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Supply-side Housing Solutions

eye on the news

Supply-side Housing Solutions

The only way out of New York’s current quandary is to build. October 24, 2019
New York
Economy, finance, and budgets

Even as employment grows rapidly, New York City remains stubbornly slow to build new housing. Annual average wage and salary employment in New York was 4.081 million in 2015 and, preliminarily, 4.379 million in 2018, a 7.3 percent gain. But over roughly the same time period, the city completed only 76,000 new housing units on its 2015 base of about 3.45 million, just a 2.2 percent increase in supply. This “jobs–housing gap”—rapid gains in employment, while housing grows much more slowly—underpins the city’s continuing crisis.

California also suffers from a significant jobs–housing gap. Annual average statewide employment grew by 6.5 percent from 2015 to 2018 in the state, which, with an estimated population of nearly 40 million, gained only 251,000 housing units from 2016 through 2018, on a 2015 base of almost 14 million. In response to the emergent crisis, California governor Gavin Newsom recently signed 18 pro-housing-supply bills passed by the legislature. In addition to legislation that removes obstacles to accessory-dwelling units statewide, the bills include Senate Bill 330, which establishes a five-year ban on housing moratoriums, new restrictions on housing, and lowered densities. Another law, Assembly Bill 1486, prioritizes affordable housing on surplus public land.

A recent conference sponsored by the Federal Reserve Bank of Minneapolis—one of America’s most forward-looking cities in making housing more widely available and affordable—offered a good look at the evidence that expanding supply is the most effective way for economically thriving communities to deal with sharply rising rents and home-sale prices. According to NYU professor Ingrid Gould Ellen, the evidence shows that in the absence of sufficient new supply, older housing stock “filters up” to more affluent tenants, while additions to the housing supply, even if initially expensive for buyers or renters, “filter down” over time, to become the low-cost housing of the future.

Another study used address-history data to follow individual households as they moved into new housing—tracking those who moved into the dwellings they had vacated, as well as those who moved into housing vacated by secondary movers. The study found that, in general, “100 new market-rate units lead about 45-70 people to move out of below-median income areas, loosening [the] housing market in such areas.” Those results compare favorably with costly efforts to build affordable housing for lower-income households in cities in like New York, where resources will never be adequate to make a dent in the needs of poor people.

Not all of California’s new measures are ideal. Newsom has also signed Assembly Bill 1482, capping annual rent increases at the inflation rate plus 5 percentage points. In order to make expanded housing development politically feasible and reassure existing tenants that they will not be displaced, the state has introduced rent controls. Such controls will discourage the new investment that the state needs.

In contrast to Newsom, New York governor Andrew Cuomo hasn’t signed any pro-housing-supply measures, and the state legislature is not proposing any. Meantime, the city’s housing debate deteriorates. The same week that Newsom was signing pro-housing bills in California, Boris Santos, a Democratic Socialist primary challenger to Bushwick, Brooklyn assembly member Erik Dilan, proposed the abolition of private ownership of apartment buildings as a solution to the city’s affordable-housing shortage. Radical proposals to socialize housing have become so common in New York that the Daily News balanced Santos with a quote from a spokesperson for what the paper called a “pro-landlord” group—as if only landlords could oppose public ownership of real estate.

Facilitating private investment in New York’s housing stock is in fact common sense, not a sop to landlords. From July 2017 to June 2018, the last city fiscal year for which data are available, the city’s Department of Housing Preservation and Development spent $1.4 billion on capital projects—that is, long-term housing investments—under Mayor de Blasio, who has expressed his own preference for public ownership of housing. It’s unlikely that future mayors will have the same willingness—or cash—to spend so heavily on subsidized housing for the poor. New York City’s public resources are no substitute for robust private investment in housing. If the city can’t accept that imperative, then Albany needs to step in, both to protect current residents and to maintain Gotham’s role as the state’s economic engine.

Photo by Drew Angerer/Getty Images

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And You, New York?

The Empire State should follow California’s lead and support housing expansion. Eric Kober September 27, 2019 New York, California, Economy, finance, and budgets

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