The Real Estate Board of New York to The City Council on the Midtown South Mixed-Use Rezoning

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The Real Estate Board of New York (REBNY) is the City’s leading real estate trade association representing commercial, residential, and institutional property owners, builders, managers, investors, brokers, salespeople, and other organizations and individuals active in New York City real estate. REBNY appreciates the opportunity to testify in support of the Midtown South Mixed-Use Rezoning, C250185ZMM.

The Midtown South Mixed-Use Plan (MSMX) is a critical step toward increasing housing production in a centrally located, transit-rich neighborhood. The Garment District currently has one of the lowest residential populations in the city with commercial vacancy rates hovering between 25% and 40%. This rezoning will bring much needed public realm improvements, support economic recovery, and increase both market-rate and below-market rate housing supply. These necessary changes support the city’s goal of adding 500,000 new units of housing over the next decade and falls within the Manhattan Plan which aims to increase housing production by 100,000 units in the borough over the next 10 years.

Importantly, MSMX includes recommendations by the Office Adaptive Reuse Taskforce and will unlock residential development in an area long restricted to manufacturing and commercial uses. This rezoning is the first application of new tools created by City of Yes for Housing Opportunity; it will map the newly created R11 and R12 districts that permit above 12 FAR and will allow for office to residential conversions for the first time in this neighborhood. MSMX estimates to create approximately 9,700 housing units, including 2,000 permanently affordable units, through the mapping of Mandatory Inclusionary Housing (MIH).

Allowing residential use in the study area will unlock the ability to use tax incentives, 485-x and 467-m, passed by the State last year. The 467-m tax incentive was carefully calibrated given the complexities and costs involved with conversions and requires 25% of the building to be permanently affordable at an average AMI of 80%. Given the increase in density, this rezoning may be the best opportunity so far for 485-x to be used for new construction. The tax incentive will result in the creation of new rental buildings with a 25% affordability requirement at 60% AMI.

It is important to point out that limiting MIH options to lower the AMI average would render these programs financially infeasible. Therefore, we recommend that all three MIH options remain through adoption to ensure the zoning will work with the available tax tools to build affordable mixed income housing.

REBNY urges the City Council to approve the rezoning with the proposed residential densities intact. In New York City, housing production continues to lag population growth, and the city currently permits 29 units of housing per 1,000 residents, well below what is needed to meet demand. Furthermore, research from NYU Furman Center has shown that increases in housing supply can reduce or slow rent growth across jurisdictions and may even lower rents in surrounding areas. Zoning changes, such as MSMX, are essential in addressing the housing crisis.

Any reduction to the proposed density could cut the projected housing by 55% or roughly 3,000 units – including a large share of permanently affordable homes. The proposal to map R11 and R12 districts in the study area is supported by the current built environment. The areas surrounding the study area currently have some of the highest densities in the city; Hudson Yards and east Midtown permit upwards of 30 FAR and some of the existing buildings in the study area have FARs of 33, nearly double what the plan proposes.

REBNY strongly supports the Midtown South Mixed-Use plan. This rezoning allows for increased housing production at a time when the housing vacancy rate is at an all-time low and addresses affordability concerns by adding permanently affordable units to an area that largely hasn’t had any affordability requirements. The plan also advances tools that reinforce the public realm, including the facilitation of Transfer of Development Rights (TDRs) and the Privately Owned Public Spaces (POPs), which support both preservation and new development. The creation of a 24/7 mixed-use neighborhood will reestablish vibrancy in Midtown South, activate streetscapes, improve public safety, and bring needed investment to improve the public realm.

We applaud the Department of City Planning for this undertaking and urge the City Council to approve the rezoning.