Monday, August 19th, 2013

Mayor Mike's Legacy: What *Really* Happened To Affordable Housing In New York City

Largely today's New Yorker profile of Mike Bloomberg makes me remember there are lots of things we're going to miss about the lil' Bostonian billionaire that could! In particular, the attitude, and also the humongous amount of money he's dumped into various institutions and projects in the city. We're also going to miss him when we forget in a couple years that he's largely to blame for the forthcoming budget crisis. But.

“No one has done more to help the poor than we have.” The city, he insisted, “created three hundred and fifty thousand jobs in tourism. These are entry-level jobs.” In his twelve years as mayor, it built “one hundred and sixty-five thousand units of affordable housing.” And by improving education the city addressed “one of the keys to getting out of poverty.” Yet a report issued by one of his own agencies, the Center for Economic Opportunity, revealed that by the end of 2011 more than a fifth of New Yorkers were living below the poverty line and another quarter just above it. These figures will rise, the report added, especially if federal spending declines, as expected.

This spring, the Fiscal Policy Institute, a progressive nonprofit research organization, issued an even grimmer report, concluding that there has been “no meaningful reduction in poverty” in the city in thirty years.

So here in the New Yorker is a thing, I am sorry to say, that is absolutely untrue. It's this part—"In his twelve years as mayor, it built 'one hundred and sixty-five thousand units of affordable housing.'" No. He/it did not. Do you want to learn about housing in New York City, and why that's not true? Let's roll! Don't be alarmed, we're going to do this very slowly, even the math-afraid can follow along.

It's true that Bloomberg's New Housing Marketplace Plan (PDF) calls for the creation and preservation of 165,000 units of affordable housing by 2014. Here's how the administration put it:

At the end of my first year in office, we announced the New Housing Marketplace Plan, the City’s largest affordable housing program since the Koch Administration. The plan pledged to create or preserve 65,000 units of affordable housing by 2008. In April of 2005 we increased that commitment to 68,000 units…. [W]e are now expanding the original five-year New Housing Marketplace Plan to a 10-year plan to create and preserve 165,000 units of affordable housing.

That's where the 165,000 number comes from.

You will notice that the word "built" doesn't appear. Whenever they drag out these numbers, create is always coupled by "preserve." People get fuzzy about this, and development is complicated, and then, something totally untrue gets passed around.

Let's pull back!

You know what an apartment is, right? Kidding: not that far back.

Almost 70% of New York City dwelling units now are rentals. That's about double the national average. All told, there are about 3.3 million buildings in which people live in New York City.

So, right. Math tells us there are about 2.1 million rental units. Around 40% of those now are unregulated, free market—that's around 900,000. About 45% are rent stabilized. (Fewer than 2% are rent controlled, so you can pretty much just ignore it when people prattle on about rent control and what it means.)

There was, as you might recall, a recession! Here's one amazing thing that happened in the recession.

There were 34,000 permits issued for new residential construction in 2008. In 2009? The number of permits dropped to about 6000. And it didn't really recover. 2010 and 2011 barely grew. In 2011, fewer than 997 buildings received permits, for a total of 8,936 units.

In 2012, still, the numbers had barely rebounded to 1998 levels—just about 10,000 permits. Basically, if you were tortured by pile-driving and construction-banging in the mid-00s, you likely no longer are. According to the city, "the number of buildings demolished between 2005 and 2007 alone was almost triple the number demolished" in all of the 90s. Then it dropped; only 1,129 buildings were demolished in 2011, which was essentially stable through 2012.

One thing that's very hard to do is to create new affordable housing when there is barely any housing being created at all.

Now, Koch, for instance, actually created around 200,000 units of affordable housing. But one thing about affordable housing is that it expires. "421a"—created in 1971—is the name for the program that used to give tax exemptions for somewhere usually between 10 and 25 years. But after that, the affordable housing rolled into market. (Here's an interesting story about that.)

