Energy, Economics, Cities Regulatory Policy, Infrastructure & Transportation
February 1st, 1997 1 Minute Read Issue Brief by Roger Starr

Stagnation By Regulation: The Sad Tale of the Three-Family House

Roger Starr is Resident Scholar of the Center for Civic Innovation.  He was formerly Editor of City Journal, an Editorial Board Member of The New York Times, and New York City’s Administrator of Housing and Development.

New Yorkers who believe that apartment comfort requires a view of the harbor and a terrace from which to admire it may be puzzled by the term three-family house—and its unlikely relevance to their image of the city.  New York’s most celebrated icon remains the Empire State Building, a mega-obelisk 1,250-feet high enclosing 50 acres of office space, capped with a mooring mast for itinerant dirigibles.  Let it therefore be emphasized that the typical three-family house, 22-feet high and shaped like a brick shoe box, has flourished as a home for families of modest means, unassisted by outside subsidies, in Brooklyn, Queens and Staten Island for the past hundred years or so.  This building type was a vital and growing part of the city’s housing supply until its future was blunted by the costs of new and old regulations that, in combination, substituted goodwill for good sense.

Regulatory disruption of needed development is not unique to three-family houses in New York.  But their predicament shows us how building regulations of the city and state of New York, especially when layered upon each other, can thwart their very purpose.

Three-family houses are not architecturally or technologically significant.  Yet their importance to New York City is evident in the decennial volume from the Department of City Planning that tallies the city’s housing supply.  The number of people living in three-family houses is roughly the same—half a million—as the number of tenants of record in all the highly subsidized public housing projects of the New York City Housing Authority.1      

Rising Costs Make It Impractical to Build Three-Family Homes

New York today suffers from a shortage of housing, especially of satisfactory homes for families of modest income.  Yet, comparing the Planning Department’s analyses of U.S.  Census data for 1980 and 1990, we find that in the decade between those two dates, only 7,500 apartments were built in three- and four- family houses.  If the city’s builders had previously produced no more than 7,500 apartments in a decade, they would have needed more than 300 years to produce the 260,000 apartments counted in 1990.  Obviously, the 7,500 apartments produced from 1980 to 1990 were a far cry from the number produced in the decades of vigorous housing construction.

According to Alan Bell, a founder of Hudson Companies, Inc., whose $147 million in development activities over the past ten years was primarily concentrated in two- and three-family houses:   “The cost of producing three-family housing in the current regulatory environment is about 25 percent higher than it was a few years ago.”   This does not include increases in the costs of labor, equipment and materials, says Bell, “but only the cost of new, government-mandated changes in design and amenities.”   The increased costs have driven profit-motivated investing builders out of the three-family field.

Rising Costs Were the Unintended Consequences of Regulation

To appreciate the causes of the building lag, one must understand the regulatory environment in which New York City builders work.  Regulations are imposed directly by both the state and city legislatures.  They are imposed also by administrative bodies that are given measures of independent authority by the legislatures that established them.  The original concerns of building regulators—fire-safety, sanitation, and structural soundness—have been supplemented by new social imperatives like environmental protection, help for the handicapped, ethnic and class integration, and historic preservation.  Most—maybe all—of these are concerns of good people.  But conflicting regulations enforced together produce unanticipated results—like two medicines each salutary by itself, but harmful, even fatal, if blindly taken together.

The drying up of three-family house construction is an unintended effect of three separate statutes adopted over a period of 60 years:  the state’s Multiple Dwelling Law, the city’s Building Code, and the city’s Local Law 58.  The first regulatory layer that, with subsequent  additions, is currently smothering three-family house construction was, ironically,  the wise, progressive, and generally successful  New York State statute—named the Multiple Dwelling Law—enacted in 1929 to impose new,   hygienic and safe conditions primarily in future apartment houses, a.k.a. “tenements.”  Most of its provisions were meant to create and improve buildings, six or more stories in height, many with elevators.  Unfortunately, the law defined  “multiple dwelling” as any residential structure with three or more apartments.

