May 11, 2014
On Monday, New York City Mayor Bill de Blasio unveiled his long-awaited solution to the affordable housing crisis in America's biggest city. And he did it in front of the very same building in the Bronx whose then-owner he named as New York's worst landlord in 2012, as the city's public advocate.
De Blasio campaigned actively on the promise he would unveil a solution to the city's affordable housing problem. On Monday, he declared his $41 billion plan, which aims to improve housing affordability in New York over the next decade by building or preserving 200,000 affordable units, would "change the city forever."
"This plan took a lot of effort, and it will take a lot more effort to implement it. But when we do, it will change the face of this city forever, and for the good of our people," de Blasio said.
"Now, it’s important to put this in perspective. This is literally the largest and most ambitious affordable housing program initiated by any city in this country in the history of the United States of America. It is the largest, fastest affordable housing plan ever attempted at the local level."
Both supporters and skeptics alike praised the plan as "bold" and "ambitious." The plan, too, was largely looked upon as pragmatic — one whose central tenet of "mandatory inclusionary zoning" has particular appeal with moderate Democrats and doesn't put the progressive-leaning de Blasio on much different footing than his predecessor, Michael Bloomberg.
The skeptics come in, though, to question whether the plan is too ambitious — and whether it's not specific enough in how it will achieve its goals.
What no one questions is that there is a housing crisis in New York City. Over the last 20 years, the median income needed to afford a typical New York City apartment (median gross rent divided by 30%, multiplied by 12 months) has soared more than $10,000.
The problem is annual income hasn't kept up with that pace:
Between 2005 and 2012, median rent in New York City grew by about 11% after adjusting for inflation. But over the same time, the real income of city renters has only increased from about $40,000 to $41,000 in 2013 dollars.
Combine that with the rising cost of utilities — median monthly utility costs are now about $20 more than they were 20 years ago:
Then you get this next chart. In 2012, almost 55% of all rental households were "rent-burdened," which means its renters were paying more than 30% of their incomes on rent. That was an 11% increase since 2000. More households, too, were "severely rent-burdened," which means its renters were paying at least 50% of their incomes on rent.
And the rent burden disproportionately affects lower-income households making less than $41,950.
De Blasio's $41.1 billion plan is expected to be paid for with a combination of city, state, federal, and private funds. The plan would be a 60-40 split of preservation vs. new construction — 60% of the funding will go toward preserving existing affordable housing, while 40% will build new housing.
The center of the plan proposes that in all rezonings that "substantially increase potential housing capacity" — allowing for taller buildings and greater density — the city will mandate a portion of the new development toward building low-income housing units.
The concept of the plan — mandatory inclusionary zoning — represents a break from the Bloomberg era. But even critics said it was a pragmatic shift that will allow de Blasio the potential to accomplish his goals — as one housing industry source put told Business Insider, "It's not a gigantic, left-wing liberal paradigm shift that a lot of people might have been worried about."
According to various studies, mandatory inclusionary zoning in practice has produced mixed results. Its application in San Francisco, for example, was generally a success — almost all jurisdictions under the plan produced some affordable housing units.
In suburban Boston, however, it was a colossal failure — at one point well into the program, almost half of the participating jurisdictions had not reported producing any affordable units.
"The most important part of the plan is that is lays out a bold vision for the city's ongoing and continuing investment in housing that serves a range of New Yorkers," said Rafael Cestero, the former Commissioner of the New York City Department of Housing Preservation and Development under Bloomberg who is now the president and CEO of the nonprofit Community Preservation Corporation.
"It really does step up and go beyond what other plans have done in a couple of key ways."
One of those key ways, Cestero told Business Insider, is the realization that the housing crisis is based off New York City's relative success. More people are moving into the city. In 2010, 8.24 million people inhabited the city, and that number is expected to rise to more than 9 million by 2040. That makes the housing market tight.
But Cestero and others argue it's impossible to fix a tight housing market by simply building. That's why de Blasio's emphasis on preservation is important.
"While mega-developments are important, the housing stock in the neighborhoods is where the vast majority of people live," he said. "And therefore, there needs to be a concerted effort to invest in the existing stock in our neighborhoods through preservation and investments in quality, but also in building new units at the neighborhood level.
"That commitment in this plan is very broad and very important."
But some have criticized the plan's commitment to specifics, noting it's light on identifying the targets for building new housing, as well as two pretty big assumptions — that some measures will be able to pass through Albany, and that the city will be able to secure federal funds.
But Cestero argued one of the hardest parts is already done. De Blasio and the city have pledged a gigantic amount from the city's coffers — $8 billion in all — toward the program. Everything else from here on, Cestero said, is easy to figure out.
"That step up in capital means the resources are there in order to execute on the broad goals," he said.
"There are lots of people out there who have said, 'Well, there are not enough specifics in the plan.' I think that's all true, but I think it comes from a place of unrealistic expectations. For those of us who have been in government and involved in planning these efforts, the important part about this plan is that it lays out a bold vision. The details with individual programs will come with time."