City Journal

Howard Husock
New Frontiers in Affordable Housing
Homeownership for Low-Income New Yorkers
Spring 1993

Last summer, after many years in a housing project, John and Aola Evans and their teenage daughter moved into their own home. They are a black family, still living in Bedford-Stuyvesant, on a street which was once a free-fire zone for rival drug gangs from the nearby projects. But their new place on DeKalb Avenue, part of the Sojourner Truth Houses, could not be more unlike the high-rise housing projects they left behind. In the projects, they recall, they worried about whom they might meet in the lobby and about the many available escape routes the building’s exits offered for criminals; once in their apartment at night, they didn’t go out. Today, the Evanses are the satisfied owners of a brand new three-story, two-family row house with a brick facade and a parking space in back. They rent out the top floor, and the income they receive makes their effective monthly mortgage payment lower than what they paid to live in public housing.

The Evanses’ story, is part of a quiet revolution in New York: Private builders are constructing thousands of modest houses for lower-income families. These homes, many of which have one or two rental apartments as well as a unit for the owner, are being built on vacant land in New York’s poorest, most deteriorated neighborhoods, including the South Bronx, East New York, Bedford-Stuyvesant, and the other dilapidated communities sometimes called the “ring of devastation.”

This new housing is of two kinds. The first is small multifamily homes, built for families with incomes of $30,000 to $50,000, by small, for-profit private builders recruited by the New York City Housing Partnership. The Partnership is a nonprofit entity to which the city gives vacant land. It, in turn, gives the land to private builders. Housing Partnership homes are frequently two-family row houses with brick facades or vinyl siding. Many have small “parking pads” in fenced-in front yards. The second kind is even more basic, less expensive, single-family homes for families with incomes as low as $20,000, built by the nonprofit Nehemiah Homeowners Association and sold to individual buyers, nearly all of whom come from housing projects. Nehemiah, a private nonprofit builder backed by a consortium of churches, has put up long tracts of homes in Brooklyn and is currently building in the Bronx. Partnership two-family houses sell for about $140,000; Nehemiah single-family homes for $63,000.

To some extent the two groups view each other as competitors, particularly for open land. Their approaches differ as well: Nehemiah visionary I.D. Robbins rejects the idea of “infill”—building some blocks of new houses amidst old. He believes that only by starting from scratch and building new neighborhoods of hundreds of homes can islands of stability be created in devastated areas. The Partnership program implicitly operates on the assumption that smaller amounts of new construction—forty to sixty owner-occupied homes—can anchor and improve existing neighborhoods, as appears to have happened in the DeKalb Avenue section of Bedford-Stuyvesant, where John and Aola Evans bought their house.

Despite these differences, the two groups represent a new generation of lower-income housing builders in New York. Their approach rejects the traditional practice of constructing large-scale rental buildings in favor of individual homeownership. Housing is treated not as an entitlement but as a goal for which the working poor strive and save. Rather than being left dependent on rental subsidies, the poor are offered the opportunity to take the risks and enjoy the rewards of ownership—including the possibility of upward mobility, what Robbins calls “filtering up.” In stark contrast to public housing, this approach requires minimal public capital subsidies and no long-term operating subsidies.

The Partnership, to date, has arranged for private builders to put up some 4,500 units, with 8,500 more in the works. Nehemiah has erected some 2,300 homes in Brooklyn and is building 600 more in the South Bronx. Yet to a great extent this movement toward homeownership in poor neighborhoods has been overshadowed by the massive, multibillion-dollar Rebuild New York effort, begun in 1987 under Mayor Ed Koch and continuing in the Dinkins administration, which has built or renovated 90,000 housing units at a cost to the city of $2.7 billion. These buildings have generally been turned over not to poor individuals but to nonprofit community groups.

Though the efforts of the Housing Partnership and Nehemiah have received some small subsidies from the city, the push toward new, owner-occupied houses has been primarily the result of private efforts. The Housing Partnership was organized by business leaders, including founding chairman David Rockefeller; the coalition of churches that backs Nehemiah provides financing from a capital pool of church, not public, funds. The city, however, has yet to make encouraging individual homeownership among low-income citizens a significant priority. In its 1992 Comprehensive Housing Affordability Strategy, the city ranked “increasing the opportunity for very-low- and low-income households to purchase and own their own homes” last in a list of five city housing priorities. The city must decide whether it will help fulfill the promise of the new generation of owner-occupied small homes in poor neighborhoods or continue present policies which modestly encourage but place no particular premium on such homes, and which make their construction difficult through a variety of regulatory obstacles.

