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City Planners Realize Windfalls for Developers and Oppose Inclusionary Zoning

April 24, 2004 by Administrator in Spring 2004

By Alex Schafran

New York City ’s planners are rezoning land left and right to make way for new housing. They refuse to adopt, however, a tried-and-true method of city planning to ensure that some of the new housing goes to meet the dire housing needs of working-class people. That method, inclusionary zoning, mandates or gives incentives to developers so that a certain proportion of new housing units are affordable to people with modest incomes. It has been used successfully all over the country, but the New York City Department of City Planning (DCP) proclaims that equity principles have no place in zoning, as they proudly create windfall profits for landowners.

Historically working-class neighborhoods that are getting up-zoned, like Hell’s Kitchen in Manhattan and Williamsburg in Brooklyn (Utne Reader calls it the third hippest neighborhood in the country), have been particularly hard-hit by both the overall housing crisis and rapid gentrification. Proposed zoning in these neighborhoods would create billions of dollars of value instantly. A landowner who owns a two-story warehouse will soon have a piece of land that can hold a 40-story office or residential tower. The fancy stores and renovated buildings that now dot formerly destitute stretches like Fifth Avenue and Bedford Avenue have already brought with them rising rents and the displacement of long-time residents. That is why all over the city organizations like Harlem Operation Take Back and Bushwick Housing Independence Project have sprung up to fight alongside existing community-based organizations and legal assistance agencies to protect residents from eviction. One of the policy changes they’re demanding from the city is the institution of inclusionary zoning.

New York City is in the grips of what is arguably its deepest affordable housing crisis. This is a city of renters—65 percent of households live in rental units. According to the 2002 Housing and Vacancy Survey, conducted by the city’s Department of Housing Preservation and Development (HPD), 25 percent of New Yorkers pay more than 50 percent of their income in rent. Another 25 percent pay more than 30 percent, the federal standard of affordability. The overall vacancy rate is 2.94 percent, well below the 5 percent benchmark for a housing crisis as defined by state law. But the vacancy rate varies at different price points. For units renting under $700 per month, the vacancy rate is just 2 percent, but for units renting over $2,000 per month, the vacancy rate is over 10 percent. And as of January 2004, 38,317 people were homeless, the highest number in city history.

New York City has had a limited inclusionary zoning program since 1987, providing floor-area bonuses to developers who build or rehabilitate low-income apartments. The program is available only in R10 (high-density) districts in Manhattan, and it prohibits the use of additional subsidies for the low-income units, rendering it rather ineffective and underutilized.

According to a study by Robert Burchell and Catherine Cally, there are seventy-two jurisdictions throughout the country that use some form of inclusionary zoning, including the states of California and New Jersey. Perhaps the best known is Montgomery County, Maryland, where an ordinance requires affordable housing in any development of fifty or more units. It has produced more than 10,000 units of affordable housing since its inception in 1974.

Planners Who Support Inclusionary Measures

Brad Lander and Frank Braconi, both urban planners, don’t see eye-to-eye on many of the important affordable housing issues facing New York City today. Lander directs Pratt Institute’s Center for Community and Environmental Development (PICCED) and Braconi leads the Citizens Housing and Planning Council (CHPC). PICCED works with community-based advocacy organizations while CHPC’s board includes some of the cities most powerful bankers and developers. These organizations have often butted heads over the years on issues like rent regulation and the rebuilding of Lower Manhattan.

There is one significant area, however, where these two dedicated planners and their organizations agree: A strong, citywide inclusionary zoning program is integral to the future of affordable housing development in New York City. Yet the Department of City Planning stridently opposes any inclusionary zoning outside of the very limited regulations that now apply to the highest density zones in Manhattan (and they even criticize these rules). If PICCED and CHPC can both agree that inclusionary zoning is crucial to the city’s future, why is DCP so opposed?

Developers Oppose It

One argument is that more government regulation will only depress the market and lead to less units being built, not more. “Developers can lose money constructing affordable housing,” said Real Estate Board of New York senior vice president Michael Slattery. “It is a pure economic burden with no real benefit to them.”

But Lander and others point to study after study that indicate that in other cities with both mandatory and voluntary inclusionary zoning regulations, development has not been dampened. “The experience of hundreds of cities, towns and suburbs across the country suggests that the rewards and requirements can be calibrated to generate new affordable housing without putting a chill on development. We believe that inclusionary requirements and options will actually help make communities more open to increased density, and help increase supply overall. And finally, of course, a policy needs to be thoughtful and appropriately tailored. You could go too far and impose such a burden that no one would develop, but that is so unlikely given current politics as to be ridiculous. The market and windfalls in the re-zoning areas are plenty strong enough to support some inclusionary requirement and still be very, very attractive deals.”

Planners Oppose It

Some think that DCP’s opposition to inclusionary zoning is not solely based on the political power of profit-driven developers, but a deeper philosophical opposition. They point to the predominance in the agency of what Pratt urban planning professor Laura Wolf-Powers calls “strict constructionists,” planners who believe that the only valid purpose of zoning is to keep physical development patterns from causing nuisances and harm to public health—for example, by blocking light or emitting noxious fumes into heavily populated areas. The need for affordable housing does not qualify as the sort of nuisance or harm that zoning was intended to counteract: It’s seen as an extraneous social goal that zoning policy shouldn’t get caught up with.

