Why is Affordable Housing Disappearing in NYC?
- Jan 16, 2015
New York—Affordable housing is vanishing in New York City neighborhoods that present residents with the highest-quality schools, lower crime rates and greater job access. That’s the news that emerges from a new report entitled “Housing, Neighborhoods, and Opportunity: The Location of New York City’s Subsidized Affordable Housing,” by the NYU Furman Center.
The report, probing changes in the location and neighborhood characteristics of New York City subsidized housing, finds that many New York City property owners in higher-amenity neighborhoods are converting their subsidized properties to market rate upon expiration of their affordability restrictions.
Between 2002 and 2011, there was a significant change in the distribution of subsidized rental units across New York City’s neighborhoods, the report stated. Distribution was altered not just as a result of new development, but also due to different opt-out rates across neighborhoods.
Properties that opted out of all affordability restrictions in that 10-year time frame were situated in higher amenity and higher cost neighborhoods than properties that were preserved as affordable during the period.
Two trends are worth noting. “One is the cost of new construction, which is incredibly high in New York City,” Max Weselcouch, director of the Moelis Institute for Affordable Housing Policy at NYU Furman Center, tells MHN. “And the cost of land is high, especially in these high-cost, high-opportunity neighborhoods. So it’s very difficult to develop new affordable housing developments in these high-opportunity neighborhoods.”
“The other side is preservation and opting out of affordability programs,” Weselcouch continues. “The state, city and federal governments have invested an incredible amount of money over the last half century in these affordable housing programs, but the programs all come with expiration dates, at which point an owner can opt out and convert their properties to market rate.”
The report finds that owners are much more likely to opt out in the high-cost, high-opportunity neighborhoods, in effect displaying a market-driven response.
“There’s a possibility of seeing windfalls for those owners when they convert to market rates,” Weselcouch says. “But at the same time, it may cost the city more in subsidies to preserve those units.”
Over the coming decade, more than 58,000 subsidized rental housing units will be eligible for affordability restriction opt-outs, many concentrated in high-cost neighborhoods in close proximity to Manhattan‘s core business areas.
“Rising market rents in a neighborhood make exits from affordability restrictions more likely, and they also may make preservation more expensive for the city,” Weselcouch says. “Still, the need for affordable units greatly exceeds the supply, and preserving units in a range of neighborhoods—low-cost and high-cost—may allow the city to spread its subsidy dollars further.”
She concludes inclusionary zoning and similar programs that promote mixed-income development are promising strategies to encourage the development of affordable housing in the city’s high-opportunity neighborhoods.