Tag Archives: New York University

Homeownership in NYC

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photo by Nathan Hart

Brooklyn’s Charles Millard Pratt House

NYU’s Furman Center and Citi have released their joint Report on Homeownership & Opportunity in New York City. It opens,

In New York City, the notoriously high costs of rental housing are well documented. But becoming a homeowner in the New York City real estate market is also a considerable challenge for low- to middle-income households. Households earning less than $114,000 face a severely constrained supply of homeownership opportunities in New York City.

This report seeks to shed light on the extreme variation in homeownership rates among New Yorkers and quantify the homeownership options that exist at different income levels. We do this by analyzing 2014 home sales prices and examining the potential purchasing power of households at various income levels in New York City, as well as in the nearby counties of Nassau, Suffolk, and Westchester.

We use five income categories for this analysis—Low-Income, Moderate-Income, Middle-Income, NYC-Middle-Income, and High-Income. These income bands are based on percentages of Area Median Family Income (AMFI) for the New York City metropolitan statistical area established by the Federal Financial Institutions Examination Council (FFIEC) and are based on data from the 2006-2010 American Community Survey. This report includes an additional middle-income band (NYC-Middle-Income), given that affordable housing programs in New York City serve households up to 165 percent of the U.S. Department of Housing and Urban Development (HUD) area median income (AMI). (3)

You’re all wondering, of course, what NYC-Middle Income is, so the report provides the following explanation of the income categories:

“Low-Income” households have an annual income of $34,000 or less, or 50 percent of AMFI;

“Moderate-Income” households have an annual income between $34,001-$55,000, or 50 percent to less than 80 percent of AMFI;

“Middle-Income” households have an annual income of $55,001-$83,000, or 80 percent to less than 120 percent of AMFI;

“NYC-Middle-Income” households have an annual income of $83,001-$114,000, or 120 percent to less than 165 of AMFI; and

“High-Income” households have an annual income above $114,001, or 165 percent of AMFI or greater. (3, emphasis added)

The report finds that

the purchasing power of most New York City households is limited, largely due to growing housing prices and stagnating incomes since 1990. In addition, while New York City had a relatively low share of homeowners compared to the U.S. in 2014, it was disproportionately low for Low-Income and Moderate-Income households relative to their U.S. counterparts.

The vast majority of home sales in New York City in 2014 were at prices unaffordable to Low-Income and Moderate-Income households, which comprised 51 percent of New York City households. Of the nine percent of sales in the city affordable to these households, three percent were affordable to Low-Income households and an additional six percent were affordable to Moderate-Income households. Home sales with prices that were affordable to Low-Income and Moderate-Income households in 2014 were, for the most part, concentrated outside of Manhattan.

Prospects for homeownership were not much better for Middle-Income households. In 2014, Middle-Income households, which comprise 15 percent of New York City households, could afford an additional 13 percent of sales (based on a total purchase price of up to $364,000), leaving 78 percent of sales out of reach for households with incomes of less than $83,000 annually. Less than half of sales in 2014 (42%) were affordable to 77 percent of New York households, including those characterized as NYC-Middle-Income.

Moving outside of New York City does not necessarily improve a New York City household’s potential to buy a home. In Westchester County, only two percent of sales were affordable to New York City Low-Income and Moderate-Income homebuyers combined in 2014. In Nassau County, only 24 percent of sales were affordable to New York City Low-Income, Moderate-Income, and Middle-Income homebuyers in 2014. In Suffolk County, 42 percent of sales were affordable to New York City Low-Income, Moderate-Income, and Middle-Income households. (4)

New Yorkers, and a lot of non-New Yorkers, are going to eat up the graphs in this report (what IS the median sales price in Brooklyn?!?), so it is worth a read for the real estate obsessed (yes, you). But it also has policy implications about the housing stock of the City and the surrounding region. The report itself does not make any policy recommendations, but it offers a stark reminder of how important rental housing policy is to any effort to maintain socio-economic diversity in the City.

