Earlier this month, New York City Mayor Bill de Blasio released Housing New York, a ten-year plan to create or preserve 200,000 affordable housing units in the city. While New York City has a long tradition of city-led efforts to create and preserve affordable housing, de Blasio’s plan has a number of new features, but one stands out in particular—the city’s long-awaited embrace of mandatory inclusionary zoning. This makes for an interesting story—as does the New York Times’ reaction to the mayor’s announcement.
Mandatory inclusionary housing programs—or zoning programs—as most Rooflines readers probably know, are programs which require developers of market-rate housing to set aside a percentage of their houses or apartments as affordable housing. Programs vary widely; some programs are citywide, some are triggered by zoning changes, and some apply to certain zoning districts in a town or city. Pioneered in a handful of communities in California, Maryland, and Virginia in the early 1970s, inclusionary housing programs have spread to hundreds of towns and cities across the United States, along with hundreds in the UK, Ireland, France, Spain, Australia and elsewhere. The number of affordable housing units that have been created as a result certainly can be counted in the hundreds of thousands, if not perhaps millions.
In the course of that experience, predictably enough, people have long since learned that mandatory is better than voluntary. Given a voluntary program, a lot of developers will duck the option, or choose to forego the incentives that come with the affordable housing strings attached. In a mandatory program, they figure out how to make it work. And after a while, as has been seen just about everywhere it’s been tried, it becomes normal, part of doing business.
New York City’s leaders have determinedly resisted mandatory inclusionary zoning, a tribute to the notorious power of the city’s real estate industry. Meanwhile, inclusionary zoning has steadily moved from its suburban origins into the urban scene. Not only has it been adopted in cities like Boston, Washington, San Francisco and Chicago, but it has become a fixture in many European cities, including Paris, London and Barcelona. So, although the devil is in the details—which remain to be worked out—Bill de Blasio and his housing commissioner, Vicki Been, deserve kudos for putting it squarely on the table at last.
What’s fascinating, though, is that the New York Times, which covered the plan in detail and devoted their lead editorial to the subject, simply doesn’t get it.
First, the editorial notes that “New York has had a voluntary plan that has produced about
4,500 affordable units in the last 25 years, which is pretty good but not the scale Mr. de Blasio wants” (my emphasis). Leaving aside the writer’s slightly snarky inference that the mayor is overreaching, the fact is that it’s not ‘pretty good’, it’s downright pathetic. It’s hard to get city building permit data that goes back 25 years, but in the last 10 years alone, the city of New York has issued 163,476 permits for new housing units. If we assume, for argument’s sake, that an equivalent number of units was built during the previous 15 years, and 1 out of 10 of those had been affordable housing through a mandatory inclusionary program—a fairly modest and easily achieved percentage—the city would have had almost 30,000 more affordable units by today. That would be pretty good.
It gets worse. The Times, looking down from its lofty perch, then asks what it clearly sees as the tough question, “what if builders reacted to mandatory inclusionary zoning by not building at all?” Well, if you are under the impression that inclusionary zoning is a new and untried, and perhaps slightly radical initiative—which is true if you don’t look beyond the boundaries of the five boroughs—this is a fair question. The same issue crops up in the Times article, where the reporter, quoting unnamed ‘housing experts’ suggests a downside to inclusionary housing, that it “can reduce or eliminate profits and dissuade developers from building.” I wish I knew which housing experts the reporter talked to, because I can’t think of any credible experts who would say that.
The fact is—and this is a fact, not an opinion—over the past 40 or more years, in any town or city with a strong enough housing market (which certainly includes New York City) which has imposed a mandatory inclusionary program based on reasonable standards and requirements, developers have figured out how to make it work, and gone on building. There are a variety of arcane arguments about who bears the cost of the inclusionary requirements, which are important and interesting but complicated, and which I won’t go into here, but the key point is – no rationally-designed mandatory inclusionary program in a strong housing market has ever led to developers choosing en masse not to build.
