What stands in the way of affordable housing?

An Expert Weighs In

What stands in the way of affordable housing?

Waterside Plaza in New York City (Matt Biddulph/Flickr/CC BY-SA 2.0)

Everybody knows that housing in New York is too expensive. Rents and sales prices have climbed far faster than wages, and the amount of housing that’s both accessible and available—to rent or buy—is small. Why that is and what to do about it, however, are more contentious questions.

When looking for forces to blame, there are a few standard culprits that come up again and again in mainstream discourse. The most common answer is zoning that restricts the amount of new housing (at any price point) that can be developed. Under the assumption that denser housing tends to be cheaper than sprawling housing and that a larger supply of housing creates more choice for New Yorkers and leads to lower prices, local zoning laws become a primary target.

When it comes to discourse around increasing the housing stock, perhaps the next most popular punching bags are labor and material costs. This argument blames the rising cost of common building materials (wood, concrete, steel, glass)—all made worse by supply chain disruption set off by the COVID-19 pandemic—and the wages and benefits demanded by building trades unions by forcing developers to set high price points for new housing. (Say what you will about material costs, but if you ever find yourself arguing that manual laborers are paid too much, think twice.)

These are the standard talking points. But there are other factors that we must consider if we want to see a real rise in affordable housing in New York.

It’s not just the price of housing, it’s the price of land.
The price of housing is what we all see, but the price of land is a big part of what’s hidden behind it. A 2018 study by Barr, Smith and Kulkarni in the journal Regional Science and Urban Economics found that since 1993, Manhattan’s land values have increased at a compounding annual rate of 15.8 percent, far faster than the rate of job or population growth. By 2014, Manhattan’s land value—separate from the value of anything on top of it—was estimated at $1.74 trillion.

Some of our existing policies, ostensibly aimed at producing affordable housing, also contribute to land cost inflation. Take 421-a, which was the law of the land in New York from 1972 to 2022 (and, many real estate professionals and some politicians hope, will return in 2024). This program offered an as-of-right tax exemption for virtually any new multifamily housing, costing the city over $22 billion in uncollected tax revenue over the course of three decades. During that time, every seller of vacant or “underbuilt” land knew that the buyer would benefit from millions of dollars in tax cuts. Sellers then priced these savings into their purchase price. The landowners pocketed the bonus; developers took on more debt; the landlords priced that debt into the rents. A program that was supposed to create mixed-income housing did so at a premium for renters, to the benefit of rentiers.

Many New Yorkers would love to see the return of Mitchell-Lama developments: Limited-equity co-ops and reduced-cost rentals that were built around the state in the middle of the 20th century for middle-income households (though over time many rentals have become available to low-income households as well). These tend to be highly coveted among New Yorkers, and those constructed under the Urban Development Corporation can also be among the most architecturally bold. But one reason why the system worked so well was that it assumed reasonably low land costs, which wouldn’t require massive long-term debt payoffs from cooperators and tenants in the form of high maintenance and rent charges. We can, should, and must create a new Mitchell-Lama program, but to do so we’re going to have to grapple with the cost of land in New York City today.

Construction in a relatively small, already built-out area also entails demolition.

Talk of “housing units” makes them seem like abstractions in a spreadsheet, when in reality they are real places, in real space, with real characteristics and affective dimensions. We need to be honest about the fact that housing must go somewhere. In the mainstream discourse discussed above, this question focuses on local opposition to relaxed zoning rules. But in a place like New York City, which is not that big considering its population, which has been subject to hundreds of years of development and redevelopment, we must also focus on the question of what we are willing to lose in order to gain more affordable housing. Yes, there are empty parcels, and some of them are owned by government agencies. The East New York Community Land Trust, for example, has been targeting a vacant lot owned by the city’s Department of Housing Preservation and Development that is currently being used as an informal police parking lot—just about the opposite of what the community needs or wants. But in a lot of places such sites are few and far between.

If we wanted to build a whole lot more affordable housing in a city as dense as New York—ideally social housing, or forms of housing like public rentals, cooperatives, and community land trusts (CLTs) that are decommodified, socially equitable, and resident controlled—some of it is going to go where something else exists. It’s important to remember that the history of urban renewal is largely a shameful one. A whole lot of our affordable housing stock was built by evicting poor people, often Black, Puerto Rican, or Chinese, without any guarantee that they would benefit from the resulting development. There are, however, some interesting counterexamples to draw from. Electchester, the electricians’ union cooperative complex in Queens, was built in 1953 on the site of a high-end golf course. Maybe the next round of urban renewal can focus on high-end blight instead of poor people’s housing.

We can’t expect housing to filter and appreciate at the same time.

Much of the discourse around increasing the housing supply assumes that filtering will take place: that people will move out of their current homes and into the new ones, creating space for others to move into their old homes and creating a class-based chain of mobility that allows everyone to access slightly better housing than they were able to have before. This kind of pattern has taken place over the course of decades-long neighborhood transitions. But it was a much more common—if still not universal—phenomenon at a time when housing was expected to depreciate as it aged. Today, developers and home buyers alike assume that housing will be worth more when they sell it than when it was bought. If the price keeps rising, so does the rent. And if the rents keep rising, nobody is filtering through anything.

There’s so much more money to be made in un-afforable housing.

Finally, we must contend with the fact that building expensive housing is just far more profitable than building affordable housing. As long as our system depends on for-profit actors to build, own, manage, and maintain our homes, good quality affordable housing will always be out of reach. We need nonmarket actors to produce social housing, as well as more robust regulation. This means both building up the capacity of nonspeculative groups (like CLTs and mutual housing associations) to take over existing housing, but also rebuilding state capacity, finances, and political will to both intervene in the market and build social housing once again. While the federal government has historically been best poised to handle this scale of action, its political gridlock and abiding conservatism all but ensure that it will not. Local governments may seem more politically responsive to local demands, but often lack the capacity to act on this scale. State governments may be positioned to take on new social housing development, though most are timid and conservative, if not outright reactionary. Still, if we want a different outcome, we have to know what would produce it: not just a change in the rules around development, but a change in who does development, what powers they have, and what mandates they must follow.

Samuel Stein is a housing policy analyst and the author of Capital City: Gentrification and the Real Estate State.