 

What Makes NYC Crowded

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"Manhattan from Weehawken, NJ" by Dmitry Avdeev

NewsDocVoices quoted me in What Makes NYC Become More and More Crowded. It reads, in part,

Yuqiao Cen, a graduate engineering student at NYU, makes sure to shower before 10pm every night, otherwise she is criticized for making too much noise in her apartment. She lives with her landlord and his family of five in a 3-bedroom apartment on 11th Avenue in Brooklyn.

Similar to Cen, Yanjun Wu, a newly admitted graduate student at Fordham University, barely stays in his living room because she feels uneasy wearing pajamas while her male roommates are around. She lives with 4 roommates in a 4-bedroom apartment on the Upper West Side.

Cen and Wu are not the only ones forced to share an apartment. Many of their classmates and friends living in New York are also doing the same thing. In fact, a recent study conducted by the New York City Comptroller Office suggested that NYC has become much more crowded in the past 10 years with the crowding rate being more than two and a half times the national average.

The study “Hidden Households” was conducted by Scott Stringer, New York City Comptroller, highlighting the growing crowding rate in housing in NYC. According to the study, New York City’s crowding rate has rose from 7.6 percent in 2005 to 8.8 percent in 2013. The number of crowded housing units grew from 228,925 in 2005 to 272,533 in 2013, representing an increase of 19 percent.

The increase in the crowding rate is city-wide. The Comptroller’s study indicates that the proportion of crowded dwelling units increased in all of the five boroughs except Staten Island during this time period. Brooklyn has the largest increase with 28.1 percent, Queens has 12.5 percent and 12.3 percent in the Bronx.

*     *     *

“Fundamentally, this is a story about supply and demand,” said David Reiss, professor of Law in Brooklyn Law School, and research director of Center for Urban Business Entrepreneurship. “The increase of the housing supply has been very slow, while the increase of the population was very fast, and that is the recipe for crowding. Because people can’t afford to live where they want to live, their choices would be continuing to live where they want to live and be crowded, or to switch to location with more space for your dollar.”

The data confirm Reiss’s observation. According to the U.S. Census Bureau, NYC’s population in 2013 was 8.43 million, increasing from t8.2 million in 2005. However, the 2014 Housing Supply Report, conducted by New York City Rent Guidelines Board, also indicates that the number of permits issued for new construction of residential units had reached its peak – 34,000 in 2008, but the number decreased greatly to 6,000 in 2009. Although the number kept gradually going up, and reached to 18,000 in 2013, the market is no longer as hot as before the financial crisis of 2008.

Contrary to common belief, income does not in itself drive crowding. Although “Hidden Households” shows that 23.6 percent of crowded households reported household incomes in the City’s bottom quartile, it also revealed that 18.5 percent of crowded households have incomes in the City’s top quartile and 5.2 percent of crowded households have incomes in the 90th percentile or higher.

In the beginning of apartment hunting, Wu and her roommates wanted to rent a five-bedroom apartment so that everyone could have their own private space. “The market is too busy in New York,” said Wu. “Once we were going to pay the [lease] for an apartment on Roosevelt Island, but someone was ahead of us by just a few minutes.”

After weeks of apartment hunting, Wu and her roommates decided to make a compromise – two of them would have to share a bedroom, in order to get a decent apartment at an acceptable price – $4,900 per month, with neither an elevator nor a laundry room.

“Land is very expensive, and there is not much left for residential development but a tremendous number of people want to live in New York,” said Albert Goldson, Executive Director of Indo-Brazilian Associates LLC, A NYC-based global advisory firm. “Real estate prices started to go up, so you have people who are middle class or who have modest salaries who can no longer afford [to pay a] mortgage. And what many of them would have done, either single people or a family, was ‘double up’. Like single people who bring in a roommate, now have several roommates in a unit.”