There were recent improvements made in the affordable housing credit scheme. For one thing, they closed down the "off-siting" of affordable housing. It used to be that you could build a fancy apartment in Manhattan and affordable housing in another borough, and you'd still get the tax credit. Also they extended the period that you had to keep the housing affordable to 30 years.

But what these "affordable housing" incentives mean is that affordable housing is constantly rolling off the books.

As well, we need to ask: what is affordable housing anyway? In fact, just over half of created affordable housing is for poor people—households under $50,000 a year. Actually 37% of this created affordable housing is for households who are 120% or more of Area Median Income ($75,360 for a family of four).

(We won't get into the whole thing about how NYC has dealt with homelessness.)

(But, a sidebar: there was also the J-51 plan. That's when you would get a tax abatement or exemption for renovating. That program ended in 2011. That's good! In fiscal year 2013 alone, J-51 will cost the city $251.3 million in lost taxes on just 1,181 buildings. The trade-off was that any apartment renovated under the plan had to enter rent regulation while the building was receiving the benefits.)

Since 2003, actually, the city has only "funded" 100,000 units of affordable housing—except most of this is retention. Overall, fully 66% of the units of affordable housing expected to be created by the time Bloomberg leaves office are actually "retention," not creation. (By the end of the fiscal year of 2011, 65% of the affordable housing "gain" was just retention.) Absolutely it costs a ton of money to retain affordable housing. But it's far, far harder to build it. And that hasn't happened.

As of March 2013, HPD and HDC have financed almost 145,000 units of housing under the New Housing Marketplace Plan, almost 88% of the total planned. The City has also shifted from its priority on new construction, and now anticipates that 68% of units by 2014 will be preservations, up from the 44% anticipated in the initial plan.

So right. (PDF) The Bloomberg administration said it would create new affordable housing. It realized it couldn't, and focused its efforts on retention. That's understandable! This is all incredibly complex and expensive and difficult to manage, and honestly the people who work with housing in New York City are pretty much heroes and must want to tear out their hair everyday.

That big jump in the last two years? That's people hustling trying to make a quota.

And also… there'll be 9 million New Yorkers by 2030; there are about 8.3 million now. Between 2005 and 2008, New York City only had a net gain of 65,000 housing units. Those numbers don't match up well.

Photo of New York City by Doug Kerr.

14 Comments / Post A Comment

Zach_Swift_Maher (#6,842)

The history of post-war NY real estate seems like one long attempt to put fewer people on the same amount of space.


More walls, less People.

I mean you can only buy the same lot once, and plans to demolish, rebuild, renovate on a large scale are constrained. But then everyone wants a return. The only way to get paper is to 'improve' your literal real estate, or convince renters you have. It helps when the citywide pool of renters is fed by a perpetual stream of moneyed, relatively clueless newcomers. More nicer walls, less nicer people. This way to the T train, making local stops all through the North Upper East Side.

smithsj (#21,669)

@Zach_Swift_Maher Actually, the population of Manhattan is down dramatically from its prewar highs. Former slum neighborhoods like the Lower East Side (which you may now also know as the East Village, Chinatown and Little Italy) have waaaaaay less population density than they once did.

smithsj (#21,669)

@smithsj I'm an idiot. Sorry.

wtl1983 (#245,123)

I'm a bit confused by this:

"Almost 70% of New York City dwelling units now are rentals. That's about double the national average. All told, there are about 3.3 million buildings in which people live in New York City.

So, right. Math tells us there are about 2.1 million rental units."

So "rental unit" here refers not to "apartment" but to buildings in which all the apartments are rented?

stuffisthings (#1,352)

Rather than trying to convince private owners/developers to build "or preserve" affordable units with complicated incentives that are bound to be gamed by everyone, why not just use the $7.5bn to just directly build a bunch of relatively nice city-owned apartment towers around the city. *Rent* 25-40% of the units at market rates and the rest below-market, via a lottery. Lock that in with no future income checks and an option to buy later on. Now you've got a steady income of market rents, plus whatever the proles are able to pay, and you own the building outright. Roll those funds back into the trust fund, along with some modest fresh appropriations each year, to finance more towers. Rinse and repeat.