There are strong financial and logistical reasons why the city should change its priorities: Not only are federal housing construction subsidies limited, but a diminishing number of abandoned buildings owned by the city are ripe for renovation. Moreover, because of its financial troubles the city may not have the resources to continue its policy of renovating large numbers of buildings at a cost of $60,000 to $90,000 per unit.

Builders and Reformers It is widely taken for granted that substandard housing was the norm in the days before large-scale public involvement in housing construction. And indeed, when massive numbers of poor people were immigrating to the city during the nineteenth century, poor people could only afford poor housing. But as the city’s population grew from 3.4 million in 1900 to 5.6 million in 1920, and as immigrants became more affluent, builders responded with new forms of housing—the kind of housing many New Yorkers remember most fondly. In the 1920s, as Columbia historian Richard Plunz notes, 658,780 new dwellings went up. The Lower East Side was emptying out and New Yorkers were moving up—to the apartment buildings of the Bronx, the row houses and two-family homes of Brooklyn, and the one- to four-family structures with businesses on the first floor. By 1930, there were 45,000 buildings in the last category in Brooklyn alone.

Such building did more than provide housing units; it laid out the framework of the city’s social structure. There were rich neighborhoods and poor neighborhoods, and a range of grades in between. Families climbed this housing ladder based on both their earnings and their willingness to adhere to the social norms of neighborhoods. For the poor to move up the ladder, they may have had to tolerate crowded conditions, take in boarders, or rent out a second floor in order to save money for a better home.

But housing reformers, who always focused on the worst slum housing as the symbol of private ownership, were unwilling to countenance this process of gradual improvement. As reformer Catherine Bauer put it in her 1934 book Modern Housing: “The justling small builders and the front-foot lots and the miserable straggling suburbs and the ideology of individual Home Ownership must go,” she wrote. “Only governments can make the decisive step and set up the new method of house production as a long-time social investment, to replace, the wasteful and obsolete chaos still prevailing.”

Beginning in the 1920s and accelerating in the years following World War II, the government supplanted private builders as the main supplier of new housing. Between 1928 and 1985, according to Department of City Planning figures, some 570,000 new public and publicly assisted housing units were built citywide, approximately one-third in public housing. Such units now constitute fully one-fifth of the city’s 2.8 million dwellings. Vast infusions of public dollars effectively enlisted the building industry in the crusade for publicly supported housing. Builders were recruited to construct “units” for the Housing Authority or to build and run vast rental complexes subsidized by low-interest loans made possible by the sale of tax-exempt bonds, by property tax forgiveness, or by guaranteed income from federal rent subsidies. Small builders continued to put up tracts in Long Island, New Jersey, Queens, and Staten Island. But on the Lower East Side, in Harlem, the South and East Bronx, and much of Brooklyn, new construction usually meant subsidized slab towers set in plazas, announced with fanfare by elected officials and built by huge developers sheltered from risk by public funds. To an extent that made New York unique in the nation, this vast effort was not limited to housing the poor: The city’s extensive system of Mitchell-Lama rental developments for the middle class, such as Starrett City in Brooklyn, was also the result of public subsidies.

The advent of public and publicly assisted housing undermined the informal system of neighborhood builders in both subtle and obvious ways. Vast amounts of land that might have been used for small homes were diverted instead to public use. The tenant pool on which owners of small, owner-occupied, multifamily housing relied was diverted by the allure of new housing with superior amenities for less rent.

Those who sought to block low-income projects in middle-income neighborhoods, such as the protesters of Forest Hills in the 1960s and Yonkers in the 1980s, well understood the threat such projects posed to the social structure by mixing middle-income residents with those who had not yet taken on the responsibility entailed by intermediate steps on the ladder of homeownership. Still, had public authorities been able to provide safe, well-maintained public housing over time, one might not quarrel with the fruits of reform. It is hardly news, however, that such has not been the case.

As Jane Jacobs has noted, the replacement of private construction and ownership with a massive, centrally planned housing bureaucracy created places that lacked the economic and social ties that bind neighborhoods. New York’s “ring of devastation” was an outgrowth of the failure of reform. The Reagan administration’s policy of ending federally subsidized construction programs, ascribed by reformers to lack of compassion, would not have been viable had the public not been profoundly uneasy with the results of reform.

Even the city’s massive effort to compensate for the decline of the federal role in subsidized housing has not filled the physical vacuum created by the waves of arson and decay in the city’s poorest neighborhoods. Into this vacuum have stepped the Partnership and Nehemiah. They represent not a new configuration of reform but a return to the New York of the private builder—and a movement toward restoring the lower rungs on the homeownership ladder.