Most experts in the urban planning industry believe that the underlying cause of the growing crowding rate is the affordability of housing. Goldson argues that the city needs to be more available for middle-class people who are actually working here and potentially leaving the city if it is too small or uncomfortable to live here anymore.

From Reiss’ perspective, the way to solve affordability of housing is to amend its zoning code to encourage the construction of housing. Vertical construction is a trend and a solution to the crowding situation. But in the meantime, with more people living in taller buildings, the density would definitely increase. “If the city is really committed to increasing the affordability of housing, you have to be committed to increase the housing density as well,” said Reiss.

Property Tax Exemptions in Wonderland

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Cea

NYU’s Furman Center has released a policy brief, The Latest Legislative Reform of the 421-a Tax Exemption: A Look at Possible Outcomes. This brief is part of a series on affordable housing strategies for a high-cost city. It opens,

Since the early 1970s, New York City has provided a state-authorized, partial property tax exemption for the construction of new residential buildings. In the 1980s, the New York City Council amended the program to require that participating residential buildings in certain portions of Manhattan also provide affordable housing. Most recently, New York State extended the existing program through the end of 2015 and created a new 421-a framework for 2016 onward. However, for the program to continue beyond December, the legislation requires that representatives of residential real estate developers and construction labor unions reach a memorandum of understanding regarding wages of construction workers building 421-a program developments that contain more than 15 units.

This brief explores the possible impacts of the new 421-a legislation on residential development across a range of different neighborhoods in New York City, including neighborhoods where rents and sale prices are far lower than in the Manhattan Core and where the tax exemption or other subsidy may be necessary to spur new residential construction under current market conditions. We assess what could happen to new market rate and affordable housing production if the 421-a program were allowed to expire or if it were to continue past 2015 in the form contemplated by recently passed legislation. Our analysis shows that changes to the 421-a program could significantly affect the development of both market rate and affordable housing in the city (1, footnote omitted)

The 421-a program operates against the backdrop of a crazy quilt real property tax regime where similar buildings are taxed at wildly different rates because of various historical oddities and thinly-sliced legal distinctions. Like the Queen of Hearts, the rationale given by the Department of Finance for this unequal treatment amounts to no more than — And the reason is…because I say so, that’s why!

The brief concludes,

Our financial analysis of the possible outcomes from the 421-a legislation offers some insights into its potential impact on new construction. First, if the 421-a benefit expires in 2016, residential developers would lower the amount they would be willing to pay for land in many parts of the city. The result could be a pause in new residential developments in areas outside of the Manhattan Core as both buyers and sellers of land adjust to the new market.

*     *     *

Second, if the newly revised 421-a program with its higher affordability requirements and longer exemption period goes into effect in 2016 without any increase in construction costs, the city is likely to have more affordable rental units developed in many parts of the city compared to what the existing 421-a program would have created. Condominium development without the 421-a program may still continue to dominate in certain portions of Manhattan, though the program appears to make rentals more attractive. (12)

The first outcome — lower land prices if 421-a expires — is not that bad for anyone, except current landowners. And it is hard to feel bad for them, given that they should not have expected that 421-a would remain in effect forever (and not to mention the rapid increases in NYC land prices). The second outcome — the new 421-a framework — sounds like better public policy than the existing program.

But one wonders — what would it take for NYC to develop a rational real property tax regime to replace our notoriously inequitable one, one that treats like properties so differently from each other. Can we escape from Wonderland?

