De Blasio's difference

For the last decade, the progressive left has been begging for a mandatory inclusionary housing program in New York City requiring that all new residential buildings include a quantity of affordable housing. The mayor has proposed exactly such a plan. The community boards and the progressive left have rejected it. Why?

First, compare the mayor's plan with the Bloomberg model of inclusionary zoning. Bloomberg rezoned 120 neighborhoods in the city. Each one contained significant upzonings -- greater allowances for larger buildings, a give-away to developers. In addition to the upzoning give-away, Bloomberg offered developers the option to build even more space if a portion included affordable housing. Usually the bonus -- the added market-rate housing that the developer could build above the affordable component -- wasn't enough for the developer to bother with, so they didn't.

However, affordable housing non profits, which manage the affordable housing component and get their funding for doing it, and whose mission is to create or promote the creation of affordable housing, were the advocates for the inclusionary program. So you'd see the irony of progressive community-based non profits selling development and upzoning to the communities with the promise that the affordable housing would benefit the community. Carefully not mentioned was that the development would raise real estate values, the market rate housing attract more money, and landlords, seeing an opportunity to cash in on the upscaling of the neighborhood, would harass tenants in a thousand ways, and the result would be community displacement and a net loss of affordable housing, particularly steep if the developers didn't even bother with the inclusionary bonus.

Of course, the affordable housing wasn't for the community in the first place. The housing was delegated by raffle, and the housing wasn't often affordable to the locals anyway. So this model of community stabilization or preservation was what I call the Invasion of the Body Snatchers model of community preservation. The community is replaced with other individuals who purport to be just like them with respect to income. But they are not the community. And since the housing isn't affordable to the prior community, it's not even Body Snatchers, it's just wholesale snatching.

Mandatory IZ doesn't solve this conflict between the creation of affordable housing through development and gentrification/displacement. That's one reason why the community boards haven't cottoned to it. But you'd think that the progressive non profits would still be advocating for it. And here's a big difference in the structure of the mayor's proposal. Instead of rezoning neighborhoods one by one, his proposal changes the zoning law itself, so the city would be upzoned automatically without any further process. Community boards would have little say and the non profits would be left out as well.

Under Bloomberg, it was possible for the communities to ask for additional perks in the form of funding for the non profits -- legal services to help evicted tenants, for example. Under de Blasio's proposal, there's no opportunity for the community to leverage such additional funding.

More important, the de Blasio proposal doesn't kick in until there's an upzoning, so in effect, his proposal is just as voluntary as the Bloomberg model. With a little difference: since developers, prior to any upzoning can develop now without including affordable housing, we should expect them to lose interest in upzonings. It has been well observed that mandatory inclusionary housing has this kind of dampening effect on development. We should expect to see the non profits still advocate for upzonings, and less upzoning advocacy from the developers.

The Bloomberg model placed the developer in the drivers' seat, drawing the non profits onto the developers' bus for the sake of the affordable housing and their legal services funding, while they all throw the community under the very bus they're driving. De Blasio's model takes the developer out of the driver's seat, leaving the non profits on a bus going nowhere.

The irony is even more stark -- we should expect to find that the only people advocating for upzoning, gentrification and displacement would be the progressive non profits under the new model.

Cooptation of the Left and the permanent shadow government at the local level

Underneath the community boards' rejection of de Blasio's zoning proposals lies a practical and familiar issue: money. Bloomberg's 120 rezonings each went through the arduous public process in which community boards -- and crucially its members -- played an important role. De Blasio's proposals bypass the community level by writing the upzoning directly into the zoning law (called "the zoning text"). The Blaz's proposals eliminate any local leverage for funds that local community non profits might obtain. 

Affordable housing built by developers to meet zoning requirements must be managed by a non profit community-based organization (CBO). It's part of their mission and they get funding for it. As a result, CBO's are often the most vigorous proponents of development at the local level. Without the market rate development, no affordable housing -- the market-rate housing "subsidises" the "affordable" housing (a deceptive expression -- the housing is often beyond the means of local residents). That's the Inclusionary Zoning/Inclusionary Housing model -- 80% market rate, 20% "affordable." The non profit becomes complicit with gentrification and displacement. 

Displacement is difficult to quantify. Unless a tenant died, the reason for vacating an apartment is anyone's guess, since it's not recorded. Affordable housing is eminently quantifiable, which is one reason why politicians romance it and parade it. Same with CBO's. If  the market-rate housing raises real estate values and landlords evict tenants wholesale, as long as the affordable units are built and occupied, no one will be the wiser even though the net affordable housing in the neighborhood has declined. 

CBO's have a long life in the neighborhood. Their members often sit on the community board. There they often create a consensus of what is "right" for the neighborhood, which too often means colluding with developers to obtain the "affordable" housing the CBO's will manage. 

The political opportunists that cohabit the community boards recognize the going game, and, being political opportunists, play their game. The community board, and underneath the CBO's, are the permanent gov't at the local level. Given that the CBO's are receiving funds to implement the policies that the community boards vote on, the CBO's can also be described as the shadow gov't at the local level.