This has not happened without help from the government: Both the Partnership and Nehemiah are much involved with the city’s Department of Housing Preservation and Development. Both are in some ways subsidized. They receive free land from the city, sometimes with improvements, though not land of great value. The Partnership homes receive outright city and state subsidies amounting to $25,000 per structure; Nehemiah receives a city loan of $10,000 per unit, paid back by the first owner when he sells the home, as well as a tax abatement and a state mortgage interest subsidy.

But a day spent with the Nehemiah builders, or with the employees of Hudson Construction of Brooklyn or Procida Construction of the Bronx, both builders of Partnership houses, makes clear that they have adopted an essentially private-sector approach to construction. One Friday last October, Alan Bell of Hudson went to examine Procida and Nehemiah houses in the Bronx. (Procida had done the same with Hudson’s Brooklyn houses the month before.) The builders compared notes on the smallest cost details, as well as important logistical issues: Who are the most reliable window suppliers? What kinds of roofing or fire wall materials can meet standards with the least expense? Which appliance distributors are least likely to damage the premises when delivering the range?

Bell views his mission as not only building houses but also reconstructing the building profession in the neighborhoods where his firm does business. It is, he observes, as if the techniques of building these small row houses had been lost and needed to be reinvented. The transformation is striking: New structures fill in the streetscape, with cars parked neatly behind fences, in what had been among the city’s most dangerous and desolate neighborhoods.

Saving Money and Neighborhoods There is strong evidence that mid-rise and high-rise buildings, notwithstanding the great density of units they place on a site, are considerably more expensive to build than small owner-occupied homes. A June 1988 study conducted for the Housing Partnership by the architecture firm John Ellis and Associates concluded that small homes can be two to three times more cost-effective than multistory, multiple-dwelling construction. A recent effort by the Cooper Square architecture firm Piscioneri Associates confirms those results. The Local Initiatives Support Corporation, which assists community groups managing multifamily buildings, asked Piscioneri to design as inexpensive a 10- to 16-unit building as possible. The firm’s estimated construction costs were $85 to $100 per square foot, twice as expensive as for Nehemiah houses and one-third more than for Partnership homes.

Owner-occupied multifamily housing offers tax advantages as well. The federal tax code allows homeowners a tax deduction not only for mortgage interest but also for the depreciation and repair costs of rental property. Thus, the new wave of homeownership in low-income New York neighborhoods helps staunch the flow of tax dollars from New York to Washington, returning them directly to families of modest means. At the same time, the city collects property taxes on the private homes, as it would not if they were owned by the government or by nonprofit organizations.

Moreover, homeowners maintain their buildings themselves, either by their own unpaid efforts or by short-term arrangements with small tradesmen. This keeps maintenance costs—and, in consequence, rents—low. Rents for two-bedroom apartments in multifamily Partnership homes average only $600 to $700 per month—quite reasonable by New York City standards. The design of smaller-scale housing also limits maintenance costs because there are no common areas to maintain. As in traditional brownstones and row houses, stairs go directly to one’s door and hallways are inside apartments.

But perhaps the greatest economic benefit from the new generation of owner-occupied housing lies in the incentives it creates for low-income people to improve their condition—in stark contrast to the disincentives created by public or otherwise subsidized housing. Because public housing requires rent paid to be a percentage of income, for example, families are encouraged to understate income. They also have little reason to save, since there has been no housing which they could aspire to buy—the gap between their situation and the homes of Queens or Staten Island has been too great. (Racial discrimination, too, has undoubtedly been a barrier to ownership for minority families of moderate means.) Because public housing prohibits doubling up of families, tenants eager to defray costs that way must be clandestine.

Privately built and owned housing offers incentives for extended families to save for a down payment (typically between $5,000 and $14,000) or to pool their income so as to afford the monthly payment, which ranges from $300 to $600 for single-family Nehemiah homes and averages some $700 for a two-family Partnership home, after allowing for $600 a month in rental income. Families often lease rental units to relatives or, even more economically, live in one bedroom of a three-bedroom, two-floor house. Families able to buy instead of rent will enjoy long-term advantages: In addition to developing equity in their homes, it seems likely that minority families who take the traditional route of upward mobility—selling their houses to move to more affluent neighborhoods—will be more welcome in middle-class neighborhoods than tenants who rent using subsidy vouchers or developers who seek to erect subsidized housing complexes.

In contrast to the anonymity of the high-rise, moreover, small-scale multifamily housing enforces social norms since owners carefully screen prospective tenants. Thus new enclaves of relative safety and stability are produced in poor neighborhoods. Police verify the feeling of security one has in such areas: Deputy Inspector Patrick Carroll, commander of the 75th Precinct in East New York, has attributed a four-year decline in major felonies to the influence of Nehemiah housing.

