By Howard Husock
Senior fellow in Domestic Policy Studies, American Enterprise Institute
To a far greater extent than any other state, New York has made substantial public investments in its housing sectorâboth through direct financial support and indirect tax subsidies. The stateâs subsidies aim to create what is often referred to as âlow-incomeâ or âaffordableâ housing, but might better be described as income-restricted housing.1Eligibility for affordable and low-income housing units in New York is limited to tenants whose income falls within a set percentageâtypically 50 or 60 percentâ of âarea median incomeâ based on family size. Governors Andrew Cuomo and Kathy Hochul doubled down on this approach, launching a new multibillion-dollar wave of government-backed affordable housing construction and preservation, financed by a combination of federal grants and billions of dollars in new state borrowing administered by agencies answerable solely to the governorâs office.
State-authorized regulation of local rental markets has also been significantly extended in recent years. In 2019, then-Governor Cuomo signed the Housing Stability and Tenant Protection Act, making permanent New York Cityâs long-standing âemergencyâ rent control system, in the process rolling back a modest âdecontrolâ reform enacted in the late 1990s.2Ch. 36 of the Laws of 2019. The law also extended rent regulations and a local rent-control option to upstate communities that already have ample affordable housing. Some state lawmakers have continued to push for more widespread rental regulations, including laws capping rent increases on all private market-rate properties and requiring landlords to show âgood causeâ for failing to offer automatic lease extensions to their tenants.
In a bid to boost housing supply in suburbs, Governor Hochulâs fiscal 2023 budget bills included a provision that would have effectively overridden local zoning laws by requiring towns and cities to allow accessory dwelling units (ADUs) in neighborhoods now limited to single-family homes. That proposal ultimately was dropped but seems likely to emerge in new forms.
For all the political focus on housing issues, however, New Yorkâs policies have produced meager or counterproductive resultsâwhen they havenât arguably undermined supply and affordability.
On Long Island and in the lower Hudson Valley, little new housing has been built, and the existing supply is both scarce and expensive.
New York City added a rising annual total of housing before the 2020 pandemic lockdown disruption, but not enough to compete with demand. The cityâs housing market remains hobbled by counterproductive regulations, inequitable taxes, high prices, and a massive but dysfunctional public housing complex.
Upstate urban areas, by contrast, have higher vacancy rates and more affordable housing stockâreflecting generally stagnant economic conditions. They, too, nonetheless have been targeted for expensive state-subsidized developmentâand, under the 2019 state law, upstate rental markets may now also be subject to disruption by local adoption of state-authorized rent regulation.3Texas Department of Housing and Community Affairs. âBasic Financial Statements Fiscal Year 2020,â December 18, 2020. https://www.tdhca.state.tx.us/pdf/fa/20-BasicFinancials.pdf.
Eligibility for affordable and low-income housing units in New York is limited to tenants whose income falls within a set percentageâtypically 50 or 60 percentâ of âarea median incomeâ based on family size.
THE STATUS QUO
As of 2021, according to federal Department of Housing and Urban Development (HUD) estimates, New York had 591,065 units of publicly âassisted housing,â or three units for every 100 state residents, which is double the national average relative to population and by far the most of any state. The total included 187,699 apartments in public housing projects, the vast majority owned and managed by the New York City Housing Authority, as well as some 271,000 privately owned units whose tenants qualified for government housing vouchers, and 108,000 units whose development was subsidized by the federal Section 8 Low Income Housing Tax credit, which requires a percentage set-aside of units for low and moderate-income households.
Even excluding publicly owned projects, New Yorkâs stock of 403,366 subsidized units (2.03 per 100 residents) far exceeded the total in every state except California, which had 475,341 units for a population nearly twice as large (or 1.2 per 100 residents). Notably, the HUD figures do not include the roughly one million rent-regulated apartments in New York City, which are also insulated from the private housing market, although not income-restricted.