I'm preparing a talk for Occupy Wall Street Altbank Group about zoning and how gov't coopts the Left through community-based non profits. I want to present this in the context of the amenity dilemma: every material improvement made in a low-income neighborhood attracts wealth and its whiteness, raises real estate values, increases pressure from landlords to evict and yields displacement. Maybe the only solution to the amenity dilemma -- remain in poverty or be displaced to poverty elsewhere; all things accrue to the top -- is protection. So the talk will include a defense of rent regulations, the defense I've made here and elsewhere many times. 

Money laundering and affordable housing

The Treasury's decision to investigate money laundering through NYC real estate might actually save New York from wholesale gentrification.

Constructing a lot of new housing can keep rents low by adding supply. Because it's expensive to build, developers prefer constructing luxury housing to get the quickest and highest rate of return. If the wealthy move out of older housing stock or locations further from the city center into these new luxury units, they free up housing for the less wealthy, who decamp from their older and further locations in turn freeing up housing for the even less wealthy and so on down the line. This is the one good reason for de Blasio's Zoning for Quality and Affordability (ZQA) -- allow new units to have higher ceilings to attract the wealthy out of less appealing older models.

But if the luxury housing is being bought by foreign speculators or money launderers who have no intention of living in the apartments, new construction does no good for the housing market. It turns the city's real estate into a non housing market crowding out the housing market. It's a disaster for the resident citizen, especially the low-income and immigrants.

(You might think, well if we eliminated rent regulations, the market would be flooded with vacant apartments, but this is both empirically and theoretically wrong. Most people who would be pushed out of deregulated apartments don't -- and often can't -- leave the local rental pool. They just move to a lower income neighborhood where they create a tighter market and push out lower income tenants who in turn move to lower income neighborhoods evicting people there, again, all the way down the line until at the bottom immigrants huddle up in substandard housing crowded together in dangerous conditions. At the top, landlords renovate the vacated luxury units and hike the rents there. Iow, deregulation doesn't free up the market, it's just a game of musical chairs, destabilizing everyone and raising rents everywhere. This happened in Boston when rents were deregulated, so we know that it's not just a theoretical speculation-- it's reality.)

The alternative to constructing luxury apartments to ease the housing market is constructing affordable housing. But if the monied are still coming to the city and searching for apartments, the pressure on gentrification in outer boroughs will be greater than the creation of affordable housing can accommodate.

It's easy to show that the current model of affordable housing creation is necessarily inadequate. De Blasio's Mandatory Inclusionary Zoning, for example, would require one affordable apartment for every four luxury unit. But as we know from Occupy and presidential campaigns and memes everywhere, the ratio of the wealthy to the struggling is not four rich folks to each struggler, but more like 1:99, and that's actually generous. 1:999 would be closer to reality. So the current model is beyond inadequate -- it's preposterously inadequate.

So again, the affordable housing model can only work if the luxury housing doesn't become a place for billionaires to park their money. It's got to be housing, not speculation, otherwise the entire geography of the city will be distorted into empty speculation at its center without even a tax base.

The MobilityDilemma and the Clearing House Effect

The Asian American Federation, the group that studied Chinatown businesses I mentioned a couple of posts ago, also studied Asian poverty in New York City. Their policy recommendations point up what you might call the mobility dilemma: efforts to increase upward mobility run the risk of displacing their target populations. Here is one of their policy recommendations:

Economic development efforts in enclave economies that encourage a diversified, vibrant business community rather than a hypercompetitive, low-margin, narrow economy would help stabilize the local economy and raise wages and labor standards. 

By "diversified" they mean non local serving businesses: semiotic, outward-looking commerce -- in a word, tourism. To upscale a local-serving produce stand into a high-end restaurant -- necessarily non-local serving since the locals cannot afford it -- will allow, if successful, higher wages for the waiters (if the manager doesn't steal the tips, a wide-spread practice as I've mentioned). But it also crowds out local-serving commerce and attracts more upscale outward-looking commerce. As prices and profits rise, so do real estate values. Soon the neighborhood is in demand from outside and landlord pressure to harass and evict locals increases. Gentrification displaces the local community.

The dilemma is parallel to the urban amenity dilemma: every material improvement in a low-income neighborhood attracts investment that eventually gentrifies and displaces the low-income community. The two horns of the dilemma both seem unacceptable: remain in poverty or be displaced to poverty elsewhere.

The AAF policy recommendation seems to ignore the historical clearing house dynamic of Chinatown. Immigrants arrive there, work hard for several years, spend frugally, save resolutely, then leave for a prettier neighborhood. Upscaling Chinatown may provide higher wages for a few, but it eliminates it as a first destination for new immigrants.

New immigrants most need work they can assume immediately and housing that is extremely cheap so they can both earn and save. AAF concludes that "Making affordable housing more available is critical to alleviating poverty." But current affordable housing programs are all geared towards permanent housing, too expensive for the needs of new immigrants. Only transient housing meets the demand in an immigrant first destination. Permanence is unnecessary and too expensive.