The Multiple Dwelling Law Wrongly Places Three-Family Homes in the Same Category as Large Apartment Buildings

By separating three-family houses from one-family and two-family houses, the Multiple Dwelling Law placed a stigma on the former.  While ones and twos were thus effectively distinguished as private houses, three-family houses were legally identified as apartment houses—not luxury apartment houses for the wealthy, but apartment houses for those who could not afford to live in one- or two-family homes.

This social denigration of people in three-family homes helped significantly to make it impossible, in later years, for the city’s zoners to encourage the construction of three-family homes along with one- and two-family homes in areas from which larger apartment houses were properly excluded.

For good reasons, the federal government avoided this trap, when, a few years after 1929, it established the Federal Housing Administration to insure mortgages and stimulate development during economic hard times.  The FHA classified two-family and three-family homes under the same heading, as “single-family homes.”  The FHA understood that both types of home were almost invariably owned by one family that also lived in the house.

The New York State Legislature did not seem to understand, as the FHA understood, the economic advantages of the three-family house.  The absence of an elevator saves both capital and maintenance costs.  A landlord-in-residence is almost always a promise of better maintenance.  The owner, his wife, and often their children, clean their own and shared spaces.  They paint, patch, repair, manage, and collect the rents.  Operating costs are significantly lower because family members do not expect a wage; their compensation is the reduction of mortgage debt.

The Zoning Law Wrongly Excludes Three-Family Homes from Areas that Allow Two-Family Homes

The first serious impact of the Multiple Dwelling Law on three-family houses did not come until 1961.  It could scarcely have come sooner because residential construction was slowed for almost a quarter century by the baleful trio of economic depression, war, and rent control.  When construction started to pick up in the 1950s, the city began a process of revising its zoning ordinance.

In 1961 the city’s new zoning statute provided additional complications.  It divided residential districts into a number of new district classifications, including two districts restricted to single-family homes; one, restricted to single- and two-family homes; and several open to multiple dwellings of various densities and sizes.  Recognizing that people who bought and lived in one- and two- family homes were fearful of being overshadowed by apartment houses, the zoning forbade multiple dwellings—three-family houses included—to locate in such districts.  Thus, the new zoning forced builders of three-family homes to compete for land with builders ready and able to pay higher prices for it because they were able to finance and construct bigger buildings, spreading capital costs over much higher rent rolls.

Many three-family house builders responded to the new zoning with a series of stealth  measures that permitted them to move into once forbidden zones in part by acquiring the financial backing needed to move into large-scale construction.  Others responded by buying land in a district open to two-family housing but closed to three-family housing.  They would file lawful plans to build two-family homes with basements.  No more than half the height of the basement ceiling was below the level of adjacent land and could therefore be made habitable.  These houses were designed to metamorphose into three-family homes after they were bought by individual owner-families.

In the years following 1961, it was not unusual to come upon sites in outer Brooklyn, Queens, and Staten Island where residential buildings were being constructed, and find a large sign reading:  “Quality two-family houses under construction with 5½-room Hospitality Suite in the basement.”  No one believed that such “Hospitality Suites” were intended to shelter lost travelers.  These signs indicated to market-wise buyers the economic potential of a house so described.

Laws Mandating Handicapped Accessibility Were the Final Nail in the Three-Family Home Coffin

The demand for “illegal threes” was strong for a long time.  Since 1987, however, the “illegal three” mode of construction has shriveled significantly along with the legal, conventional “threes.”  The final nail in the coffin for conventional “threes” was the passage of New York City’s Local Law 58, adopted in 1987, mandating access by the disabled (primarily the wheelchair-bound) to new and (sometimes) to existing buildings undergoing major renovation.