New York Stateâs housing finance debt of $18 billion is roughly six times larger than those of two states with larger populations, Texas and Florida, where state housing finance agencies most recently reported indebtedness of $2 billion4Florida Housing Finance Corporation. â2020 Financial Report,â 2021. https://www.floridahousing.org/docs/default-source/data-docs-and-reports/finance/audited-financial-reports/2020-audited-financial-statements.pdf?sfvrsn=65b3317b_2. and $2.1 billion5Press release at https://hcr.ny.gov/governor-cuomo-launches-landmark-20-billion-plan-combat-homelessness-and-create-affordable-housing respectively.
In recent years, the Empire State has committed itself to subsidizing even more âaffordable housing,â as well as renewing existing housing subsidies due to lapse. In 2017, then-Governor Cuomo launched what was described as âa landmark $20 billion, five-year plan to combat homelessness and advance the construction of affordable housing in New York State,â including creation or preservation of âmore than 110,000 units of affordable and 6,000 units of supportive housingâ over five years, which his office touted as âthe largest investment in the creation and preservation of affordable housing and efforts to end homelessness in the history of New York.â6To cite one recent example: in the small city of Olean in western New Yorkâs Cattaraugus County, where the median 2021 home price was $125,000, the state in September 2022 announced the start of construction on a 46-unit affordable housing complex with an estimated cost of $16 millionâor $347,826 per unit. See https://www.governor.ny.gov/news/governor-hochul-announces-start-construction-16-million-affordable-housing-development
Incorporating and expanding on this program, the FY 2023 state budget included what Governor Hochul called âa bold $25 billion, five-year housing plan that will create or preserve 100,000 affordable homes across New York, including 10,000 with support services for vulnerable populations.â
The latest version of the state plan includes $5.7 billion in capital resources (funded by legislatively authorized but non-voter-approved state bonds, also known as backdoor borrowing), $8.8 billion in State and Federal tax credits and other federal allocations, and $11 billion to operate shelters and supportive housing units, and to provide rental subsidies.
While they are billed as affordable to low- or moderate-income renters, subsidized apartment complexes have been expensive to constructâtypically ranging between $250,000 to upwards of $400,000 per unit even in low-cost upstate metro areas, depending on the extent of added amenities and âsupportiveâ services included in each package.7New York State Department of Taxation and Finance. âResidential Median Sale Price Information by County.â Accessed September 1, 2022. https://www.tax.ny.gov/research/property/assess/sales/resmedian.htm. By contrast, as of mid-2022, median single-family home prices in the largest upstate New York cities ranged from $174,900 in Syracuse to $242,700 in Albany.8Salins, Peter, and Mildner, Gerald C.S., âScarcity by Design: The Legacy of New York Cityâs Housing Policies,â Harvard University Press, 1992.
Rent regulation
New York State (principally New York City) contains the vast majority of the nationâs rent-regulated apartmentsâsome 1,048,860 ârent-stabilizedâ units, plus a dwindling 16,400 apartments with pre-1971 tenants grandfathered into older, more stringent ârent controlâ provisions.
State law requires owners of rent-regulated apartments to apply annually for any increase in unit rent. Requests for higher rents must be based on demonstrated higher costs to landlords, rather than any assessment of what the rental market would bear. Rent-regulated units, in contrast to government-subsidized âaffordableâ units, do not require an income test for potential tenants.
Like all forms of government price control, rent regulation has had the counter-productive effect of creating what the political scientist Peter Salins has termed âscarcity by design.â9âProfile of Rent-Stabilized Units and Tenants in New York City.â New York University Furman Center. Accessed September 1, 2022. https://furmancenter.org/research/publication/profile-of-rent-stabilized-units-and-tenants-in-new-york-city.
First, rent regulation discourages the normal turnover that makes way for newcomers to a city. A 2014 study found that more than three times as many rent-regulated tenants (23.1 percent) as market-rate tenants (7.1 percent) have lived in their units for 20 years or more.10Op cit Furman Center Long-time tenants who may no longer need as much space naturally cling to their good deal rather than moving and making way for new arrivals, as they do in normal housing markets. Compared to tenants in market-rate units, twice as many rent-regulated tenants are over 65 in New York City.