Chinatown today is divided between two communities, one immigrant and transient, another American-born and permanent. Current affordable housing models would change Chinatown into all permanent, but the mobility it provides for the low-income immigrant is not upward, but outward, so the problem is not solved, in Engels' famous words in The Housing Question, "they are merely shifted elsewhere."
See also in this series:
Semiotic neighborhoods vs the authentic and anti-fragile: prestige and its deceptions and betrayals
Prestige and distortion in Chinatown
Suits and betrayal in Chinatown
Authenticity in the East Village

Marginalizing the Homeless

Last night I attended a town hall on homelessness and homeless services. As would be expected, the local electeds and the city administration spoke mostly about public safety -- they have to appease the local residential voters. Only Gail Brewer, the Borough President, addressed her comments to the needs, rights and interests of the homeless themselves. Props to her.

In the Q&A, a couple of middle-aged white men asked pointed, testy questions about public safety. A few graceful senior white women made constructive suggestions on how the homeless could be better served. Not surprisingly, the most trenchant comments were made by the homeless themselves -- several members of Picture the Homeless were present: Why doesn't the city ask the homeless what they need rather than funnel them into the modes convenient to the city. Why solve a housing problem with a policing answer? Why is all the affordable housing in the mayor's housing program way beyond the means of a minimum wage worker?

I complained to the council members present that the Parks Department continues to marginalize the homeless in Tompkins Square Park (Parks last month installed a ping pong table right smack in the middle of the space where the homeless regularly gathered), a public park that has been for many decades a place for the homeless to socialize with their friends, feel at ease and enjoy. They have every right to be there. What they don't have is the political clout to protect their right.

Afterward, a well-intentioned rep from a city agency said to me, giving me her card, "If any of your homeless friends aren't being served, please contact me." IOW, 'help me funnel your friends.' My take-away: the people who've been funneled are the people working for the city.

The city is focused on dragging street people off the street.into shelters. They wanted residents to be complicit in this, distributing to the audience maps for residents to pinpoint places where they could identify "problems" (aka a homeless human that the resident wants to have disappeared into the system). Presumably that gives the police the excuse to forcibly remove the human. Providing homes seems to be way down their list below the level of constituency politicking.

Rent regulations

Thinking about the construction boom and the Rent Guidelines Board rent hike, I went back to a piece I did for Met Council refuting the claim that rent regulations artificially raise market rate rents. The key insights were two: 1) in New York, newly constructed apartments are not required to be regulated, so regulation doesn't add to the tight housing market (in fact, rent regs are one of the few incentives to construct in NYC); 2) deregulation doesn't flood the market with new apartments since evicted tenants don't leave the local pool of renters, and wherever they go they tighten the housing market there, displacing lower-income renters. 

Looking back, I'd want to explain explicitly why it is that displacement always shifts downward, and not just a musical chairs of apartments among renters. Deregulation eviction implies that the tenant can no longer meet the high market-rate rent. In a tight housing market, if they go to a lower-income neighborhood, they will find an apartment by displacing someone who was renting at a lower rate. The displaced renter does the same in the next lower-income neighborhood and so on.

[Update: on second thought I think I was right in the original, not as in the paragraph immediately above. Obviously deregulation evictions out of prime locations also allow high renters to move upward -- upward displacement. That displacement doesn't ease market rates: the evicted have created a tighter market down the line. On the other hand, if new upscale renters are entering the market from outside the pool, they would increase downward displacement pressure.]

Some of those deregulation-evicted tenants can pay higher rents than they'd been paying under regulation, just not quite as high as the market rent where they'd been. No one will seek a cheaper apartment -- if there was something cheaper suitable to them they'd have decamped long before deregulation. But some will seek apartments somewhat more expensive than what they'd been paying under regulation. So the only change in the economic equilibrium is the added funds available for rent among the deregulated. 

At the end of the day, deregulation increases the aggregate funds available for rents taken from whatever else the regulated tenants had been spending on in the economy. All of that increase goes to the landlords. Deregulation is just a pointless shift from the non real estate economy to landlords and a downward spiral of displacement, while more upscale renters flow into the city to raise the luxury rates. With more funds flowing into the real estate market, developers construct to meet those upscale renters, who then recreate the commercial economy in their own image, buying upscale items. 

So rent regulation is just a restriction on upscale real estate speculation and upscale commerce. It doesn't raise market rate rents, but actually dampens them. And it's good for non upscale commerce.

So here's the article. The point about the rent pool seems to have grown legs -- I've heard it repeated by lawyers as well New Yorkers on the street. 

Why Rent Regulations Don't Raise Market Rents 

By: 

Rob Hollander

Published: 

June 2011

"If rent decontrol would mean a fairer, less insane market, then it is a just cause," the libertarian-conservative Cato Institute argues.

In every debate over rent regulations, someone—often an angry tenant paying outrageous rent—argues that regulations are responsible for pushing market-rate rents way up. If those regulated rents were brought into the free market, the market would level down, allowing a fair rent for all.

This argument has had wide currency among conservatives in their effort to undermine rent regulation and promote developers and landlords, the market suppliers in the real-estate industry. It appeals directly to people who, bitter over their heavy rent burden, welcome a convenient scapegoat: their own neighbors. And the authority, the landlord, is conveniently exculpated.
This argument is false. It is based on these premises:
1) Rent regulation discourages housing construction, restricting housing availability;
2) landlords make up their losses on regulated rents by gouging market-rate renters; and
3) deregulation would level the playing field, lowering high rents

Its conclusions have been demonstrated to be empirically, factually untrue. It is time to put this claim to rest.