The 22-foot height of the typical three-family house reflects two-and-a-half stories of above-ground living space.  The underground half-story is the lower half of what is termed a “basement apartment.”  Each of the two apartments above may take up an entire floor, but the owner’s family often occupies a duplex that takes part of a second floor.  The remainder of that floor is then structured as a small apartment and rented, like the basement.  Frequently, three-family homes are built in a row, nestling against each other.  The builder hopes to sell each to a buyer who will become a resident landlord.

Understanding the higher costs imposed by Local Law 58 requires a new look at the    Multiple Dwelling Law.  That statute requires that the roof of every building be rimmed by a parapet made of brick or an incombustible fence, the choice being left to the Department of Buildings of the City of New York.  The department ruled that the parapet must, inferentially, be made of brick.  The New York City Building Code (see C26-503.3 in that 786-page volume) ruled that any building less than 22 feet high is exempt from the parapet requirement.

The exemption was effective for every three-family house whose lowest floor is a basement apartment.  Local Law 58 requires, however, that the lowest apartment in a new non-elevator building be reachable by someone confined to a wheelchair.  This could be achieved only by putting what had previously been a basement apartment at ground level—raising the basement apartment by about four feet.  That change naturally lifted the roof by the same four feet, making a building that would previously have been exempt from the parapet requirement, subject to it instead.  That, alone, can raise the cost of constructing such a building by ten percent.

In addition, raising the basement apartment to ground level raises by four feet the apartment next above it.  This turns the traditional stone or concrete stoop which connected the front door with the sidewalk into a full one-story black steel staircase, resembling a permanent fire escape, at the front of the house.  The   result is not simply unattractive.  It can prove to be very expensive.  At least one borough office of the Department of Buildings insists that sprinklers be placed in the windows in the front of the house.  They are intended, at considerable expense, to keep the steel outdoor staircase from deforming under the heat from a possible fire.

As Alan Bell points out, government-mandated changes have so increased construction costs that his own company no longer builds three-family houses for its own account.  It acts as a contractor for non-profit organizations that are subsidized, directly and indirectly, by the city government to the extent, according to Bell, of $60,000 per three-family house, a practice that can hardly continue in the face of the city government’s budget-balancing problems.

How to Build More Three-Family Homes and Thereby Ease the Housing Crunch

The drying up of three-family house construction, resulting from  the concatenation of the Multiple Dwelling Law, the Building Code and Local Law 58 can and should be cured.

  • The Multiple Dwelling Law should be amended to eliminate three-family houses from its purview since they do not belong in the same class with apartment houses of larger size.  Even more important, the present classification makes difficult, if not impossible, changes in the city’s zoning that would encourage the development of three-family houses without forcing their builders to compete in land acquisition with builders of substantially denser structures.
     
  • The zoning statute of New York City should be amended to provide districts in which three-family houses would be permitted as of right, along with one- and two-family houses, but no larger residential structures.
     
  • Local Law 58 should be amended to reduce the requirement that the lowest apartment in  a three-family house be at ground level.  This requirement now applies to every new three-family house, and directly involves 33 1/3 per cent of the apartments in such houses.  The percentage of New Yorkers confined to wheelchairs is much closer to 2 percent than to 30 percent.  Since builders of such houses build more than one at a time, one in every five new houses should be required to meet the ground floor requirement with its costly addendum, the roof parapet.  If the builder’s entire program on a contiguous site involves fewer than five houses, only one house of the group should be required to provide such wheelchair   accessibility.

From these changes, all legislative regulators should gain a better understanding of what their work is expected to accomplish and of the  unintended consequences that they should try, in the future, to foresee and steer clear of.

In sum, a series of well-intentioned but misguided state and local laws have come close to destroying the three-family house, one of New York City’s most urbane and historically useful housing styles.  Even as three- and four-family houses continue to flourish in other   cities throughout the country, New Yorkers of moderate income who yearn for precisely this decent and affordable housing stock are denied it.  The first step in the city’s drive to provide affordable housing to hundreds of thousands of under-housed New Yorkers should be to  reform the Multiple Dwelling Law to restore the three-family house to its place of honor and usefulness.

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