Moreover, rent regulation does nothing to ensure that regulated units will serve those of modest meansâjust the opposite, in fact. When property owners face limits on how much rent they can charge, they have more incentive to seek tenants who are financially able to pay in full and on time. Indeed, the same 2014 study found that less than half of rent-regulated tenants in core Manhattan could be classified as low-income or ârent-burdened.â11The Housing Stability and Tenant Protection Act of 2019.
Rent regulation also discourages capital investment and long-term building maintenanceâa problem exacerbated by 2019âs Housing Stability and Tenant Protection Act, which sharply limited maintenance-related investments that may be used to justify rent increases.12S.3082, 2021-2022 Session. Specifically, the law capped non-capital upgrades at $15,000 to three separate units over a 15-year period; it also capped major capital improvements at two percent, amortized over 12 years for buildings with 35 or fewer units, or 12.5 years for those with more than 35.
By explicitly trading off building upkeep for limits on rent increases, regardless of tenantsâ ability to pay, state law creates a recipe for the long-term decline or âshabbificationâ of New York Cityâs housing stock. The questionable changes in the 2019 law notably included an indefinite extension of rent regulation, which had previously been linked to a finding that a housing âemergencyâ continued to exist, as indicated by census data on rental vacancies. As a practical matter, the lawâincluding its deterrent effect on new investors and new construction, concerned about the possibility of further expansion of regulationâwill perpetuate the âemergency.â
Supporters of added rent regulation are pushing to go further via a âjust-cause evictionâ law, proposed in the 2022 state legislative session and likely to be reintroduced in 2023.13Husock, Howard. âThe War on Landlords Continues.â City Journal, January 17, 2022. https://www.city-journal.org/war-on-landlords-continues-with-new-york-state-good-cause-eviction-legislation. That proposal would bar the initiation of eviction proceedings if an apartment rent had been increased by more than three percent (or 150 percent of the Consumer Price Index as measured at a set point in the calendar year). The proposal would effectively extend rent regulation statewideâand pose a particular problem during a period of increasing overall inflation.14US Census Bureau. âBuilding Permits Survey Annual Data 2021.â Accessed September 1, 2022. https://www.census.gov/construction/bps/stateannual.html. In fact, rising rents in many of the stateâs older cities would actually be a positive signâof rising demand and returning prosperity. The idea that property owners should be compelled to provide low-cost housing is distinct from the markets for virtually all other goods and services.
Big investments, scant return
New York stateâs ongoing public investment in financing housing construction has not significantly boosted growth in housing supply, especially when compared to other states, even in the expensive, slower-growing northeast, according to Census Bureau data illustrated in Figure 1, below.
In 2021, when new housing starts surged across the country in the wake of the pandemic, New York State municipalities issued building permits for 40,135 residential units in single- and multi-family homes, a ratio of just 1.99 units per 1,000 residents. This was well below the 50-state median, which was 4.4 units per 1,000. Only three statesâConnecticut, Illinois, and Rhode Islandâauthorized fewer new housing units relative to population, while neighboring Massachusetts (2.82), New Jersey (3.99) and Pennsylvania (3.68) approved more housing construction.
A similar pattern had been in place for years before the pandemic; in 2019, for example, the New York residential permits ratio was 2.09 per 1,000, just over half the national ratio of 3.75.15The eight states authorizing less new housing than New York from 2012 to 2019 were Rhode Island, Connecticut, West Virginia, Illinois, Pennsylvania, Michigan, Ohio and Alaska. Only eight states issued fewer new housing permits per 1,000 in the seven years leading up to the pandemic.16US Census Bureau. âBuilding Permits Survey Annual Data 2021.â
In 2021, New York residential building permits were concentrated in just two residential categories: single-family homes (11,099 units) and apartments in buildings of five or more units (27,510) units. Across the Empire State, only 908 two-family homes were issued permits in 2021âjust three percent of the totalâeffectively limiting the range of housing types available, repeating a pattern from recent years.17Badger, Emily, and Quoctrung Bui. âCities Start to Question an American Ideal: A House With a Yard on Every Lot.â The New York Times, June 18, 2019. https://www.nytimes.com/interactive/2019/06/18/upshot/cities-across-america-question-single-family-zoning.html, This âmissing middleâ in the new multi-family housing market is less reflective of tenant preferences than of the strict, single-family zoning prevailing in many municipalities across the state.
