|The Manhattan Institutes|
Center for Rethinking Development
Ideas that shape the citys planning, housing, and development
|A Monthly Newsletter by Julia Vitullo-Martin, MI Senior Fellow|
Have housing advocates found the magic bullet that will produce affordable housing without overburdening taxpayers or enraging neighbors? Many think so. The land-use regulation called inclusionary zoning basically offers developers a deal: in exchange for supplying or rehabilitating some low- and moderate-income housing units a developer gets to put up a larger market-rate building than would be allowed under standard zoning. The rationale is that the profit of the additional space will subsidize the reduced rents on a few units. The term "inclusionary" was devised to contrast with the "exclusionary" impact of traditional zoning, which tends to exclude lower-income housing from upper-income areas.
Inclusionary zoning is thought to have worked successfully all over the country, including in strong urban markets like San Francisco, Chicago, and Boston. But is it the right answer for New York? Brooklyn Councilmember David Yassky, who represents the booming neighborhoods of Greenpoint-Williamsburg, regards inclusionary zoning so highly that he wants to make it a requirement of new construction on the rezoned waterfront.
A large coalition of community groups, the NYC Campaign for Inclusionary Zoning, is lobbying the city to adopt a model of mandatory inclusionary zoning in all neighborhoods slated for rezoning and redevelopment. In other words, any developer putting up a market-rate apartment building would have to supply a proportionate amount of affordable housing.
Making inclusionary zoning mandatory would be a huge mistake - not because the program is bad, but because it's untried in all but the wealthiest neighborhoods. Even in prime neighborhoods only some 600 affordable (and some 2400 market-rate) units have been built - an achievement, but an inconclusive one.
HOW INCLUSIONARY ZONING HAS WORKED SO FAR
The program is limited to Manhattanís high-density neighborhoods - those zoned R10, where buildings can be constructed as-of-right to about ten times the lot size. The program allows a developer to increase a building's floor area by up to 20 percent in exchange for building or rehabilitating a proportionate amount of affordable housing.
In practice, though, this is a new construction program. Almost no units have been rehabilitated. Further, it has unpredictable neighborhood consequences, both because the increased bulk can come as quite a shock to residents who think R10 is as bulky as buildings will get and because the affordable housing component can be built off-site. As Hope Cohen, chairperson of Community Board 7 on the West Side, notes, "The upside of the program is that it builds real, permanent affordable housing, though thereís always the question of how you define affordable. The downside is that it gives an automatic bonus for the allowable zoning district. This makes it hard to plan for the neighborhood, which can get buildings 20% denser than anyone thought."
While the developer can provide the affordable units on-site or off, most developers have chosen off-site, because the bonus is slightly better and the long-run hassles are far fewer. Developer Ron Moelis, a principal in L&M Equity, says "Bottom line: itís a good program that works so long as you let the developer build the affordable component off-site. If the developer wants to build on-site, fine, but donít force it." Off-site still means theoretically close by, either in the same community board or within a half-mile of the market-rate building.
But is this geographic restriction a efficient use of scarce affordable housing dollars? For every unit that gets built on the Upper East Side, many more could be built for the same amount of money in the outer boroughs.
WHY BUILD ON THE MOST EXPENSIVE LAND IN THE CITY?
Why indeed? The answer is a bit of weird planners' double-think. Inclusionary zoning is an heir to the old planning concept of mitigation, by which a development that benefits from upzoning must in turn pay to mitigate the effects of increased density on the public infrastructure. Thus a development that is going to pour hundreds of new commuters into a subway station might pay to upgrade and expand the station's capacity. The somewhat stretched idea of mitigation applied to below-market units is that the new development increases the value of neighboring property - causing rents to rise and lower-income people to be displaced. Therefore, says the Department of City Planning, the developer's mitigating response of building below-market units must occur in the same neighborhood as the damage.
Still, says Michael Slattery, senior vice president for research at the Real Estate Board of New York, inclusionary zoning "has worked for what it's intended to do, which is be a neighborhood mix program, helping to integrate low-income households into high-income neighborhoods." The geographic restrictions have limited the program's use, he argues, because land costs are simply too high in R10 areas to make the program financially worthwhile for any developers except those few who can generate high enough rents to offset the production of affordable housing.
RETHINKING THE CURRENT PROGRAM
City Planning could stick to its principles while still broadening the area of so-called impact. The point would be to give the program more space to show what it can do.
Similarly, why not extend inclusionary zoning to other high density zoning categories, R7, R8, and R9? Let's open it up and see what happens. Some planners think the lower density won't be able to pay for affordable housing, but that's what markets are for - to pass on this kind of information.
The Department of City Planning is right to resist making it mandatory, however. When transferred to less dense, less wealthy neighborhoods, the program is going to change substantially - and no one can predict the consequences accurately enough to justify this. And as Kathy Wylde, president of the Partnership for New York City, says, "Doing any kind of development requires maximum flexibility. If you take away the developer's flexibility, you're going to halt some housing, which we just don't want to do."
Even many of the coalition members say they do not want to stop housing development - they just want to make sure that neighborhood residents are accommodated. Brad Lander, Director of the Pratt Institute Center for Community and Environmental Development, says, "Everyone understands that you could clearly dampen development if you imposed a mandate that was too large and you drove land prices too low. I donít think thatís going to happen because expanded inclusionary zoning will only work if the administration comes through with a compromise. This isn't something the City Council can do on its own."
Councilmember Yassky's proposal is now in front of the City Planning Commission, which has held dozens of informal meetings with advocates and community groups but has not yet responded officially. The NYC Coalition's report arguing for a greatly expanded and mandatory program will be released in mid-September. While City Planning would like to see inclusionary zoning extended to new neighborhoods, such as Hudson Yards, it has proposed only a modest, 10% bonus program for the Brooklyn waterfront, which remains the major battle ground for development issues. City Planning hopes the Environmental Impact Statement on its Greenpoint-Williamsburg plan will be ready at the end of September or early October - which will trigger a new round of discussion and debate.