- REAL ESTATE EDUCATION
- GIVING BACK
Itʼs a daunting task, but REBNY is committed to affordable home building
January 27, 2016
New York City’s need for affordable housing continues to be an issue that requires serious attention if we plan to not only satisfy Mayor de Blasio’s housing goals, but to house our city’s incoming population. The recent loss of the 421-a program has made this task even more pressing, and presents a new set of challenges that we must work together to solve before New York’s affordable housing circumstances are further exacerbated.
The objective truth of the situation is that roughly two-thirds of New York City is comprised of rental housing, and we need more of it. Without programs that offer incentives for building multi-family rental housing with significant below-market, or affordable, components, it is simply not feasible from a developer standpoint to build this housing on the scale necessary to satisfy our needs. This is because today’s high land prices are not controlled by developers, who will instead opt to produce market rate condos wherever possible due to the higher levels of profit.
According to recent trends published by the Mayor’s Management Report and HPD, 421-a has resulted in 60% of the production of affordable units citywide over the course of 2015 alone, and the loss of this program will ultimately result in the loss of a prospective 18,000 below-market units citywide over a four-year period. If we intend to build rental housing throughout the City – especially housing that is significantly below market – a government subsidy to offset the costs of property taxes, land, and construction is imperative.
However, the time to rue the expiration of 421-a is not today; although the program is gone, the city’s housing dilemma remains, and now is the time to take definitive steps towards addressing it going forward. One of the preliminary steps in this process is to understand what will now happen to New York’s housing landscape. First and foremost, we will likely see an increase in the number of market rate condos being built throughout the city, as well as hotels and retail real estate. Because only a finite amount of land is available to build on, if an incentive for building affordable housing is not introduced in the near future, the amount of land available on which to build it when an incentive is eventually put in place will be even scarcer than it is today.
In addition to the loss of 18,000 affordable housing units which would have been built over the next four years using the 421-a abatement, there is also the risk that over the course of an even longer period of time, rents in existing rental units will begin to rise due to supply and demand. This could result in the renters who need below-market housing the most being priced out of their homes.
Going forward, the real estate industry, unions, officials, and legislators need to band together and come up with plan to address this issue as soon as possible. REBNY is confident that together, we can work to fashion a brand new program that will not only produce the affordable housing New York City needs, but that also ensures that construction workers are treated fairly, and that in the process, more job opportunities will be created for the City’s residents.