On a regional basis within the state, permits for new housing units were concentrated in the four largest boroughs of New York City, particularly in buildings of five or more housing units. But even in a city where housing variety abounds, fully 25 percent of Queens and 22 percent of Staten Island remains zoned exclusively for single-family dwellings.18Appelbaum, Binyamin. âLong Island, We Need to Talk (About Housing).â The New York Times, February 24, 2022. https://www.nytimes.com/2022/02/24/opinion/long-island-housing.html. In those areas, a single-family home could neither be replaced by a two or three-family home nor converted into one.
The situation is more extreme in downstate suburbs such as Suffolk County, where single-family homes account for more than 81 percent of the housing stock.19Government Accountability Office. Low-Income Housing Tax Credit: Improved Data and Oversight Would Strengthen Cost Assessment and Fraud Risk Management. GAO-18-637. Washington, D.C.: Government Accountability Office. Accessed September 1, 2022. https://www.gao.gov/products/gao-18-637. Among the nationâs 100 most populous counties, between 2008 and 2018, Suffolk and neighboring Nassau County ranked near the bottom in measures of new residential building permits per 1,000 residents, even amid continuing political talk and media reporting of an affordable housing âcrisis.â This was not just a northeastern phenomenon; most notably, Hudson County, NJ, part of the metropolitan New York City market, authorized nearly 48 residential permits per 1,000 during, the fifth largest ratio among the 100 most populous counties.
This pattern also continued as pandemic restrictions were being lifted. In 2021, among the nationâs 281 most populous counties (those with 250,000 or more residents) the median rate of new housing permits was 43.5 per 1,000. But four large New York countiesâNassau, Onondaga, Suffolk, and Richmondâwere among only a dozen out of the 281 issuing fewer than 10 permits per 1,000.
Stifling opportunity
Limiting the variety of housing stock also limits homeownership opportunities for individuals who could otherwise offset their costs with rental income. It not only limits buyer choice but inhibits the construction of what has been called naturally occurring affordable housingâhomes within a variety of price ranges, reflecting modest size and rental income.
Governmentâs âaffordableâ housing solution doesnât come cheap to taxpayers. New Yorkâs per-unit cost of developing subsidized housing, financed through federal and state tax credits and administered by the stateâs Housing Finance Authority, is among the highest in the nationâranging as high as $450,000, with medians of $282,000 in New York City and $264,000 in the rest of the state, according to a 2018 federal study based on data from 2011-15.20Department of Housing and Urban Development. âAssisted Housing: National and Local.â Accessed September 1, 2022. https://www.huduser.gov/portal/datasets/assthsg.html.
If government-subsidized housing were the best way to alleviate housing shortages and economic burdens, New York State should have done better in approaching those problems than any other state. Not only does it have a greater number of subsidized units, but it has invested more capital, as reflected by bonded indebtedness, than any other state. Moreover, it has facilitated the highest amount of subsidized housing during the same post-1960 period in which its population has persistently declined in relationship to other states.
As older New York cities and neighborhoods struggle with vacant housing units, itâs important to recognize that new subsidized housing competes with privately-owned, unsubsidized but still relatively affordable unitsâand thus actually can encourage more abandonment of older housing in marginal neighborhoods. New subsidized units with contemporary amenities, priced below what the unsubsidized market would otherwise demand, logically divert demand from older but adequate private housingâjust as subsidized steak would divert demand from ground beef, or subsidized lobster from catfish.
