Thoughts on Mandatory Inclusionary Zoning

Building much more affordable housing is one of the great challenges New York City is facing.  While Mayor Bloomberg oversaw the country’s most aggressive housing plan, it was not enough to address the City’s insatiable need.  A report by the Center for Urban Real Estate at Columbia University estimated that the City needs to build over 400,000 units over approximately the next two decades to meet population demands—about 20,000 units each year.

Mayor-elect de Blasio has pledged to create 50,000 units of affordable housing over the next decade and to preserve an additional 150,000 units.  Central to his plans to build the new units is the concept of mandatory inclusionary zoning.

Mandatory inclusionary zoning would require new residential developments in rezoned areas to include some affordable housing.  Many have suggested that mandating the inclusion of these units would be an improvement over the existing voluntary inclusionary zoning program (“IZ”) given its limited impact on the City’s housing stock thus far.  It is important to note that the voluntary IZ program has been effective in specific areas of the City.  Although critics point to the fact that the IZ program has only produced a small amount of affordable housing (2% of the total units built), the program is only available to 1.3% of all properties in the City.  Further, many of the properties that are mapped for IZ fall into historic districts.  As we’ve demonstrated in a recent report, landmarking impedes affordable housing development, and may be more responsible for the alleged ineffectiveness than the voluntary program. 

It is difficult to predict what the impact of a mandatory program would be.  However, there are some principles and factors of which to be aware.  This summer the Furman Center explained in its #NYChousing series that requirements that increase development costs are likely to lead to less development.  It is unreasonable to assume builders will continue to build regardless of growing costs and difficulties. 

If a mandatory inclusionary zoning policy is implemented throughout the five boroughs, the City should provide density bonuses in every instance.  As we have seen on the West Side of Manhattan and on Brooklyn’s waterfront, zoning incentives are a cost-neutral and effective way to spur affordable housing development.  Careful consideration also should be given to the definition of “affordable”, the period of mandated affordability, as well as the required location of the affordable units.

The conclusion of the Furman Center’s #NYChousing report, which can be found in the publications section of their website, mentions the possibility that increasing density may be the only way to increase the housing stock while increasing affordability.  A successful housing plan should prioritize higher density development while addressing rising real estate taxes, labor rates, and land costs.  If utilized correctly in the context of such a plan, mandatory inclusionary zoning may prove to be an effective tool in facilitating a wider breadth of development throughout the City. 

Given the difficulties and high cost of producing new housing, policymakers will have to continue seeking out creative approaches to expanding the City’s stock of affordable and market rate housing.  REBNY remains committed to working with the next administration to find solutions to the critical problem of affordable housing. 

In other REBNY News:

REBNY’s Residential Brokerage Division is pleased to announce the results of their 2013 Annual Elections.  Barbara Fox, of Fox Residential Group, Inc., Max Kozower, of Maxwell Jacobs, Inc., Diane Levine, of Sotheby’s International Realty, Inc., and Kenneth Scheff will join the Residential Board of Directors.  While Joseph Barbaccia, of Essential New York Real Estate, Helene Fields, of HF International Realty, Ltd., and Reba Miller, of CORE, will join the Ethics Committee.  REBNY congratulates all of the newly elected Residential Board of Directors and Ethics members! 

The Commercial Division Holiday Luncheon will be held on Tuesday, December 17, 2013 in the Vanderbilt Room at the Waldorf Astoria Hotel from 12:00pm-2:00pm.  Jonathan D. Gray, Global Head of Real Estate of the Blackstone Group, will be the guest speaker.  Tickets are $95 per person, to register please visit the events calendar on REBNY’s website.  Seats are limited; act now to reserve your spot!  For more information, contact Desiree Jones at djones@rebny.com.

REBNY will host its 118th Annual Banquet on Thursday, January 16th at 7pm at the New York Hilton.  Join us for the event of the year as we honor six great New Yorkers: Stephen L. Green, Chairman of SL Green Properties, Kenneth Fisher, Senior Partner of Fisher Brothers, Joel I. Picket, Chairman and CEO of Gotham Organization, Robin Abrams, EVP of The Lansco Corporation, Thomas L. Hill, SVP at Boston Properties, and Robert C. Fink, Director of Leasing for the Winter Organization.  For tickets or advertising information, contact Maryann Aviles at maviles@rebny.com