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There Is a Way to End The Housing Crunch


There Is a Way to End The Housing Crunch

February 27, 2002
Urban PolicyOtherInfrastructure & Transportation

The 1990s were New York's decade of spectacular resurgence. People from all over the world wanted to live in New York — and still do. There's just one problem facing these new New Yorkers: finding a decent, affordable place to live.

New York's traditional remedy has been government-funded housing subsidies. Today, with the city in fiscal crisis, even the most strident subsidy proponents recognize that more spending is unrealistic. Now, with even housing advocates calling for a degree of deregulation and Mayor Bloomberg apparently willing to consider private-sector solutions to city problems, the city may finally enact some overdue housing reforms.

The need has never been clearer. The city is at least 140,000 units short of what it minimally needs to house its 8 million people. If one also factors in the need to replace — as other American cities do — 1% of the oldest and most deteriorated dwellings, the real gap is more than 400,000 units.

Housing advocates point to the gap as proof the free market is incapable of meeting the need. But this ignores the fact that New York's housing market is the least free of any U.S. city's. The answer is stepped-up private-sector production.

How can the city unleash new housing development? Changing the city's inflexible zoning laws should be at the top of Bloomberg's list. The city actually has a great deal of vacant land — 749 million square feet, or 47,500 separate parcels to be precise — but little of it can be used for high-volume residential development. Under current zoning rules, 24% of vacant land is set aside for manufacturing, and 60% is designated for low-density residential use. In desirable parts of Manhattan and Brooklyn, development is further constrained by a variety of special districts or programs.

Zoning reform must be coupled with a streamlining of environmental-quality and land-use reviews. These form a costly, time-consuming gantlet that exposes builders to court challenges by antagonistic local and advocacy groups.

To bring building costs in line with other U.S. cities — they are now 33% higher — the administration needs to reform the sclerotic Buildings Department and replace the outdated building code.

Just as pernicious as government policies that constrict supply are those that distort demand. More than half the city's residential dwellings — including 70% of rental units — are priced below market levels by rent regulation or by the rent schedules of public housing, housing vouchers and other government programs.

This rent-discounting effectively freezes the market, giving price-protected tenants a strong incentive to stay where they are. As a result, turnover is a fraction of that in other cities. Anyone moving to or within the city must bid against many others for the small number of available units. This situation artificially reduces the vacancy rate and raises rents. In short, price discounts lead to price hikes.

At least some resistance to reform may be fading. A prominent advocacy coalition, Housing First, recently issued an "action plan for reducing costs and stimulating construction" that embraces zoning and land-use-review reforms, as well as reforms to the building code. And while the mayor has endorsed the city's rent regulations, in his State of the City speech he also spoke of "stimulating new investment" rather than embracing massive new government programs.

For too long, New York's leadership has shrugged off criticism of regulatory and price-setting policies because it thought they were either necessary or innocuous. New Yorkers increasingly understand they are neither, and they no longer have the ability to throw more money at the problem.

An emerging consensus for deregulation and new thinking in City Hall offer the best hope for real reform. It is past time for New Yorkers to be as well housed as other Americans.