More space for fewer tenants
A more subtle problem with the New York housing market is its failure to make the best use of existing public housing units. Many tenants, particularly in subsidized complexes, effectively are âover-housed,â epitomized by apartments with one resident and multiple, unused potential bedrooms. What HUD defines as âmore bedrooms than peopleâ characterizes 17 percent of all subsidized housing nationwideâbut 27 percent of public housing households in New York State. Among tenants of the New York City Housing Authority (NYCHA), the nationâs largest, nearly one-third of residents are over-housed by HUD standards.21Ch. 116 of the Laws of 1997
The over-housing syndrome reflects a larger problem stemming from state policies: low rates of tenant turnover. The limited supply of new market-rate housing, combined with the rules surrounding subsidized and regulated rents, encourages renters to continue to avail themselves of what they inevitably regard as a good deal. For many prospective tenants, landing an apartment in a public complex or state-subsidized system is akin to hitting the housing lottery, providing subsidized rent without a time limit even when income or assets increase.
Compounding the problem, the 2019 rent regulation law repealed a key provision of the Rent Regulation Reform Act of 199722Husock, Howard. How New Yorkâs Public Housing Fails the Cityâs New Poor. New York, NY: Manhattan Institute, 2017. lifting price controls from units whose regulated rents moved above a âluxuryâ threshold (initially $2,000, most recently $2,744 a month), or whose tenants earned more than $250,000 a year. The so-called luxury decontrol provision served as gradual means of returning high-rent units to the free market, inducing turnover and investment that, indirectly, can benefit tenants of all income levels.
New Yorkâs current subsidized housing regulations not only limit turnover but also discourage upward mobility on the part of low-income households in public or voucher-subsidized housing. Like most similar agencies around the country, NYCHA and other authorities in New York link rent to tenantâs incomes (typically pegged at 30 percent), rather than offering fixed-rent leases, which is the private-sector norm. This discourages subsidized households from increasing their incomeâwhich, after all, will only lead to higher rent.
Low turnover also leaves low-income newcomers, many of them immigrants, figuratively out in the cold. Asian-Americans, for instance, comprise 11.1 percent of New York Cityâs households in poverty, based on median income, but make up only 4.7 percent of households in subsidized housing.23âLegislators aim to legalize underground basement apartments,â Crainâs New York Business, May 6, 2022. https://www.crainsnewyork.com/politics/officials-want-regulate-thousands-basement-apartments-following-11-deaths-during-hurricane Many have no alternative but to turn to informal, illegal arrangements, as reflected by the estimated 100,000 people living in non-legal basement apartments across the five boroughs, many concentrated in immigrant-magnet neighborhoods such as Jackson Heights in Queens.24Ch. 225 of the Laws of 2022.
Excluded from property tax assessments and uninspected by the city Buildings Department, these units are more likely to pose safety hazards to their inhabitantsâas evidenced by the 11 drowning deaths in such units following the Hurricane IDA storm surge in the fall of 2021. However, safe and legal basement units could also provide much-needed additional housing.
Rethinking policy
It is time for a sharp departure from New Yorkâs past housing policy focus on subsidies and regulations, shifting to an approach aimed at harnessing private market forces by encouraging more new construction and renovation of existing vacant units.
Given the extent of debt financing for housing subsidies, and the much higher-than-average cost of construction of subsidized units, the state should adopt a moratorium on new subsidized housing construction. However, this need not preclude investment in maintenance and repairs in existing subsidized housing, such as that of the New York City Housing Authority, whose capital needs have been estimated at $40 billion. A good start is the New York City Public Housing Preservation Trust, created by 2022 legislation,25Housing Authority of the County of San Bernardino. 2023 Moving to Work Annual Plan. San Bernardino, CA: Housing Authority of the County of San Bernardino, 2022. which has assumed responsibility for NYCHA renovations through a 99-year ground lease of the housing authorityâs properties. The Trust structure gives NYCHA access to twice as much federal funding, which will be used to leverage bond financing for capital projects. There is no justification, however, for a provision requiring the Preservation Trust to contract with NYCHA for property management, given the abysmal record NYCHAâs unionized workforce. At the very least, the authorityâs staff should have to compete with private contractors.