Let's start with the basics. Not only conservative think tanks like the Cato Institute, but the consensus of economists, even the liberal Paul Krugman, accuse rent regulation of discouraging new housing construction. Without new apartment units, the supply can't keep up with demand, and fierce competition for the few remaining units pushes market rates up.

Their observations are true where rents for new construction are regulated. But in New York, it isn't.

New construction is exempt from rent regulation in New York. Building new affordable housing is entirely voluntary in New York, and developers only provide it where the city gives them special incentives, such as allowing construction beyond the zoning restrictions or giving tax breaks. In fact, rent regulation encourages new construction, as the Citizens Budget Commission has pointed out, since new units can garner far higher rents than older regulated units. If landlords can't cash in on regulated units, the only other means to make money is to build new, unregulated units. Rent regulation is an incentive for construction.

The difficulty of building in the city has many causes—the cost of land and construction, restrictive zoning laws, building codes, permits and bids, and, not least, the private and political graft involved. Nevertheless, New York continues to see housing construction. Even during the recession year of 2008, the city issued 33,911 permits for new housing, the greatest number since 1972. In a city of obstacles to construction, rent regulation is one of the few encouragements to build.

The second premise contends that if landlords can't raise regulated rents, they will raise rents on unregulated units to make up for the lost revenue. Unfortunately for the landlords, the free market doesn't work that way.
Market rates depend on renters' willingness to pay, not on owners' costs or losses. Rents can't rise above what renters are willing and able to pay, and the nature of the profit motive ensures that market-rate rents will rise exactly to that level of renter willingness, regardless of what other renters are paying.
In a city where construction lags behind demand, it may be legitimate to ask whether deregulation would free up apartments and ease the market down—the third false premise. Quite aside from the consequences of displacing individuals or even whole communities, the answer is a surprising no.

Rent deregulation, believe it or not, raises market-rate rents. The conservative Manhattan Institute, in its 2003 study of deregulation in Cambridge, Massachusetts, found that, following deregulation, landlords invested in improvements to attract the highest possible market-rate renters. The result of the 1994 deregulation in Massachusetts has been better-quality housing, but higher market rents across the board.

That shouldn't be surprising. A tight housing market implies that many renters can't find apartments in their preferred locations. That's the meaning of a housing crunch. Renters can't find the spaces they want, and the ones they have to live in become overpriced. But when vacancies appear, those renters are willing to pay exorbitant rents for the locations they prefer, and landlords will meet their willingness.

The market value depends on three general factors: demand, supply, and the aggregate available funds for rents. If regulated renters are paying less than their available rent funds (the excess of which presumably goes into the goods and services economy), when they are forced to pay more, it will increase the aggregate funds going to landlords as rents, since most of those renters are tied to the metropolitan area by work, family, or preference. If their rents are deregulated, these people will force rents up wherever they go in the metropolitan area.

That's a recipe for disaster. When renters can't afford their location as a result of deregulation, they move to lower-rent neighborhoods, where they create a tighter rent market, raising the rents there and even gentrifying the area. Some of the longtime renters in those neighborhoods will be priced out and move to even lower-income neighborhoods, tightening those locations in turn.

More affluent longtime renters will see their rent increases as an opportunity to move to a more desirable location. But wherever they go, landlords will raise their rents as high as they are willing to pay. If the market is tight and people are not leaving the metropolitan area, the market rates will remain high.

Market rates only go down if demand goes down—if people leave the city entirely or excess housing is built. But New York's population is increasing, not decreasing, and construction is costly and difficult. Deregulation here will not ease the market any more than it did in the Boston area.

It's not even certain that in a tight market like New York, landlords would invest widely in improvements, as they did in Boston and Cambridge. Unregulated renters have few rights, so if they complain to the city about lack of services or repairs, the landlord can retaliate by refusing to renew their lease when it expires. Regulated renters can compel repairs without that fear. So it is possible that deregulation in a tight market would result in lowered quality of housing and a degrading of services, as well as higher market rents. That's exactly what happened in New York when vacancy decontrol was imposed in 1971.

Regulated rents actually help to depress market rates. Renters who pay exorbitant rents may think it's unfair that regulated tenants pay so much less than they do, but the source of exorbitant rents is not regulation. It is landlords' profit motive and New Yorkers' desire to live here. We are the market that sustains high rents.

So what is the effect of deregulation? It provides a cheaper means of placing money into landlords' hands than construction does. The chief effect of deregulation is an increase in the aggregate funds available for rents. It doesn't ease the market, it won't improve the quality of housing in New York, and it won't create more housing. It will give more money to landlords, it will raise rents all over the city, and it will wreak havoc on communities as markets are tightened even in low-income neighborhoods, causing a spike in gentrification and displacement.

Rent regulation does create an unfairness—the lucky get to spend their money on the local economy, not just on rent, while their market-rate neighbors have to suffer. But forcing everyone to suffer doesn't solve the suffering of the overpriced. It just makes life worse for everyone. Two wrongs don't make a right. Deregulation is a lose-lose. 

