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How New York City Gets Affordable Housing Wrong

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eye on the news

How New York City Gets Affordable Housing Wrong

Rent-restricted housing projects lock families and neighborhoods in a poverty trap. August 9, 2022
New York
Economy, finance, and budgets

As New York mayor Eric Adams announced the completion of the ten-story, $120 million, 224-unit Beach 21st Street housing complex in Far Rockaway last week, he framed it as a model for affordable-housing development. “This is the kind of community-led and community-supported investment we want to see more of and a prime example of government working the right way for the people of this city,” the mayor said. In truth, the project illustrates how New York gets housing policy wrong—and how it often hurts those it purports to help.

There’s no doubt that those few lucky tenants who will move into the new architecture-award-winning project will be getting a good deal, at least for now. The city advertises the building’s low rents—starting at $522 for a studio and $809 for a two-bedroom—and its “extensive amenities,” which include “laundry room, fitness center, community room, landscaped terrace, LVT floors, security cameras, granite countertops, and dishwashers.” It sounds a lot better than public housing, for sure.

But there’s a lot wrong with these kinds of projects. For starters, consider the eye-popping cost. The handful of rent-restricted apartments pencil out at a construction of $535,714 per unit. That’s more than it costs to build a 2,700-square foot single-family home in Austin (about $500,000)— not that much less than the $850,000 it costs to build the same house in Gotham. One big difference, of course, is that those who hope to buy such a house in New York must also subsidize these cheap Far Rockaway rents.

What’s more, it’s not even clear that winning the housing lottery is in the tenant’s long-term interests. A never-ending “restricted” (below-market) rent is a tempting trap. A path to wealth for many American families is homeownership and the eventual appreciation of that asset; a guaranteed low rent encourages households to stay put in a unit that will never allow them to build wealth. Nor is it good for the city, which is plagued by low turnover in rent-regulated units and resulting low vacancy rates. This is the same trap that has led New York City public housing tenants to stay in their units for an average of 23 years.

Nor can Beach 21st Street tenants be at all confident that the impressive amenities present when the ribbon was cut will remain well-maintained over time. Consider the saga of Marcus Garvey Village, a 625-townhouse unit complex in Brownsville. Built in 1973 to represent an improvement on public-housing towers, it evoked comparisons to a pastoral college campus, with safe, private backyards; it seemed to have been designed with a “sense of exuberant experimentation,” according to the New York Times. Forty years later, the Times called it a “housing solution gone awry,” plagued by gang violence and a poverty rate that had gone up, not down. That’s what happens when a property’s rental income is restricted: as maintenance costs rise, those once-gleaming amenities rust.

The politics that creates subsidized housing perpetuates high-poverty neighborhoods. At Beach 21st Street, 50 percent of the units are set aside for those who live in its community district. A state analysis has found that a third of children in that area live in poverty. That leads to two ways, both misguided, to qualify for a unit: living nearby and being poor. The incentive to stay and enjoy a cheap rent means that poor households will be more likely to stay that way—as will the neighborhood. In a healthy, dynamic city, neighborhoods change. Some residents grow better off, some become poorer. Housing prices go up and down as a consequence. But a static real estate market will never find the highest and best use for its land—and, as with public housing, the area will be frozen in place, with potentially tax and job-generating new uses never realized.

From Fiorello LaGuardia to Eric Adams, New York mayors have reveled in cutting ribbons on new housing projects, but they’re no longer around when their misguided policies bear bitter fruit. If Adams really wants to say yes to new housing, he should take steps to relax zoning, reduce construction costs, and jumpstart private building. The true path to affordable rents is more housing supply.

Photo: gregvr8156/iStock

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