- New York City Mayor Bill De Blasio recently unveiled an Inclusionary Housing Program which allows developers to build beyond existing restrictions if they create permanent affordable units, this is one of the most aggressive programs in the country – as many as one in four new apartments will include permanently affordable and low income units (available as rental or ownership programs).
- While the U.S. Congress is in recess advocacy groups are encouraging members to get in touch with their representatives who will be considering tax extenders and other affordable housing legislation when they return.
Tag Archives: low-income housing
The Challenge of Rising Rents
NYU’s Furman Center has issued a research brief, The Challenge of Rising Rents: Exploring Whether a New Tax Benefit Could Help Keep Unsubsidized Rental Units Affordable. The brief considers whether the creation of “a new property tax subsidy program aimed at maintaining affordability in buildings that currently provide affordable rents could be attractive to owners.” (1)
The brief concludes that
The bulk of New York City’s housing stock that is affordable to low-income households is in buildings that currently receive no government subsidy to maintain low rents. In a city where the real estate market is booming and the supply of housing is constrained, the upward pressure on these rents is likely to continue. However, our analysis here suggests that there are some markets in the city where an owner of an unsubsidized building would agree to restrict future rent increases in exchange for a tax benefit.
If owners think their building is in a neighborhood likely to experience rapid rent increases, they are not likely to participate in a program like the one we have outlined. But, owners who are less optimistic about rent growth in their neighborhood may be willing to sign up in exchange for the certainty of a 30-year tax break. Owners might be more likely to participate in this program than our modeling suggests if it were bundled with another benefit or if the regulatory requirements were less onerous. (11)
This is obviously a good exercise to undertake, but I wonder if most landlords believe that their buildings are like Lake Wobegon children — above average, one and all. So, if the success of this proposal rests on reaching pessimistic landlords, it may be relying on a very small pool of landlords indeed.
Tuesday’s Regulatory & Legislative Round-Up
- U.S. Department of Housing and Urban Development Issues a Revised Rental Assistance Demonstration (RAD) notice, RAD which is the program by which Public Housing Authorities obtain funding for project based rental assistance. The revised notice, among other things, increases the maximum number of units per project, provides additional rights and protections for tenants and provides greater incentives for green initiatives.
Thursday’s Advocacy & Think Tank Round-Up
- On June 23, at 2pm the Urban Land Institute, John D. and Catherine T. MacArthur Foundation, and Hart Research are hosting a Virtual Conversation entitled: Housing, Communities, & Messaging that Resonates: Results from Three New Polls (RSVP Here).
- Americans’ housing and community preferences in this rapidly changing landscape,
- where and how Millennials want to live,
- overall satisfaction with government’s prioritization of housing affordability, and
- the most persuasive messaging about affordable housing.
- Corelogic’s Equity Report finds that 245,000 properties regained equity in the first quarter of 2015 – over 90% of properties have positive equity and the percentage of “underwater” mortgages decreased by over 19% year-over year.
Wednesday’s Academic Roundup
- Keepings, by Donald J. Kochan, NYU Environmental Law Journal (2015) Forthcoming.
- Low-Income Housing Policy, by Robert A. Collinson, Ingrid Gould Ellen, & Jens Ludwig, NBER Working Paper No. w.21071.
- Housing Discrimination Among Available Housing Units in 2012: Do Paired Testing Studies Understate Housing Discrimination, by Rob Pitingolo & Stephen L. Ross, April 5, 2015.
Housing out of Thin Air
NYU’s Furman Center has posted a policy brief, Creating Affordable Housing out of Thin Air: The Economics of Mandatory Inclusionary Zoning in New York City. It opens,
In May 2014, New York City’s new mayor released an ambitious housing agenda that set forth a multi-pronged, ten-year plan to build or preserve 200,000 units of affordable housing. One of the most talked-about initiatives in the plan was encapsulated in its statement, “In future re-zonings that unlock substantial new housing capacity, the city must require, not simply encourage, the production of affordable housing in order to ensure balanced growth, fair housing opportunity, and diverse neighborhoods.” In other words, the city intends to combine upzoning with mandatory inclusionary zoning in order to increase the supply of affordable housing and promote economic diversity. (1)
Inclusionary zoning, “using land use regulation to link development of market-rate housing units to the creation of affordable housing,” is seen by many as a low-cost policy to support a broader affordable housing approach. (2) There is a limit to the reach of such a program because developers will only build if the overall project pencils out, including any units of mandatory inclusionary zoning.
The policy brief’s conclusions are important:
In many neighborhoods, including some that the city has already targeted for the new program, market rents are too low to justify new mid- and high-rise construction, so additional density would offer no immediate value to developers that could be used to cross-subsidize affordable units. In these areas, inclusionary zoning will need to rely on direct city subsidy for the time being if it is to generate any new units at all regardless of the income level they serve.
Where high rents make additional density valuable, there is capacity to cross-subsidize new affordable units without direct subsidy, but the development of a workable inclusionary zoning policy will be complex. The amount of affordable housing the city could require without dampening the rate of new construction or relying on developers to accept lower financial returns or landowners to be willing to sell at lower prices will vary widely depending on a neighborhood’s market rent, the magnitude of the upzoning, and, to a lesser extent, on the level of affordability required in the rent-restricted units. Where developers must provide the required affordable housing, and whether they can instead pay a fee directly to the city, also bears heavily on the number of affordable units a mandatory inclusionary zoning policy has the potential to generate, but raises other difficult issues. (14-15)
The de Blasio Administration’s housing and land use team is very sophisticated (including the Furman Center’s former director, Vicki Been, now Commissioner at the Department of Housing Preservation and Development), so the City will be well aware of these constraints on a mandatory inclusionary housing program. Nonetheless, it will be of great importance to design a flexible program that can adapt to changing market conditions to ensure that such a program is actually a spur to new development and not merely a well-intentioned initiative.
Wednesday’s Academic Roundup
- Countercyclical Regulation and Its Challenges, by Patricia A. McCoy, Boston College Law School Legal Research Paper No. 351.
- Low-Income Housing Tax Credit Developments and Neighborhood Property Conditions, Kelly D. Edmiston, February 20, 2015.
- First Principles for Regulating the Sharing Economy, by Stephen R. Miller, February 20, 2015 (focusing on the short-term rental market, for instance, Airbnb).
- The Future of Foreclosure Law in the Wake of the Great Housing Crisis of 2007-2014, by Judith L. Fox, Washburn Law Journal, 2015, Forthcoming.
- Regional Redistribution Through the U.S. Mortgage Market, by Erik Hurst, Benjamin J. Keys, Amit Seru, & Joseph Vavra, February 25, 2015.