I don’t know whether it’s because the Times editors spend too much time lunching with New York’s real estate magnates, or because their city staff have a uniquely parochial vision of the world, in which things aren’t real until they happen in New York City. I suspect the latter, judging from their coverage of the New York City bike-share program last year, which they treated as a path-breaking urban initiative, even though it was merely the latest of over 500 such systems around the world, and far from the largest.
The main thing, though, is that the city people stick to their guns. Inclusionary housing will not solve New York City’s massive housing problems, but it is an important tool, and a major step in that direction.
To learn about inclusionary housing programs around the world, read Inclusionary Housing in International Perspective, a 2011 book co-edited and largely authored by Nico Calavita and Alan Mallach.
I agree with Allan Mallach that mandatory IZ policies are likely to be more impactful than voluntary policies, all else equal, and I too would urge NYC to stick to its guns and adopt the plan they have proposed.
But I take away a different lesson from NYC’s experience with voluntary IZ. My sense is that New York City’s voluntary policy WAS effective in producing affordable housing in the rezoned Brooklyn waterfront and parts of the West Side. According to the report by Brad Lander, 13% of the multifamily units developed in designated areas were affordable. However, since the designated areas included only a small share of all multifamily development in NYC, the impact on the overall NYC market was modest. A second problem noted by the Lander report was that the incentives worked better for larger developments than smaller ones.
What this argues for is broader applicability of the IZ ordinance (to all of the city or much more of it) as well as better tailoring of incentives to different types of development. This will be important whether the policy is voluntary or mandatory. Yes, mandatory policies allow for a greater margin of error, but they don’t obviate the challenge of adapting IZ to different market contexts within the same larger market.
Here’s my second quibble with Allan. I think it would be a mistake to assume that IZ policies (even thoughtful well-meaning IZ policies) will never affect the production of housing. In my view, it IS possible to deter production (leading to higher prices) if you get the details wrong and require affordability that is too deep or do not provide sufficient cost offsets. While the available data for analysis are limited, this was the implication of an analysis of data from the Greater Boston area. http://www.hks.harvard.edu/var/ezp_site/storage/fckeditor/file/pdfs/centers-programs/centers/taubman/policybriefs/silver_bullet.pdf .
Importantly, that same analysis did not find any impact on prices of IZ policies in San Francisco. One potential explanation is that the results are sensitive to the effectiveness of cost offsets in offsetting the costs of producing affordable units. More on the policy implications here: http://furmancenter.org/files/publications/IZPolicyBrief.pdf
So, bottom line: a mandatory policy will likely have more impact than a voluntary program, but it doesn’t avoid the hard problem of tailoring the ordinance to different market conditions. A mandatory policy also increases the risks of deterring needed production, with possible negative impacts on price/rents. This problem can be managed by working closely with the development community to design realistic, flexible policies.
A community in a strong housing market that cannot muster the political will to adopt a mandatory policy would be advised to consider a voluntary policy, so long as they are willing to adopt strong, economically valuable incentives that would put developers at a disadvantage if they don’t utilize them. As with mandatory policies, the impact of a well-designed voluntary policy will depend on how broadly it is applied.
Both mandatory and voluntary inclusionary housing programs work, if the “takes” are properly balanced with the “gives.” As an example, Fairfax County in Northern Virginia, where I was a long time Chairman of the Redevelopment and Housing Authority, has both mandatory and voluntary programs. And both work well. The long standing mandatory program applies to single family and garden style apartment/condominium developments; and requires that 5% to 12% of all new units be affordable to households at or below 70% of Area Median Income (AMI). The more recently adopted county wide voluntary program applies to all developments including high rise developments, which are much more expensive to construct. It provides for 12% of units to be affordable to households with incomes between 80-120% AMI; and grants one additional market rate unit for every affordable unit, within certain bulk and height limits. An even more aggressive voluntary policy applies to the Tysons Corner community, which is a very desirable development area. The Tysons Corner policy provides a 20% residential floor area bonus and targets 20% of the units to be affordable to households between 60%
120% AMI on a tiered scale. To repeat, the key is providing sufficient incentives in exchange for affordable units to balance the “takes” and “gives” and to make the bargain to developers–regardless of whether the policies are mandatory or voluntary.