It is also worth re-examining the promise of long-term affordabilityâup to 30 yearsâfor current tenants, in the context of re-imagining public housing as a means of transition up and out of poverty, rather than remaining indefinitely in subsidized units. The state should seek federal permission to participate in the Moving to Work program, which permits local housing authorities to give preference to potential tenants who agree to a time limit, as well as to adopt fixed rents so as not to discourage earnings. Adoption of the Moving to Work approach in one California housing authority (San Bernadino), has led to striking results, including an average increase in earned income among program participants of 45.5 percent following a voluntarily adopted five-year stay in public housing. During the same period, full-time employment of participating tenants increased by 25 percent.26U.S. Census Bureau. âQuickFacts: New York.â Accessed September 7, 2022. https://www.census.gov/quickfacts/NY.
There are other potential ways to make better use of existing housing stock, both subsidized and non-subsidized. New York state households, according to Census data, average 2.55 persons per household,27U.S. Census Bureau. âQuickFacts: United States.â Accessed September 7, 2022. https://www.census.gov/quickfacts/fact/table/US/HCN010217. That is slightly smaller than the US average of 2.60, which itself has been in long-term decline, as households have come to have fewer members.28Part AA of budget bills S.8006/A.9006 The prevalence of âover-housingâ reflects that trend. While New York state is not an outlier in this regard, it can make better use of housing by encouraging somewhat larger households. To do so, local housing authorities could consider permitting tenants to sublet empty bedrooms to lodgers or single parents, without being penalized by paying higher rent. This also would also increase income for the subsidized tenants.
Allowing Accessory Dwelling Units (ADUs) in single-family neighborhoods could both increase household size and spur housing construction. These so-called âgranny flatsâ may take the form of an additional small building on a single-family home lot, or the carving out of a small apartment in an existing home. This is an especially practical option for the lower levels of the raised-ranch and split-level houses common in New York City suburban subdivisions.
Expansion of ADUs throughout the state was among the non-budget items packaged with legislation presented to the Legislature in January 2022 as part of part of Governor Hochulâs FY 2023 Executive Budget. Her supporting memorandum for the proposal emphasized the potential benefit of ADUs to elderly residents living in multi-generational homes.29David M. Schwartz. âHereâs Why Most of Suffolk County Doesnât Have Sewers.â Newsday, April 29, 2018. https://www.newsday.com/long-island/suffolk-clean-water-t23000. However, the governorâs original bill language would have taken a coercive approach, forcing localities to authorize creation of at least one ADU per residential lot, overriding local single-family zoning statewide.
Unsurprisingly, the proposal ultimately ran into opposition from suburban legislators in both parties. The governor amended her bill to eliminate the statewide mandate, focusing instead on an authorization for New York City to establish a program to legalize pre-existing ADUs; the final budget, however, contained no new ADU language. Widely viewed as interference with local zoning, the governorâs approach of wrapping an ADU mandate in the massive budget package squelched a statewide debate that would have clarified the issue on all sides. Nonetheless, ADUs remain a housing option deserving of consideration in many suburban areas, especially downstate communities.
Local-control issues aside, another obstacle to housing development in New Yorkâs suburbs, and to ADUs in particular, is a lack of municipal water and sewer infrastructureâespecially on eastern Long Island, as well as in New York Cityâs further northern suburbs. For example, as Newsday reported in 2018, ânearly 75 percent of homes in Suffolk Countyâsome 360,000 residencesâare not connected to sewers and rely instead on septic tanks and/or cesspools, through which wastewater flows into the ground and Long Islandâs bays, rivers and the Sound.â30Wright, Michael, âStreamlining SEQR.â Empire Center for Public Policy, December 16, 2013. https://www.empirecenter.org/publications/streamlining-seqr/.
Another obstacle to housing development is New York State Environmental Quality Review Act (SEQRA), which is among the most expansive and restrictive environmental planning laws in the nation. For decades, in countless cases across the state, SEQRA has been employed by development opponents to delay and ultimately stifle new construction of all types, including housing, as explained in a 2013 Empire Center report.31The city of Kingston in 2022 became the first municipality to opt into rent regulation for the first time under the new law. Others reportedly were considering it.
