These last few weeks have been a tumultuous time for housing policy in NYC. Among other things, a state judge has ruled that the City Council’s attempted expansion of the CityFHEPS housing voucher program last year is unlawful. The vouchers work much like the better-known federal Section 8 vouchers– they’re a government-funded guarantee of a portion of rent per month for low-income tenants.
The legal reasons are a bit technical, but boil down to the judge’s determination that the program is primarily controlled by state, not city, law, and therefore the city cannot unilaterally change it. The expansion would have taken the eligibility criteria from people who were already in shelter and made up to 200% of the federal poverty level to those who might only have received a demand letter from a landlord and still be in their housing, and making up to 50% of area median income. Practically speaking, this would be a huge jump in income eligibility.
Perhaps readers of both my work here and the editorials at the New York Daily News, where I sit on the editorial board, might be wondering why we came out against this expansion, especially given how pro-housing and housing security I tend to be. The reality is that we didn’t oppose CityFHEPS expansion on an ideological basis but a practical one. It comes down to this: it’s like expanding access to food stamps in a complete food desert, or providing free vaccine vouchers in an area with no clinics or pharmacies. There’s a cost problem, sure, but the base issue is supply.
All the vouchers in the world can’t materialize new housing, and the Adams administration’s argument against the expansion — which, having had careful conversations with people on either side of the matter, makes sense to me — is that it might actually be worse for the lowest-income New Yorkers. If you expand the pool of voucher-holders but not the availability of apartments to use those vouchers on, then you simply have more people competing for the same set of available apartments, and who’s going to win that competition? In all likelihood, the definitionally wealthier and more stable new participants in the program.
That theory has not really been tested, because despite the fact that Adams’ veto was overridden, the administration has never moved to actually implement it, citing various “financial, operational and legal issues.” Hence the lawsuit, which was intended to force compliance, but which ended up backfiring with this ruling that the whole law was illegal. This is a bit tricky because, whether I or anyone thought that the expansion was functionally a good idea or not, it’s not a good thing for the administration to just ignore laws it doesn’t like. I’d be hard pressed to commend this and at the same time condemn Gov. Kathy Hochul for unilaterally stopping the implementation of the congestion pricing law.
Anyway, all this just refocuses attention on the base problem, which is the absolute lack of affordable housing in the city. On that front, there are some good signs and bad signs. One of the good is that the Adams administration last week announced that over fiscal year 2024, which ended on June 30 (yes fiscal years are weird), NYC created 14,706 affordable housing units and preserved another 10,560, a marker essentially of units that were financed or subsidized by the city in exchange for affordability conditions. The number created is the highest on record for any fiscal year.
That should be unabashed good news, but unfortunately it’s the highest out of a series of pretty low bars. We’ve long been building less housing (particularly affordable housing) than there’s demand for for years. This is merely a good start, not a fundamental victory. Which brings up another bit of news from this announcement, the fact that 40% of the units were in buildings using the 421a tax break, which state lawmakers allowed to expire two years ago. New units constructed under 421a are basically just running out the completion extensions, but no new projects can get off the ground because the program is no longer available.
I’ve touched on 421a before, and I could write an entire thousand words on how that works, but the bare bones is that it’s a program that provides developers exemptions from property taxes, including 100% exemption at first, in exchange for the development of multifamily housing with stabilized and affordable units. You wouldn’t really expect any housing program in NYC to be uncontroversial, and this one certainly hasn’t been; a big part of the reason that lawmakers allowed it to expire in the first place was because it was bashed by housing advocates as practically a giveaway to rich developers, who got a get-out-of-taxes-free card. Yet it seems now that this was a pretty significant carrot in getting developers to build this type of housing, and now we have neither similarly potent carrots nor sticks.
Fortunately, Gov. Kathy Hochul and lawmakers have introduced a replacement program, 485x, that does much the same but with some tweaks. Among them are tighter affordability restrictions and the requirement to use union labor for certain projects, which predictably already has some developers grumbling. How much uptake there is on the new program remains to be seen, but I believe given its closeness to 421a and the draw of those tax breaks, developers will use it and hopefully the expiration will just be a hiccup.
Beyond these financing questions, there are issues of practicality — where can you build, and how? The most concrete city-level proposal on the table is the housing opportunity plank of Mayor Adams’ broader City of Yes effort. I actually wrote a whole newsletter just about that back in May, after the plan kicked off its tour of the city’s community boards and borough presidents ahead of an expected vote later this year. You can go read that if you want all the nitty-gritty, but the basic contours are that the plan targets zoning and regulations, including a lot of ways of building housing that are actually pretty historic and recognizable to NYC but have been made illegal, either directly or de facto.
For example, a lot of housing development atop commercial blocks — the apartments above delis and storefronts that are common in neighborhoods around the city — are more or less prohibited now. The package would change that, as well as get rid of things like onerous parking requirements and allow developers to add more units over what would otherwise be allowed so long as those units are guaranteed affordable. There has been some political pushback, especially from areas of the city that have traditionally been opposed to denser development, but the support has been surprisingly strong, now including four of five borough presidents (yes, the odd one out is Staten Island) and seemingly on track to pass the Council with perhaps some modifications.
The introduction of 485x and the likely passage of the City of Yes plan all seems like tempered good news, but let’s not forget that we’re starting from behind here. The housing economist Jay Parsons noted on Twitter that Equity Residential, one of the nation’s largest REITs (a type of real estate investment firm) had laid out in an earnings call that NYC “probably has the best supply-demand dynamics in the country for the next couple of years,” which is just another way of saying that they’re planning on raking in the big bucks given how unbalanced the level of demand is with what’s going to be available.
Note that the executives didn’t say “this year,” they said “the next couple of years,” meaning they expect this dynamic to continue, and are in fact banking on it. To overcome this presumption, these policies not only need to be implemented but implemented well, with relatively streamlined processes and ideally local and political buy-in. Otherwise, the only people who will be happy are the real estate investors.