What About the Poorest? Despite the benefits of privately owned low-income houses, the city continues to list “increasing the supply of affordable rental housing for very-low- and low-income households” as its top housing priority. By ranking ownership as its lowest priority, the city signals its belief that such efforts are merely frosting on the cake. HPD’s 1992 capital plan makes this clear. It calls for construction of 2,952 new rental units for the homeless, moderate rehabilitation of 3,981 apartments for low-income tenants, and construction of only 850 new homeownership units.

In part, this reflects the high priority the city places on housing the poorest of the poor. “The City of New York,” reads the Comprehensive Housing Affordability Strategy, “has consistently provided the bulk of its housing assistance to those with the lowest incomes and the greatest needs. The city is now, and has historically been, poised to provide special aid to households with ’worst case’ needs.”

A common criticism of the Partnership and Nehemiah efforts, as Richard Plunz argues in his History of Housing in New York City, is that they help only the “deserving poor,” leaving little decent housing for those left behind. Plunz assumes that the upwardly mobile will advance in any event and that the concept of the “deserving poor” distracts from the structural economic problems that truly hold back the poor. But the facts belie Plunz’s analysis. Eighty percent of Nehemiah buyers in the Bronx and the largest plurality of Partnership buyers have come from public housing, suggesting not that the economic system has consigned them to poverty, but rather that New York’s housing system has not offered them the chance for homeownership.

If some people, for social or economic reasons, are simply not prepared for homeownership, they still stand to benefit indirectly from the exodus of public housing tenants to the new builder housing. There are some 240,000 people on the Housing Authority waiting list; the city’s most recent Housing and Vacancy Report asserts that overcrowding affects 7 percent of all renter households. Drawing the slightly better-off out of public and other low-rent housing would open up units for the poorest. In neither its Comprehensive Housing Affordability Strategy nor its Housing and Vacancy Report, however, has the city attempted to assess the number of families in either public or low-income rental housing who might have sufficient income or savings to buy a modest new home.

Perhaps the most powerful argument for small-scale, owner-occupied multifamily housing is that it appears to be what New Yorkers of modest means want. In the Bronx, the Department of City Planning conducted a survey in 1991 to determine housing preferences among those seeking to own a house or apartment. Sixty-nine percent of respondents ranked the two-family house first; none gave such a ranking to a condominium in a new high-rise building. Twenty-five percent chose a single-family house; 16 percent a three-family house. The survey had been prompted in part by the skepticism of elected borough officials about building new Partnership-style housing on land where traditional New York high-rises could be erected. Subsidized high-rises are popular among elected officials, in part because they could bring large numbers of new voters to districts where the population is declining. The potential residents who were surveyed, however, chose differently. In fact, 76 percent indicated they were “not interested” in high-rise housing at all.

What the City Can Do Without the city’s help in identifying and donating vacant land and supplying modest subsidies, the Nehemiah and Partnership homeownership programs could not have taken hold. But the city’s effort on behalf of these programs pales before the billions of dollars it is spending to rehabilitate and subsidize city-owned housing. This is not to say that the city should shift such massive investments to new owner-occupied housing. Such housing does not need public funds. And building it with private capital frees scarce city funds that could instead be used to improve parks, recreational facilities, and public safety efforts in low-income neighborhoods. The city can, however, take several steps to make the type of housing offered by the Partnership and Nehemiah easier to build.

* Make more sites available. In its Comprehensive Housing Affordability Strategy, the city anticipates that some seventy thousand housing units will be “lost” over the next five years through demolition, condemnation, or abandonment. The city has adopted a policy of strongly favoring publicly subsidized rehabilitation of vacant and abandoned apartment buildings. “As a practical matter,” observes one HPD official, “we rehab anything that can stand up: buildings without roofs, floors—without much of anything. It’s a fine line between rehab and new construction.” A change in policy could allow for demolition of dilapidated buildings that are expensive to renovate and open up sites for the row houses which Partnership-designated builders prefer to erect.

It is important to note that making new areas in poor neighborhoods available for construction of homes does not necessarily mean demolition of existing apartment buildings. Large sections of Brooklyn and the Bronx are currently zoned for manufacturing but, because of the decline of the city’s manufacturing base, are little used for that purpose. Rezoning such areas to permit housing construction is one way to let private builders provide homes for those of modest means.