The future of NYCHA

If NYCHA follows through with its infill plan, building market-rate housing among the subsidized projects, I bet that within a decade the city will come up with a plan to give the low-income residents ownership of their apartments for minimum maintenance in the expectation that they'll sell immediately on the open market. The city will require only that it get a cut from the flip to fund the program. NYCHA projects is quality housing stock, a lot nicer than tenement housing, and it's got those river views. Where will the current residents go with their windfall? The city doesn't care, and the city won't have planned for it either. DCP plans only for upscaling and revenue-enhancing real estate raising, not for people.

Puzzling

It's supposed to be well-established that commodity prices are the inverse of interest rates. Interest rates are as low as they can be and luxury housing prices are high, for example. But the rest of the economy is not wildly inflated. Is liquidity trapped only for the 99%, and not for the luxury economy of the 1%? Anyone know?

Update with my own guess, since nobody ventured: low interest rates in a liquidity trapped recession hike luxury assets like the stock market and luxury housing, but don't stimulate the economy. Quantitative easing adds to the luxury market, since it pumps money directly to the 1% -- the banks. The underlying trouble is the lack of fiscal stimulus coming from Congress made worse by the sequester. In short, the well-established inverse relation between interest rates and commodity prices is just a generalization, not a rule. The economy is like the proverbial horse -- the Fed can flood the land with money, but it can't make that horse drink.

Demand for luxury apartments is higher than ever

Luxury apartments are rising higher now to meet increased demand. But "demand" is a gloss for at least three independent economic functions: 1) the quantity of those seeking an apartment relative to the availability of supply, 2) their willingness to part with their disposable income for living space (the "opportunity cost" of space), 3) the sheer quantity of their disposable income. There's a fourth function: a decline in use value that increases the exchange demand -- the willingness of apartment seekers to double up and share a space. Even if that doesn't directly raise prices of luxury apartments, it raises them indirectly. Raising prices down the ladder raises up top as the options narrow. 

The 19th century argument that the cost of living space would always rise as capital expands was definitively disproved in the 1960's and '70's when large swaths of Manhattan saw rental declines, in some places precipitous declines to zero and even below (landlord abandonment or arson, the city giving properties away to residents). This wasn't a shift of capital as with Detroit -- Detroit's experience gave support for Engels' warning that the immobility and economic inflexibility of home ownership for labor would be a curse as capital shifted locations, although in Engels' case he thought it wasn't so much capital shifting as that labor needed mobility to shift so it could sustain a strike by seeking work elsewhere. 

In New York it was a cultural shift to the suburbs partly encouraged by government both by construction of suburbs and of infrastructure to take residents to and from the suburbs. That's why Robert Moses is so much blamed for the bankrupting of NYC. Capital did not shift to the suburbs, leading urban dwellers out of the city; capital was still in the urban center when Moses allowed the tax base to shift to the suburbs, and capital followed. It can't be blamed on the loss of manufacturing base: New York is growing in population and in wealth and tax base, but not in manufacturing. The move to the suburbs was a government-facilitated cultural shift that eventually spiraled the city downward as the eroded tax base undermined services, and middle class flight undermined public education. Explicit race-based programs like red lining and slum clearance closed the coffin. 

The new demand for upscale housing shows distinct reflexes of its distinct functions. The quantity of apartment seekers will gentrify outer boroughs as long as central upscale development lags demand. The price of space will rise as long as the willingness and wealth is there. The draw in New York seems to be its density, safety and convenience. It's a party for the rich. 

So why do all these rich folks come here and why are they willing to pay ever more? Is it the nightlife here? Or that NYC is the chain store capital of the US? Maybe it's just NYU. 

New blog "Chinatown for Chinatown: a discussion board"

I started a blog about Chinatown planning called "Chinatown for Chinatown"
http://chinatownforchinatown.wordpress.com/

I've avoided blogging about Chinatown while I was involved with a Chinatown planning group. It's not the kiss-and-tell aspect -- I believe in transparency. But journalism gives the writer an unfair advantage within the group. It can bias the process or coerce it. But the Chinatown Working Group has mostly concluded its discussions, now waiting for its planning consultant to come up with recommendations to the group. So I can write as an outside observer.

I've asked several local voices and urban planners to post as regular guest bloggers. I'm hoping to see an open, broad discussion that will be of help to the planning consultants as they dig into the issues and challenges that Chinatown faces.

What's really wrong with the NYCHA plan

The complaints about NYCHA's infill losing park and air space are difficult for me to identify with. I grew up in Manhattan in a high-density urban street environment, like most Manhattanites. As a child I enjoyed that streetscape at least as much as the local public park. We played handball and boxball on the sidewalk, running around in alleyways, climbing fences. Still today I prefer to walk uptown on 1st Avenue, dull as it is, rather than walk through Stuy Town, which feels like a pristine, landscaped, anti-urban gated community. To me, the tenement street wall is attractive, comforting, neighborly and conducive to community, just as I far prefer tenements to the anonymity of elevator building compexes or the isolation of single family houses. 