MOVING FORWARD
New York State faces a seemingly perennial âhousing crisisâ which political and policy intervention has not solved. Rent regulation rewards the affluent and inhibits the housing turnover a dynamic city like New York City relies on to accommodate ambitious newcomers and their innovative idea. Public housingâincluding the nationâs largest such system, in New York Cityâis structured to discourage increased household earnings and upward mobility, while making poor use of what could be valuable development sites. Single-family zoningâthe norm in most suburbsâacts as a straitjacket, limiting housing choices and making home ownership more difficult for households of modest means. So, too, does large-lot zoning (one-acre or more), which increases cost by limiting density.
Each of these problems cries out for common-sense reform. As priority steps, policymakers should:
- Reverse rent regulation. To prevent the spread of âscarcity by design,â the Legislature should repeal provisions of the Housing Stability and Tenant Protection Act that allowed adoption of local rent regulations in municipalities not already covered by the pre-2019 rent law.[i] In New York City and other communities that were already subject to rent control and regulation, the law ideally should be amended to provide for a phase-out to protect existing tenants but restore and broaden vacancy decontrol of regulated units. Short of that, state law at a minimum should restore the vacancy decontrol provisions of the pre-2019 law, which affected only the highest-priced units and the most affluent tenants and repeal those provisions capping rent hikes related directly to capital investments. Additionally, the Governor and Legislature should reject the proposed âjust cause evictionâ law, which would effectively extend rent regulation statewide by limiting rent increases to a cost-of-living adjustment. In a period of high inflation, such a measure quickly becomes outdated. Moreover, any rule restricting rent increases will spread the distortions of the New York City housing market statewide.
- Encourage New Private Housing Development. The ADU issue can be revisited without resorting to the coercive, top-down mandate proposed by Governor Hochul in 2022. Rather, the state should develop and promote a model ADU law for local governments, including guidelines for housing types and neighborhoods most appropriate for the change. To head off community opposition, this should be approached with the goal of minimally disrupting existing neighborhood housing patterns and streetscapes. For instance, ADUs close to commercial and transit hubs make more sense than mandating them in areas further away. These can be coupled with local financial incentives including but not limited to added grant money for road improvements, expanded transit networks, andâlast but not leastâwater and sewer infrastructure in areas that lack it. More broadly, similar state financial incentives should be linked to more relaxed local zoning that would accommodate the natural affordability of small, multi-family homes, such as two- and-three-unit structures. Historically, in the era before draconian single-family zoning, even affluent communities had a âpoor side of townâ, where younger families, public employees and service workers could afford to live. Far-sighted zoning would recognize the need for such âworkforceâ housing.
- Reform and Repurpose Public Housing. Municipal housing authorities, especially NYCHA, should be encouraged (including through conditional state financial assistance) to seek participation in the federal Moving to Work program, giving preference to potential residents who agree to a tenancy time limit, as well as to adopt fixed rents so as not to discourage higher earnings. Housing Authorities should also be encouraged to sell properties on very high-value sites that could be used for other purposes. To do so, tenants should qualify for buyouts based on their years in a unit. Many public housing developments, especially in New York City, stand on extremely valuable real estate sites that could generate revenue sufficient to buy out tenants, on a voluntary basis. Both zoning changes and public housing site repurposing should be thought of as tools to unfreeze local housing markets whose constraints and distortions have combined to create, not resolve, a never-ending housing âcrisis.â
- Cut red tape. Zoning is not the only barrier to new housing construction. New York should streamline State Environmental Quality Review Act to curb undue delay of housing developments that otherwise comply with all relevant state and local environmental standards. This should include a fixed time-limit for review, so as not to discourage developers concerned about open-ended regulatory delay. More broadly, an open-minded state administration should consult with housing developers as to what they consider to be the chief deterrents to new construction, including zoning, permitting and regulation. The question should be asked of housing providers: what would it take for you to build more? Their answers should not be dispositiveâbut they should not be overlooked.
