. Then, says Hughes, he'd be perfectly willing to have residential neighbors.

Up a few piers but still in Red Hook, engineer Daniel Preston, founder and CEO of Atair Aerospace, says he likes having residential neighbors. Atair designs and produces parachutes for corporate and government clients, including the Navy Seals.

"When we first moved to Red Hook, our neighbors were appreciative that we were making an investment," he recalls. "And they still are." After restoring and updating an 1846 building that had been abandoned for 22 years, he put his first factory on the lower two floors and built an apartment for himself on the top floor. He's building additional factory space on the two lots next to his house, saying the neighborhood is perfect for living and working. "Only a handful of developers work here, and they keep the look of the neighborhood in what they build."

Many small manufacturers co-exist with residents-glass works, embroidery, screen printing. Preston is apprehensive of the Ikea, however. "We have only a single lane in and out of the neighborhood. The new tractor-trailers can't make the bend now. I'm worried that our many visitors—buyers, government officials, commercial clients—will stay away if the neighborhood gets jammed with traffic. But more residents would be fine."

Saving manufacturing doesn't mean that the city has to hold onto the land for 750,000 jobs that no longer exist. The Bloomberg administration has the right idea: the M envelope is enormous, so refine and tighten the boundaries that restrict use to manufacturing, permitting residential and commercial development everywhere else. Help manufacturing co-exist peaceably with other uses whenever possible—segregating it only in the rare instances when this must be done.

The City Council will vote on the Bloomberg administration's rezoning proposals for the Brooklyn waterfront in early May. How the IBZs will interact with the administration's proposed rezonings is not yet clear.

Meanwhile, the construction of the Ikea, which had successfully passed all the city's land-use reviews, has been halted by a suit led by the Municipal Art Society.

April 2005
Brooklyn Community Board 6
NYC Economic Development Corporation
NYC Department of Small Business Services
Greenpoint-Williamsburg Rezoning
Community Plan for Greenpoint-Williamsburg
Hughes Marine Firm
Brooklyn Waterfront
South Brooklyn Marine Terminal
Port Authority of New York & New Jersey Cargo Records
American Waterways Operators: Tugboat, Towboat, and Barge Industry
Hugo Neu Corporation
Metropolitan Waterfront Alliance
New York Industrial Retention Network
Atair Aerospace
Municipal Art Society
Maritime use will revitalize Brooklyn’s waterfront, says Economic Development Corporation
NYT: “City sees savings in a partnership built on tons of plastic and metal”
The 20% solution: State lawmakers in the zone
“Forum charts Harlem’s changes: From black Mecca to private market”
“State bond-doggle: Small building seeks big subsidy”
“Discovering Williamsburg”
“Treasured Staten Island housing project doomed”
“Bangladeshi presence grows in the Bronx”
“In my company we live and breathe industrial space. We’re the largest industrial landlord in the city, and we keep and preserve our industrial leases. But the big industrial users who are going to come in and take whole floors just don’t exist anymore. Now the demand is for 5,000-6,000 square feet, often the smaller the better from the tenant’s point of view. From a landlord’s point of view, you can only divide down so far.”
Bruce B. Federman, president, Industry City Associates