Floodproofing Communities

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Gordon Tarpley

NYU’s Furman Center has released a Research Brief, Planning for Resilience: The Challenge of Floodproofing Multifamily Housing. The Brief opens,

As sea levels rise and storms become more frequent and severe due to climate change, many urban areas along the coasts and rivers of the United States are facing a flood-prone future. Especially in the older urban areas along the eastern seaboard, there is a significant stock of multifamily housing that will be increasingly at risk. Much of this housing is out of compliance with federal flood-resistant design and construction standards. Some of these buildings have housing units that are out of compliance because, regardless of their age, they were only recently mapped into the floodplain. And, even buildings that have been in the floodplain for longer may be out of compliance with the rules because their construction predated their jurisdiction’s adoption of the standards. (2)

And it concludes,

As the nation’s floodplains expand, the number and types of housing units at risk of flooding also grows. Multifamily housing makes up a larger share of the at-risk housing in the floodplain than was previously understood, and mitigating the risk to this housing and its residents presents unique challenges that local governments must be prepared to face. While there is no easy answer to how to fund the often costly and disruptive retrofit measures needed in these buildings, there are steps that local governments can take to make it easier for buildings to adapt, such as educating owners about risks, providing them with information about retrofit strategies, and helping them finance improvements. Including strategies like these in a long-term resilience plan will make communities stronger and will ensure that multifamily buildings and their residents are not left behind as flood-prone areas adapt. (10)

There is no doubt that this is right. New York City under both Mayors Bloomberg and De Blasio have taken this issue very seriously, but a lot of work remains to be done. And the odds are that the amount of work will only increase with time as sea levels rise higher and higher. Because many other local governments do not have the resources of NYC, they will get their wake up calls the hard way.

Given the broad effects of climate change, resiliency efforts would ideally be led by the federal government. But I don’t see that happening for a long time, probably after an avoidable tragedy on a large scale spurs Congress to action, notwithstanding its ideological commitments.

Segregation in the 21st Century

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NYU’s Furman Center has posted a research brief, Race and Neighborhoods in the 21st Century. The brief is is based on a longer paper, Race and Neighborhoods in the 21st Century: What Does Segregation Mean Today? (One of the co-authors of the longer paper, Katherine M. O’Regan, is currently Assistant Secretary for Policy Development and Research at HUD.) The brief opens,

In a recent study, NYU Furman Center researchers set out to describe current patterns of residential racial segregation in the United States and analyze their implications for racial and ethnic disparities in neighborhood environments. We show that 21st Century housing segregation patterns are not that different from those of the last century. Although segregation levels between blacks and whites have declined nationwide over the past several decades, they still remain quite high. Meanwhile, Hispanic and Asian segregation levels have remained relatively unchanged. Further, our findings show that the neighborhood environments of blacks and Hispanics remain very different from those of whites and these gaps are amplified in more segregated metropolitan areas. Black and Hispanic households continue to live among more disadvantaged neighbors, to have access to lower performing schools, and to be exposed to more violent crime. (1)

And the brief concludes,

Black and Hispanics continued to live among more disadvantaged neighbors even after controlling for racial differences in poverty, to have access to lower performing schools, and to be exposed to higher levels of violent crime. Further, these differences are amplified in more segregated metropolitan areas. Segregation in the 21st century, in other words, continues to result not only in separate but also in decidedly unequal communities. (5)

This conclusion makes clear that segregation is not merely the result of poverty. It is important to understand how segregation persists even though the legal support of segregation has been dismantled. Richard Brooks and Carol Rose’s work in this area is a good start for those who are interested.

Housing in Smart Cities

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I attended an interesting research seminar led by Anthony Townsend yesterday at NYU’s Center for Urban Science and Progress (conveniently located in downtown Brooklyn). Professor Townsend is affiliated to NYU’s Rudin Center for Transportation Policy & Management. He discussed his recent book, Smart Cities: Big Data, Civic Hackers, and the Quest for a New Utopia. Townsend argued that the 21st century will be defined by two global trends – urbanization of the world’s population, and ubiquitous computing. He traced the origins of the “smart cities” movement, its goals and the problems it faces.