So I was gratified to hear GOLES director Damaris Reyes' response last night to NYCHA's presentation to Community Board 3. She jumped on the real danger of the infill scheme: the dilution of the political base in the projects and its likely consequence, the erosion of political will to maintain the NYCHA tenants. Amidst all the NIMBY concerns -- one white gentleman with the most beautiful brown shoes I've ever seen, worried that the new rich tenants might crowd his child out of the better local public schools, a worry that drove home to me, no prejudice to him or his honest issue, just how far this community has changed -- Reyes was almost alone in speaking to the social issue of preserving the community. Bernard Marti also faced that issue, but he spoke in favor of the infill plan, expressing his hope that it would help the NYCHA properties so desperately in need of help. Everyone else demanded a better community process, which seems to me a diversion. We already know what the problem is -- the state has no commitment to public housing. How is a "community process" going to change that? 

You might object that, even without the infill, this neighborhood is developing and gentrifying anyway -- it's just a matter of time, and this infill will at worst speed it up by a few years. That's too coarse-grained an analysis. The poltical base here has remained in the older residential demographic despite demographic upscaling partly because the local housing stock of tenements is ill suited to permanent or family housing, and ideal for transient students and young singles. So the PS 64 transformation into a dorm will bring a lot of youth commerce (bars), but will not change the political base -- most students don't vote. The infill market-rate housing will bring permanent resident voters. 

I asked the NYCHA presenters privately why the state won't build the market-rate housing and give the profits to NYCHA rather than let a private developer build and own it and reap the profit. They explained that the state simply won't touch public housing. This is plain deceit on the part of the state: it builds prisons, and there's no question that prisons are, among other things, public housing, except it doesn't generate market-rate rental revenue. 

An answer for NYCHA's troubles

Our political office holders, assuming that there's no alternative to the NYCHA leasing scheme, are left complaining about the lack of "community process" on how to implement the infill leasing plan. But there is an alternative. 

Here's an op ed I wrote for Bowery Boogie explaining what the city and state can and should do. That they haven't done this suggests to me that the state has no faith in the future of public housing. That's scary. 

http://www.boweryboogie.com/2013/04/op-ed-looking-for-a-better-alternative-to-nycha-leasing/

(Bowerygals' comment on Boogie's site is also a must read.)

There’s been a furor over NYCHA’s plan to lease so-called underused properties to private developers, but there have been few alternative solutions offered. While everyone complains, the NYCHA tenants continue to suffer from hurricane damage and inadequate management. So complaints without solutions just won’t cut it.

Everyone on all sides agree that if the city would properly fund NYCHA, there’d be no need for this leasing scheme. And many are ready to fight to get that funding today. That’s heartening.

But it’s not the solution. Getting the funds today might be possible in this election year amidst the noise that the leasing scheme has raised, but what about next year, when it’s not a city election cycle year and the locals have forgotten all about NYCHA? Fighting for the funding means NYCHA tenants get services one year in every four. In between, they’ll be literally left in the cold.

NYCHA needs a steady, dedicated revenue stream protected from changing political winds, revenue that won’t be syphoned away from NYCHA and its tenants. And it needs a transparent process that will guarantee that the funds won’t disappear into someone’s personal pockets.

The current leasing scheme fails to meet that need from the start. The profit derived from the new market-rate units will go straight into private pockets by right, without even any political corruption or subterfuge. NYCHA is giving its own potential revenue away. Handing the people’s public property into private hands for their personal profit is the opposite of good government. It’s a travesty.

Why doesn’t NYCHA ask the state to intervene, construct the market-rate units itself, and give them to NYCHA? The state loves to construct — prisons, schools, more prisons. It’s easy for the state: issue a bond, the funds go to the huge construction industry, a state favorite, with lots of jobs. And market-rate housing yields a fast return, so why not? Years ago, when I sat on the CUNY Board of Trustees, I watched the state cut the tax-levy budget to shreds, but I never once saw the state deny a capital construction item.

That the city hasn’t asked and the state hasn’t offered suggests to me that neither really wants to save NYCHA housing at all. A 99-year lease will not generate enough for NYCHA’s needs in the future. Luxury housing might, if it were owned by NYCHA, not a private developer.

Should the state get into the business of luxury housing? Consider why government is viewed as a shabby landlord. Government is capable of managing quite well — look at libraries, rec centers and parks, all widely used. But when it comes to housing, government owns only low-income housing. It’s a kind of self-fulfilling prophesy. If the state owned the Upper East Side, it would be rolling in dough and well able to maintain those properties with plenty to spare to keep up its low-income properties in style. But it doesn’t own upscale properties with surplus revenue and, let’s be honest, the city just doesn’t care about its low-income residents. Certainly that’s been true under the current city administration, its mayor and city council leadership.

The new market-rate housing would rob space and air and light. NYCHA must at the very least compensate for those losses with improvements in the remaining spaces so that they are better used and more appealing. More troubling is the danger of upscaling local commerce, outpricing the low-income tenants. NYCHA has to address all these issues as well. I wonder whether the NYCHA tenants would accept these as conditions:

1. The state should issue bonds to build the market-rate units, giving the units to NYCHA so all the profits stay in NYCHA and benefit the subsidized tenants
2. NYCHA should hire a decent architect (there are plenty of brilliant young designers aching to solve urban challenges) to redesign the remaining open spaces to make them greener and better used,
3. The city should subsidize a percent of the commercial space specifically for low-income consumer services
4. Let the current tenant community set out ground rules for public use — music, noise-making (upscale partiers make a lot of noise), barbeques and such — to minimize conflicts between the new and the old.