(This has the advantage of being a model that's successfully worked in other countries, as opposed to something that has never worked anywhere, like the Bloomberg plan.)

TARDIStime (#238,737)

@stuffisthings It has worked well in other countries, but what happens when the land for more towers runs out?
We're having the same issues in Sydney and politicians are promising new affordable housing by pushing to release more land. We're now at a point where people are buying and building brand new houses and spending upwards of FOUR HOURS commuting to and from work every day because the city is where the jobs are and the land being released is practically rural (the city's full – no more land to be released here, seriously). Not to mention that infrastructure has not kept up with this – a lot of these areas are not at all accessible by public transport, and there are few jobs there. Putting public housing out there would trap the residents in a poverty cycle because they wouldn't be able to afford to run a car on the paltry welfare they receive and there isn't any other way of travelling such distances to find/get to work.
I really love the idea, aprt from the option to buy; it just means that one day all of the apartments will be owned by advantaged people and there won't be enough for those who truly need housing.
Unless there's something I'm missing? Is there some kind of control on how many units can be bought in the models designed in other countries?

stuffisthings (#1,352)

Alternatively you could start a Cold War between two halves of Manhattan, build a huge ugly wall across the island, and wait 60 years for one side to economically collapse. This worked really well to produce cheap housing in Berlin.

Brunhilde (#1,225)

@stuffisthings I vote for this idea.

scrooge (#2,697)

If that's moving up then I'm
Moving out

LincolnM (#247,182)

From the New Yorker article…

"In next year’s budget, the cost of pensions and other benefits will exceed twenty-three billion dollars, more than the city spends to deliver all municipal services, including police, fire, sanitation, welfare, and education."

THAT is the real problem with NYC (and other cities and states). Gold-plated pensions and benefits when you damn well know it is an unsustainable model.

macartney (#1,889)

I've missed Choire's OCD math posts. This was what made the Awl in the early days. Sigh.

Also, this is something no one is talking about in the current coverage of the mayoral election: "We're also going to miss him when we forget in a couple years that he's largely to blame for the forthcoming budget crisis." Shit's gonna hit the fan and everyone in the media is going to blame de Blasio or Quinn or Thompson, but it's really basically going to be all Bloomberg's fault. But he will be sunning in the Bahamas or soaking in his $13,000 tub or bouncing around up in his space compound by then so what will he care.

joeclark (#651)

Why is a posting about affordable housing overrun with spam comments about getting rich quick?

Welcome to the Broken Awl Theory.

aurorab (#247,225)

we live in a so called "stabilized" building in an outer borough- our landlord gets a huge tax break, for 10 or 15 years – but our rent is over the "decontrol" point so theoretically we still have some protections. This summer he annexed 1/2 of our terrace (the only good point of the apartment) to rent to someone (separate of an apartment) because we balked at high increases – Illegal? No it turns out in 2004 he had "registered" the so called "legal" rent on our otherwise shack-like apartment at $6000 per month!(it is now on the books at closer to $7000!) Which means that the apartment is considered "stabilized" as long as he does not raise the rent past that. We live catty-corner to 2 burned out buildings that have been in re-building limbo since at least 2005 because that owner only wants to do illegal work. Who on earth decided that landlords can just "name" their rents and still get tax subsidies???? If we argue against the loss of our space next time our lease comes up he can just "raise" us on out of there. Out side of having had a generous terrace space, no one- on seeing the apartment could ever claim that it's a $7000.00 a month space, by ANY stretch of the imagination. The whole system is so weighted against the tenant.

TheBigBabyP (#246,322)

I know this will sound terribly libertarian, but the problem is the government regulation. I lived in Seoul for three years a city with 10.5 million people in a land area just over half the size of NYC. I paid about 1100 USD a month for a very nice apartment.

How is this possible without any crazy tax loophole shenanigans? The free market sets the price at what people can afford. Because otherwise units sit empty and land lords make no money.

But I am sure the next overbearing meddlesome Mayor will fix the problem.

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