As noted on Amazon, the book argues that

cities worldwide are deploying technology to address both the timeless challenges of government and the mounting problems posed by human settlements of previously unimaginable size and complexity. In Chicago, GPS sensors on snow plows feed a real-time “plow tracker” map that everyone can access. In Zaragoza, Spain, a “citizen card” can get you on the free city-wide Wi-Fi network, unlock a bike share, check a book out of the library, and pay for your bus ride home. In New York, a guerrilla group of citizen-scientists installed sensors in local sewers to alert you when stormwater runoff overwhelms the system, dumping waste into local waterways.

While Townsend’s talk did not apply his thesis to urban housing and his book only touches on it, it is certainly worth thinking through how Big Data can help provide more housing and better housing in big cities.

Housing is as “unvirtual,” or perhaps as “real,” a good as a good can be. But businesses such as Airbnb show how the virtual and the real can combine into something quite new. Obviously Airbnb does not solve many housing problems for residents of cities, but it does demonstrate that there is a brave new world ahead. Housing policymakers should try to discern what it is going to look like and how it can be harnessed as a force of civic good.

A Resilient NYC

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NYU’s Furman Center released a report, The Price of Resilience: Can Multifamily Housing Afford to Adapt? It explains that storm-proofing New York City

poses several special challenges not shared by all coastal areas. First, New York City is largely built out, with much of its building stock long predating current flood-resistant design standards. Resilience in New York, then, primarily means retrofitting older buildings, not just strengthening building codes for new construction. Second, much of the official guidance about how to retrofit residential properties to reduce risk and lower insurance premiums is geared toward 1-4 family buildings, reflecting the national housing stock. In New York City, though, only one-third of the buildings thought to be vulnerable to flooding are1-4 family, detached homes. A much larger number of housing units vulnerable to future storms are located in roughly 4,500 multifamily buildings with five or more rental units. Finding ways to cost effectively retrofit these types of buildings to protect residents and reduce insurance premiums for owners needs to be central to New York City’s storm-preparedness efforts.

Finally, the extreme shortage of affordable housing in New York may make the direct and indirect costs of retrofitting particularly hard to bear. Based on current federal policy, increased flood risk requires for many buildings either investment in physical improvements or payment of higher insurance premiums. Without external funding or other relief, there is no clear avenue to enact these resilience improvements while maintaining affordability. Eliminating all units below the predicted flood level, for example, could result in the loss of thousands of indispensable housing units. Even if units are not lost, property owners may pass on the costs of retrofitting buildings to residents through a rent increase, reducing the supply of affordable units in New York City’s coastal areas. For buildings that are constrained in their ability to raise rents and raise funds for improvements, like many of the rent stabilized and subsidized buildings in the city, the financial burden of making costly retrofits might be overwhelming, leading to the conversion of those buildings to market rate (when permitted), unsustainable operating budgets that may require a bail-out, or a large number of buildings left unprepared for future storms. The costs of not retrofitting, however, may be even more burdensome: building owners may face skyrocketing flood insurance premiums if they do not retrofit their buildings.

While I am not so sure that storm-proofing will be what pushes New York City’s housing stock into the unaffordable column (I think the relentless increases in demand might just to the job for units that are not rent regulated), the Furman Center report reminds us that we have a lot to do to protect New York from the next big storm. The Bloomberg Administration did a lot in a short time to identify what the City can do to increase the City’s resiliency. Given the quality of his housing and economic development team, there is reason to hope that the de Blasio Administration will continue to tackle the threat of climate change in a productive way.

The Furman Center report provides three concrete recommendations to ensure that NYC’s large stock of multi-family housing in flood zones is protected from future storm events:

  1. The Federal Emergency Management Agency (FEMA) should modify the guidelines for its National Flood Insurance Program for coverage of existing multifamily buildings;
  2. New York City should expand its Flood Resilience Zoning Text Amendment to cover buildings in the 500-year floodplain; and
  3. The city should revisit its existing rehabilitation programs to ensure that resilience measures can be readily funded; and it should require that buildings in the 100-year and 500-year floodplains that receive city assistance have adequate emergency and resilience plans.

These all seem like reasonable policies that should be implemented asap.