CONCLUSION
Viewing developers and property owners as a special interest, while viewing tenant âadvocatesâ as representing the public interest, has led to a distorted and dysfunctional housing market in New York State. The time is right for a new, fairer balanceâone that will broaden access to housing for New York State residents and potential newcomers.
APPENDIX
The state Division of Housing and Community Renewal (HCR) stands at the top of an organizational chart including a series of housing-related financial entities, all with the capacity to issue implicitly state-backed bonds and which rely on the interest income from developers, tenants, homeowners, and others to repay its bondholders.
Despite its high-profile role, statewide footprint, and extensive investments, HCR (now calling itself âHomes and Community Renewalâ) is not among the 20 cabinet-level agencies authorized by the state Constitution. Rather, it is an outsized division within the Executive Department, directly controlled by and answerable to the governor, who appoints its commissioner without a requirement for legislative confirmation. As of FY 2023, HCR had a $1.37 billion budget, funded overwhelmingly by federal grants, and all but $66 million was distributed in grants to local public chousing agencies. (As its name implies, HCRâs Office of Rent Administration also administers rent regulations in all cities subject to them.)
The main sources of subsidized housing finance in New York state are a series of agencies grouped under the HCR umbrella but operating independently, directed by their own boards of gubernatorially-appointed directors. Operating like independent public authorities and formally categorized as public benefit corporations, these entities include State of New York Mortgage Agency (SONYMA) and the New York State Affordable Housing Corporation, both of which subsidize home ownership by using their bond-financed appropriations for such purposes as providing lower-income borrowers with financial assistance for home mortgage down payments.
By far the largest entity under the HCR umbrella is the New York State Housing Finance Agency (HFA), which is in the business of floating âsocial bondsâ to finance subsidized, income-restricted multifamily apartment complexes. HFA has issued more than $31 billion in bonds since 1960, including $1.1 billion in 2020 alone.32New York State Housing Finance Agency. â2021 Fiscal Year Statutory Report,â February 1, 2022. https://hcr.ny.gov/system/files/documents/2022/03/hfa-annual-report-2021-final.pdf. Its accumulated liabilities total some $18 billion, as of February 2021. In effect, the HFA functions as a state-owned bank dedicated to allocating capital for a single purposeâsubsidizing housing.
SUGGESTED READING
Peter D. Salins and Gerald C.S. Mildner, Scarcity by Design: The Legacy of New York Cityâs Housing Policies, Harvard University Press, Cambridge, MA, 1992
Howard Husock, The Poor Side of Townâand Why We Need It; Encounter Books, New York, 2021
Howard Husock, America’s Trillion-Dollar Housing Pollicy Mistake; Ivan R. Dee, Chicago, 2003
Howard Husock, What is the Future of Public Housing in Americaâs Cities? American Enterprise Institute, July, 2022
Howard Husock, âEnding NYCHAâs Dependence Trap,â Manhattan Institute for Policy Research, September, 2019
Howard Husock, âUnlocking Public Housingâs Value,â City Journal, June, 2022
Howard Husock, âNew York Cityâs Public Housing Fails the Cityâs New Poor,â October, 2017
Bernard H. Siegan, Land Use Without Zoning, Rowman and Littlefield/Mercatus Center at George Mason University, March, 2021
William Fischel, âZoning Rules! The Economics of Land Use Regulation,â Lincoln Institute of Land Use Policy, Cambridge, MA, 2015
Jane Jacobs, Death and Life of Great American Cities, Modern Library, Random House, New York, 1993
Nicholas Dagen Boom and Mathew Gordon Lasner, Affordable Housing in New York, Princeton University Press, Princeton, New Jersey, 2016
David Autor, Christopher J. Palmer, and Parak A. Pathat, âHousing Market Spillovers:Â Evidence from the End of Rent Control in Cambridge, Mass.â; National Bureau of Economic Research, Cambridge, MA, June, 2012
Howard Husock is a senior fellow in Domestic Policy Studies at the American Enterprise Institute and a contributing editor of City Journal.