The Real Estate Board of New York to 2025 Charter Revision Commission regarding Housing and Land Use

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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. Thank you for the opportunity to testify this evening on the issue of housing and land use.

New York City is in the throes of a housing crisis marked by a severe lack of new production and an absence of sufficient affordable housing needed to meet the city’s diverse socioeconomic needs. New York City’s affordability crisis will persist without tools that allow supply to match demand. Unfortunately, recent positive efforts such as the City of Yes for Housing Opportunity do not change the fact that today the New York City development process is up to three times longer than anywhere else in the country and costs up to twice as much on a per unit basis, with costs estimated up to $800,000 per unit.

The length of time between a project starting and a tenant moving in is driven by a multi-agency permitting process and then exacerbated by a discretionary environmental and land use process that is long and costly. Moreover, even after this long and costly discretionary process, the result is too often a reduction in the amount of housing for the final project. This regular result therefore fails to adequately take into account the fact that the need for more housing is a matter of urgent citywide concern, a challenge discussed at length in February 11th testimony before this body.

Costs of the Current Development Process

There are several key considerations in the “to build or not build” decision that a developer must make before it can secure financing to start construction. In addition to determining whether a proposed project will generate enough revenue to cover the costs of construction, operations, and maintenance, the developer must conduct due diligence around zoning and tax program requirements. A developer will not choose to build if its project will not generate a sufficient return to compensate for the high risks and large up-front costs of development. Nor will a lender provide the debt needed for development unless the project’s revenue is sufficient to support the size of the loan.

City government process has a significant role in this calculation. For example, the design of City agency approval processes drives costs. City agencies including DOB (Department of Buildings), FDNY (Fire Department of New York), DSNY (Sanitation), DEP (Department of Environmental Protection), DOT (Department of Transportation), LPC (Landmarks Preservation Commission), PDC (Public Design Commission) and DPR (Parks) each have permitting authority – and a project that is as of right under zoning will nevertheless need to obtain permits from some or all of these agencies. Each of the permitting agencies has a different pathway for permit filing, review and issuance. While some agencies have timeframes associated with permit review, those timeframes may not be short enough to address time sensitive deadlines such as financing closings.

A related challenge is the fact that the Uniform Land Use Review Procedure (ULURP) applies to all projects that require land use approval – such as a rezoning, zoning text amendment, or special permit – regardless of project size or the amount of housing proposed, and without a distinction between those projects with the potential for environmental impacts. By treating modestly sized housing projects much the same as larger more complex projects, the process adds costs and delays to smaller projects that are not able to face those burdensome costs. All too often, this dissuades many developers from even entering the process. As a result, we continue to fall further behind in the delivery of necessary affordable housing.

Principles for Considering Changes to the NYC Charter

The Charter should establish a government framework for land use that can address critical City needs. Unfortunately, our current land use processes delay, hinder, or outright forestall the creation of the new housing that is desperately needed. The Commission’s proposed charter changes in the area of land use should be designed with a goal in mind of finding better ways to stimulate housing production.

The construction of affordable housing is inherently constrained by the City capital budgets, federal policy, availability of municipal land, and staffing levels at the relevant City and State housing agencies. The Charter alone cannot solve those issues. But it can play an important part in increasing the affordable housing pipeline by building a framework focused on increasing production.

Changes to the Charter should consider whether projects that vary widely in size, complexity and in the potential for environmental issues should continue to be treated alike in the approval process. Housing projects – regardless of their size or environmental profile – are serving a Citywide need. The ability of these projects to move forward should not be determined under a process that elevates local perspectives above citywide concerns. This may not require a re-imagined process all together but instead a new determining threshold for what enters ULURP in the first place. And, finally, all permitting should be predictable and time certain. The Charter may have a role to play in making those changes, and it is worth further discussion.

Recent State and City efforts demonstrate positive momentum toward building more housing. However, the size of the need to house New Yorkers and the protracted duration of our housing crisis require more structural changes. This Commission should not hesitate to take advantage of this historic opportunity to make them. Thank you to the members and staff of this Commission for undertaking this necessary work, and for consideration of the points I shared with you all today.