How to ensure a transparent process that will prevent corrupt officials from stealing NYCHA funds is tough one. It’s a challenge that has to be met no matter what NYCHA chooses to do.

No escape from luxury

Btw, this is the article that Yglesias was responding to:

http://www.forbes.com/sites/stephensmith/2011/09/29/does-urban-growth-have-to-mean-gentrification/

Smith doesn't assume an upper limit on luxury demand, he thinks the upper limit is reached when overdevelopment begins to lose its attraction. It's a scary thought: the rich lose interest in bland elevator buildings, so they raid the neighborhoods without them. Their presence attract their elevator-addicted friends, so developers construct for them and transform the neighborhood, driving the upscale to seek a hipper slum to raid. It's already happened here -- the Schwimmer Manse. 

Changes to housing regulations

On August 12, 10am-4pm, at Spector Hall, 22 Reade Street, the Department of Housing and Community Renewal (DHCR), the NY State agency that oversees housing regulation, will hold a hearing on several proposed changes to housing regulations. Of most concern to tenants, DHCR intends to

1. allow landlords to evict tenants merely to gut and renovate a building, a procedure known as "phony demolition"
2. base the stipend given to such evicted tenants on stabilized rents levels rather than on market-rate rent levels

Holding the hearing in the dead of August ensures that publicity, discussion and resistance will be muted. Please consider writing to DHCR and attending the hearing.

Here's a version of a sample letter sent around for public use by Village Independent Democrats.
DHCR's proposal can be found on page 28 of the pdf at this link
http://www.dos.state.ny.us/info/register/2008/jun25/pdfs/rules.pdf


Juy 10,2008
Deborah VanAmerongen
Commissioner
DHCR
25 Beaver Street
New York, New York 10004


Dear Commissioner,

I strongly object to the unfairness of the new formula you are
proposing for people forced out of their homes because of demolition. It
should be based on the difference between a comparable market rate
apartment in the same neighborhood and what the tenant is now paying
This was the recommendation of the Working Group of elected officials and
housing groups that your office met with over the past year. They urged
the stipend be given for ten years (120 months). Why have you not
listened to them? To base the stipend on the average rent stabilized
amount is totally unrealistic. Rent stabilized apartments are not
available for people to rent. They have to go to a market rate apartment
if forced to move. Rent stabilized apartments are being
demolished to put up more luxury condos.

I also object to the proposed code change that would make phony
demolitions legal. It is not right to define gutting the interior of a
building as "demolition." The law's original definition intended "razing a
building to the ground." Your proposed code change only helps developers
destroy more affordable housing. It takes away the last grounds on which
tenants could make a legal challenge to the loss of their home. I want
you to start protecting tenants by enacting code changes that slow down
the frenzy of demolition. I want you to preserve affordable housing.

The hearing should not be held in August when most people are
away on vacation. It should be held in September.



Sincerely,

The effects of deregulation

In case you think deregulation of housing will bring rental prices down by a general leveling of the market, here's what's actually happening as a result of deregulation (from Liz Peek, NY Sun, of all places):

"According to a report from the Harvard University Joint Center for Housing Studies, the stock of what is considered low-cost rentals in America fell by 1.2 million units between 1993 and 2003. For a variety of reasons, "affordable" rental units have been disappearing, causing prices for the remaining properties to rise. In 2005, according to the MacArthur Foundation, almost 9 million middle- and low-income Americans spent more than half of their income on housing, an all-time record.

"According to a study by the Furman Center for Real Estate & Urban Policy, median rents in New York have risen considerably faster than incomes. It says the number of rental units "affordable to low and moderate income households in the city fell significantly" between 2002 and 2005. During that period, the report says, the total number of rental units in New York grew by only 0.4%, while the number of condos and other owned units grew by 3.5%. Adding to the problems of low-income citizens, the new housing stock shifted significantly upmarket, with higher-priced units growing by almost 25%. These trends are also in place across the country."

http://www.nysun.com/article/68414?page_no=1

In other words, the effect of deregulation is not a leveling of the market. The effect is more upscale housing in the city, more of the labor force moving out of the city. No leveling, just up or out.

Same thing happened in Boston when they deregulated housing there: no leveling, just more upscaling and gentrification. Even the conservative Manhattan Institute's study couldn't find any beneficial effect on rents in Boston's deregulation.

Why do you think regulations were created in the first place?

Phil DePaolo tells it like it is

Mayor Bloomberg, Second Mayoral Debate, November 1 , 2005:
“This is an expensive city; it always has been, probably always will be.”

We have seen first hand the devastating effects of the New York City housing boom on the residents of our city, mainly low income people who cannot afford to live in their apartments with all the rent increases applied to rent stabilized apartments.