“What is frustrating about this position,” says Wolf-Powers, “is that it seems to housing advocates that DCP is willing to rely on zoning to protect property and to create huge opportunities for real estate developers (as occurs when there is an up-zoning) but not to create opportunities for people and communities with fewer resources.”

Lander also finds this particular stance difficult to stomach, if not a bit hypocritical. “DCP is currently aggressively using the city’s formidable zoning powers in social-goal-oriented, ‘anti-market’ ways to enhance quality-of-life through a full-scale down-zoning on Staten Island, to save the High Line in Manhattan, and to preserve historic brownstone neighborhoods. But the Department remains steadfast in opposition to using zoning powers to ensure that redevelopment initiatives will offer housing opportunities for average New Yorkers.”

A Missed Opportunity

The city’s planners already defeated a strong neighborhood campaign to get inclusionary zoning. In April 2003 DCP re-zoned a twenty-five block stretch of Brooklyn ’s Fourth Avenue, allowing developers to put twelve-story residential buildings on a stretch of land currently occupied by three-story tenements and low-slung warehouses. The re-zoning also provided protections against new development to the surrounding low-density brownstone community.

In anticipation of the re-zoning, the Fifth Avenue Committee (FAC), a neighborhood-based non-profit developer and advocacy organization, proposed a change in the city’s zoning law that would take advantage of the windfall about to be granted to landowners and use some of it to develop much-needed affordable housing. They proposed a voluntary inclusionary program, similar to one proposed by CHPC the year before, which would allow developers to build up to the height being proposed by the city if they made 20 percent of the units affordable. Otherwise, they would be restricted to a slightly lower Floor Area Ratio (FAR), which would effectively lower the heights of their buildings by a floor or two. Similar to the CHPC proposal, the proposed zoning would have eliminated previous restrictions on the use of subsidies by developers.

Despite support from many community leaders and many in the City Council, the proposal was defeated, and DCP pushed through a re-zoning with no inclusionary provisions. Why was this fight lost? The way Braconi sees it, advocates got on the ball too late to make a difference. By the time the CHPC and FAC plans came out, there was already a tacit agreement at DCP about the new densities. There was little fear on the part of interested parties within the development community that they would lose anything, so they did not have to compromise.

The Next Battlefront

Now the city is planning two massive re-zonings that will make Park Slope’s look puny in comparison. A huge swath of Manhattan ’s west side and virtually the entire Williamsburg/Greenpoint ( Brooklyn ) waterfront are being considered for conversion from low-slung manufacturing and mixed-use zones into sites for 40-60-story high-rises. The inclusionary zoning battle is heating up again, this time at a more fevered pitch. So the question becomes, If the city is going to give landowners such an enormous windfall, why not take back 10-20 percent of that value and dedicate it to affordable housing?

Council Member David Yassky (D-Brooklyn) has introduced a bill that would make inclusionary zoning mandatory. He is unequivocal in his thinking. “When there is a change from manufacturing to residential, property values increase 500 or 600 percent. When you have that kind of wealth created by a government action, it is only fair to use some of it for the public good. The Department of City Planning came to Brooklyn and told the residents there would be affordable housing in new developments. If they really intend to keep their promise, then they should have no problem putting it into writing and guaranteeing that it will be done.”

Some small cracks are starting to appear in the DCP’s frontal assault on inclusionary zoning proposals. Karen Phillips, one of thirteen appointees to the City Planning Commission, recently came out in favor of inclusionary zoning. “I feel that the need for affordable housing should be included as a part of the new residential zoning,” she said at a recent public hearing. At another event she stated, “ The market does short-sighted things to benefit itself at the moment. The long-range cost is a loss of diversity.”

 One prominent for-profit developer who supports inclusionary zoning and spoke on the condition of anonymity did not mince words in his description of the motivation driving some of his colleagues to oppose it. “It is simple, unbridled greed. The only thing that will really happen is that land values will go down. In fact, it will give an advantage to certain sectors of the development community who have experience working with government programs—developers who know how to make affordable housing profitable. But many of us are afraid to speak out—it would jeopardize not only our standing in the community but our relationship with the city on which we depend to make a living.”

Braconi sees the possibility of some sort of compromise on inclusionary zoning as the city faces increased opposition to its plans. The political realities of the situation, as he sees it, will force DCP and the for-profit development community to compromise and accept some sort of bonus program, much like the one proposed in Park Slope, in order to achieve the level of density they desire.

Lander, on the other hand, thinks that only a mandatory program will work, at least in the areas that are being up-zoned. According to Daniel Lauber, president of the American Institute of Certified Planners and a long-time advocate of inclusionary housing, “The research is pretty much unanimous that inclusionary zoning must be mandated. It simply does not work if it’s voluntary.”

The irony, as Braconi sees it, is that the city to date has been a nationwide leader in innovative affordable housing techniques. “For whatever reason, we have not taken advantage of this particular tool,” he said. “It’s somewhat surprising that the city has not looked at inclusionary housing seriously. But I’m happy to see that more and more there is ample public discussion of this issue. We still believe that a bonus program should be implemented citywide.”

Alex Schafran is a student in the Graduate Urban Planning Program at Hunter College,City University of New York. Beatrice Ammann provided valuable research assistance in preparing this article.

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