NYC's Housing Gap: Squeezing the Middle Class

New York is a much better place for all New Yorkers than it used to be. Crime is down, streets and parks are cleaner -- even the schools are slowly improving. The one exception to this otherwise brightening picture is the city's housing which is still too scarce, too costly and too often of low quality.

Some of this can be explained by the city's high density, which raises building costs, but much of the problem arises from laws and regulations that make it needlessly hard to add to the supply of housing, especially for the middle class.

While the city's consideration of a less-cumbersome building code and piece-meal revisions of its antiquated zoning law provide glimmers of hope, New York is still an expensive and unfriendly place to build new homes. The result is a "housing gap" -- the difference between the amount of housing needed for the city's growing population and the amount actually available.

By my estimates, New York's housing gap is now between 111,000 and 370,000 units. Without question, the gap is growing: The city's latest Housing and Vacancy Survey found that, from 1999 to 2002, housing production only added 43,500 new units - even as the Census found that the city's household population grew by 137,1000.

The housing gap is greatest in the city's middle class neighborhoods. For example, in the 1990s, the population of Jackson Heights, Queens, increased by 41,000, but the area gained only 1,324 new dwellings; Canarsie in Brooklyn added 32,000 people, but only 1,300 new homes.

Housing-advocacy groups want to close the gap with more subsidies. But not only does the city not have the resources to fund them, the majority of New York's middle class wouldn't benefit even if it did. The only way this gap will be cut, and cut in a way to help middle-income New Yorkers, is to make it easier for private developers to build more housing through deregulation.

A good place to begin reform is New York's zoning ordinance, an impossibly complex web that has too many zones and too many rules within each zone, applied to a capricious and anachronistic zoning map. The city's planners are now engaged in piecemeal rezoning. But to encourage greater housing development, the scope of rezoning must expand and its pace must accelerate. Ideally, we should replace the entire ordinance with a code that is simpler, easier to navigate and more effectively targeted on zoning's proper purpose of protecting neighborhood character.

The constraining impact of zoning is compounded by the city's Uniform Land Use Review Procedure (ULURP) and a stringent environmental-review procedure not applicable anywhere else in the state. The reports and hearings required by these regulatory reviews not only extend project time (and cost), but often invite deadly community or special interest opposition.

The prospect of opposition or delay may not deter heavily capitalized developers of profitable luxury projects, who treat them as a necessary cost of doing business, but can be fatal for small, local developers who have limited reserves and need to stay continuously busy. Rules for land-use and environmental review must be reformed to reduce the delays and uncertainty that drive up the price of housing.

Then there is the city's building ordinance, a primary contributor to New York's high building costs, which are about 50 percent higher than the country's big city average. Happily, a commission convened by the Bloomberg administration is now drafting a wholesale revision, based on a model national building code. If this effort succeeds, it will remove at least one important barrier to affordable housing.

The city's private-housing developers once built thousands of unsubsidized dwellings each month. During the 1960s, the housing stock grew by 47,000 units a year. There is no intrinsic reason why that can't happen today.