In the 1970s, when no one was developing, the 421a program was a wonderful plan. The original intent of the law establishing the 421-a tax abatement was to encourage housing development in an area where market rate development was not occurring and would not occur without the tax abatement. In return a developer could expect that by the time the full tax on the building had phased in, tenants would be paying rents that were high enough to cover the higher tax bill. But now the incentive is used as nothing more than a come on to entice prospective buyers of luxury units. The abatement is a crutch for developers that costs the city millions in tax revenue, dollars badly needed to fund affordable housing and improve the city's increasingly overloaded infrastructure.
The 421-a program has subsidized over 100,000 housing units since the program’s inception. However, according to a 2003 report by the Independent Budget Office, only about 8% of the units were affordable to low or moderate income families. The cost of the program to the City of New York has grown 150% in the last four years. Another report by the Pratt Center for Community Development also found that while the 421-a program did subsidize the building of more than 100,000 units since 1971, again only 8 percent of them were actually affordable for low and moderate income residents and with soaring rents and record numbers of homeless the city and state must continue to do what they can to fill the void.

A huge problem we see is that affordable housing is calculated off of the HUD AMI charts, which groups all of NYC together, so that the median income for a family of four is 70,900, and 80% of AMI is considered low income. With a community AMI of $30,000 and average renter wages of under $14.00 an hour even at 60% of AMI most residents in Williamsburg and Greenpoint Brooklyn will not be able to afford the units proposed under Chairman Lopez's Bill. We also worry about the fine print in the new HDC programs, which now has affordable housing rent to income ratios going all the way up to 35%, when the entire country uses 30% as a standard. It seems like it might not be much, but if you do the math, that extra 5% really squeezes working families!

The current zoning incentives are not working, Inclusionary Zoning is not working and expanding the 421a program with the use of IZ will not stabilize low and middle income neighborhoods. It will kill them!

It's very important to focus on the luxury units which invariably change the economic demographics of less affluent communities and have the effect of forcing out the less affluent. The wealthy residents that move in have larger incomes putting pressures on local retail outlets to change the mix of amenities. Instead of hardware stores, affordable supermarkets and Laundromats, the commercial core changes to noisier bars, expensive restaurants, boutique food markets and so on. Stores offering less expensive goods can no longer pay the cost per square foot of the gentrified neighborhood.

While some affordable units are built, there's a larger net loss of affordable housing in the surrounding areas as real estate values and rents rise. With the loss of protections and enforcement of any meaningful rent regulation, surrounding neighborhoods are being torn apart.

I reject the idea that private developers need to have hefty 421a tax incentives to provide construction where the majority of the new units are market rate. Such developments are destroying low and working class neighborhoods, and the home to generations of immigrants are becoming unrecognizable.

If our elected are going to allow what is basically fair market rate housing to pass as "affordable" to residents of our City we need to hold our elected accountable as well.

According to the National Low Income Housing Coalition the Fair Market Rent (FMR) in New York for a two-bedroom apartment is $1,076 a month. In order to afford this level of rent and utilities, without paying more than 30% of income on housing, a household must earn $3,588 monthly or $43,051 annually. Assuming a 40-hour work week, 52 weeks per year, this level of income translates into a Housing Wage of $20.70 hr.

In New York, a minimum wage worker earns an hourly wage of $6.75. In order to afford the FMR for a two-bedroom apartment, a minimum wage earner must work 123 hours per week, 52 weeks per year. Or, a household must include 3.1 minimum wage earners working 40 hours per week year round in order to make the two bedroom FMR affordable.

I believe that this new Bill will not create substantial amounts of real affordable housing .At this time, market rate housing development is clearly occurring and will continue to occur in the city without the benefit of the 421-a tax abatement. Therefore, the tax abatement is no longer needed as an incentive. I believe this Bill as written still gives way too much to developers and will not stabilize communities that are being targeted by rezoning and gentrification. Once again the City and State have missed an opportunity to pass meaningful 421a reform and the low and Middle income residents of our City will continue to be the victims.

Phil

Research money for displacement? Not likely.
Monday evening (2/12) NYU held a forum on "Housing and America's Future" to announce a $25,000,000 grant for research on housing from the MacArthur Foundation. The speakers included Shaun Donovan, the city's Housing Preservation and Development commissioner. I was struck by the rhetoric: where Denise Scott of the Local Initiative Support Corporation gave highest priority to "neighborhood preservation" in light of the rapid loss of existing affordable housing in the city, Donovan talked about "rebuilding communities" with inclusionary zoning. When I pointed out the tension between preservation and rebuilding, and the strong possibility that the displacement induced by rebuilding could result in a net loss of affordable housing especially since the mayor refuses to implement IZ without an upzoning (i.e, upscaling), Donovan replied that "growing the city" motivates the city's plans.

If the goal were affordable housing *and* community preservation, IZ would be offered without upzoning. So far as I can tell, the goal is upzoning, plain and simple; IZ is included in the upzoning solely to get support for neighborhood upscaling from affordable housing advocates committed to the construction of new units. The unfortunate effect of the mayor's carrot to affordable housing advocates has been to demonize community preservationists who see the upzoning as a threat to existing housing. Now that the 421a tax break in our district is going to require the construction of new affordable housing rather than the renovation and preservation of existing affordable housing, developers will have no incentive to renovate and preserve existing affordable housing.

Donovan's characterization of 80% market-rate and 20% affordable as creating or preserving "a mixed-income community" seemed to me an extreme of administrative cynicism. Others in the audience were likewise appalled.