* Exempt three-family homes from the multiple dwelling law. City ordinances impose construction codes comparable to those of large apartment buildings on four-story, three-family buildings. A three-story, two-family building needs one exit from each unit; a four-story, three-family unit needs two. The smaller structure needs a nine-square-foot skylight to vent the stairs; the four-story building needs a twenty-square-foot skylight. All told, one construction firm estimates, the multiple dwelling law requirements can add as much as $33,000 to the cost of a three-family house, sharply reducing or even negating the advantage to buyers of having two rental units instead of one.

* Reexamine handicapped accessibility requirements for three- and four-story homes. Some of the city’s most valuable properties—the brownstones of Brooklyn Heights and Park Slope, for instance—could not legally be built today, for their design does not conform to new city wheelchair-accessibility regulations. The traditional design includes steps down to a basement apartment and a stoop leading to the entrance for one or two other units. Current rules, however, require at least one entrance at street level, so as to permit wheelchair access. This regulation increases costs and poses serious design complications for a three-unit building without ensuring that the handicapped will avail themselves of the units.

The traditional four-story design was popular for good reason: It allowed owners of a three-unit building to have a two-floor unit, sharing only one exterior door with one tenant’s apartment. Requiring ground floor access makes such an arrangement impossible. Creative designers may work this problem out: One Partnership builder has proposed including a loft within the largest unit to provide a sense of living on two floors. It seems worth considering, though, whether the accessibility standard might be applied only to a percentage of buildings in a development rather than to all—while at the same time requiring developers to actively seek out handicapped buyers for those houses.

* Simplify the permit and certification process. Small builders constructing individual homes on individual lots are at a bureaucratic disadvantage under current regulation. Developers of large apartment complexes can receive, all at once, a single permit for construction and the various departmental approvals necessary for occupancy. Small builders, by contrast, must have their plans for each individual house lot approved by the Buildings Department. To make matters worse, builders say the department will give out only four of the necessary review forms per customer each day.

There is nothing approaching one-stop permitting for house builders seeking the approvals they need to get their certificates of occupancy. Builders must schedule separate appointments with the Highway Department, Sewer Department, Electrical Bureau, and an inspector from the Buildings Department. Often, inspectors limit the number of houses they will inspect in a day, forcing the builder to schedule many appointments for the same project. The total fees a builder must pay during the approval process, meanwhile, have gone up sharply—from $600 per building in 1985 to $2,200 today.

Other regulatory complications bear scrutiny as well. The Uniform Land Use Review Process is a protracted environmental review required before builders may construct housing on sites where housing previously stood. There are also requirements for archaeological review of building sites—perhaps a means to gain historical insights, but an additional burden of time and cost in a city suffering a serious shortage of affordable housing.

* Open new areas for middle-income housing. Demand for housing one or two steps above Nehemiah and Partnership homes will likely increase as those owners or their children decide to move up. Traditionally, middle-class areas of the boroughs have served as “zones of emergence” (in the phrase of sociologist Robert Woods) for upwardly mobile immigrants and their children. Continuing that tradition may, over time, require new construction of middle-income houses. Thus, it is important for the city not to stand in the way of such development.

Conclusion The new builders have already realized some regulatory concessions. Nehemiah, for example, won city approval for a drainage system that does not require each individual home to be tied directly into the city’s sewer system. The Partnership has convinced the Federal National Mortgage Association to change its underwriting guidelines so that income from a rental unit can be counted when mortgage applicants apply for loans. This significantly reduces the income level required to qualify—a particularly reasonable measure if, as the city says, the shortage of inexpensive rental housing continues to be acute.

Despite some encouraging steps, however, the city has remained reluctant to embrace the new builders and the idea of homeownership. Yet the advantages are clear: New housing construction can serve those of relatively modest means, allowing them to move up the housing ladder. New housing for those just above the poverty level can indirectly help those below it by freeing up space in public housing. Most important, the rise of low-income homeownership can contribute to a healthy social structure, one that encourages individual initiative, responsibility, and upward mobility. Planners simply have not been able to create social structures with anything like the cohesion that spontaneously arises when people own their own homes.

Unfortunately, the advent of the Clinton administration may strengthen the city’s tendency to view inner-city homeownership programs as little more than a short-term adaptation to the Reagan-era end of construction subsidies. In December 1992, for example, New York City Housing Authority Chairman Sally Hernandez-Piñero said, “The need for housing has not been addressed on the federal front.... There has been no meaningful construction of new apartments and the city does not have the means to construct housing in a major way.

It would be a serious mistake, however, to ignore the lessons of private construction and ownership programs like the Partnership and Nehemiah. As New York once led the nation toward government ownership of housing, today it could lead the way in a promising new direction—if it would only recognize how much has already been accomplished. Those of modest means themselves want new, small houses of their own. That, if nothing else, should tell us that this is a vision worth pursuing.

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