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Zoning For Dummies II: What's Affordable Housing?

by Rob Hollander

Previously in this series: Zoning For Dummies I - So You Want to Understand Contextual Zoning

Affordable housing is disappearing in Manhattan (and not just in Manhattan). Luxury decontrol has overtaken previously affordable havens like Stuy Town. Rising rents are forcing people out of their homes; communities are being decimated. Rentals in our neighborhood are filled with students and recent grads willing to share space with multiple roommates to meet exorbitant rents. Multiple payers push market rates even higher so that we have a kind of inflated rent zone in the LES that is supported by, and can only sustain, transient multiple renters. Such rents are prohibitive of permanence: they are accompanied by a loss of community and the proliferation of youth-oriented businesses -- bars and chain stores. We desperately need permanent affordable housing if the historic LES, with its ethnically mixed community, is going to survive as anything more than a campus nightlife strip.

Inclusionary Zoning (IZ)

In the world of triumphal capitalism, government is no longer expected to build housing. Instead, government gives incentives to private developers and hopes the developers do the work big government used to do. That's what inclusionary zoning is all about: trying to turn always robust American greed to good use.

IZ consists of a carrot and a stick. Government limits the FAR on development (the stick) but offers a bonus FAR (the carrot) if the developer will include some affordable housing. The typical IZ program includes 20% affordable, 80% market-rate (luxury). (This is the moment when you complain, "But that's just crumbs off the rich man's table!" Well, that's the world we live in -- FDR's face is on the dime, not the ten dollar bill.)

IZ can work as a disincentive to development if the stick is severe and the carrot small. That will preserve the neighborhood from development, but won't get you much affordable housing. And as rents rise towards luxury decontrol and preferential rents are being revoked (see Zoning for Dummies Part 3), merely preserving the buildings here in the community isn't enough to keep the community here in the buildings.

If you really want a significant contribution to affordable housing under IZ, you have to be willing to put up with a huge influx of luxury units -- for every four luxury units you only get one affordable unit -- and you need to offer the developer a box full of carrots in the form of a big FAR bonus. And that's how IZ opened the floodgates to development in other neighborhoods in which it has been implemented.

It all depends on how much affordable housing you want and how many luxury folks you are willing to put up with. Nothing against the wealthy -- great charm may be found among them -- but they bring with them huge glass buildings you don't want to live around, big banks you don't want to hang out in, restaurants you can't afford to eat at and stores you can't afford to shop in. And if you blink, you find that they've pushed out all the local spots you used to love that gave this place its character, which, btw, was based in its rich and long and diverse ethnic history, not on the latest whims of upscale fashion and conformity. Once you lose history and community, you can't get them back.

There's a fundamental tension in IZ between preservation and development. If we had better tenant protections, lower rent increases and no luxury decontrol, we might not be in this miserable bind where we have to beg for bones and depend on the devil for a house in his hell. But that's where we are: without IZ, no new affordable housing, just luxury, and, thanks to the deplorable new tenant laws, we're rapidly losing what affordable housing we have now.

On Site, Off Site

The IZ affordable housing does not have to be built on the same site as the luxury market-rate units ("units" is dismal jargon for "apartments"). It can be built anywhere in the community district (and if the development site is at the border of the district, it can be even be built outside the district, within a half mile of the development). So you could conceivably see luxury units built at one tiny end of the district and all the affordable units built far away, way over at the other end of the district in its poorest corner.

Housing Preservation and Development (HPD), which runs the IZ program, calls this, euphemistically, "flexibility."

There are, however, tax incentives for building affordable units into the luxury site. On the other hand, the bonuses for affordable housing can be sold by the developer, so one affordable housing developer can build affordable housing units and sell the bonus FAR to another developer who builds only luxury. That encourages off-site.

IZ Proposals

Assuming that large commercial streets could more easily sustain large development, our Community Board proposed two streets for IZ, Houston and Delancey. City Planning accepted these and added Avenue D. These three streets will not be zoned R7-A, but R8-A, which comes with a height cap of 120 feet, half again as high as the 80-foot R7-A cap.

The IZ component: without the affordable housing bonus, the FAR is 5.4. If you build 20% affordable housing, you get a bonus -- you can build up to FAR 7.2.

In other words, if you only build luxury housing (or don't buy the affordable housing bonus from an affordable housing developer), then you can't take much advantage of the 120-foot height of the lot. But if you do build affordable housing (or buy the affordable housing bonus from someone who has built affordable housing in the district), you can build much more densely in that same lot.

The Community Board has also asked DCP for IZ throughout the R7-A area: they've suggested a bonus of up to 4.6 FAR for affordable housing in R7-A. The 4.6 FAR would yield a densely built structure within the 80-foot height cap. Alternatively, it's been suggested that a better incentive would be to lower the luxury R7-A FAR way down to 2, and allow an FAR of 4.0 if affordable housing is included. That would be a lot like mandatory 80/20 and yield less bulky structures. We don't know yet what DCP thinks of any of these R7-A IZ proposals.

There's one last important piece to this puzzle. Renovating existing low-income housing counts as building affordable housing. A developer can, instead of building new affordable housing, renovate a building where the rents on average are affordable ("affordable" is defined as at or below 80% of the area median income (AMI) level). Then those apartments become permanently "affordable," meaning just that they can never be luxury decontrolled -- they remain permanently within Rent Stabilization, the rent increases determined, along with all stabilized rents, by the Rent Stabilization Board. And the cost of those renovations is not passed on to the tenants.

The consequences of these proposals depend largely on what there is available to develop. That's the topic of Zoning for Dummies Part Three: Impact, soft sites, protection.

The last part, Part Four, will be devoted to a general assessment of the DCP proposal including items to watch out for in the final proposal to be presented in October and what happens to the proposal after its October presentation.

Summary of Part Two:

IZ entails an FAR restriction on the construction of market rate housing along with an FAR bonus if the developer includes 20% affordable housing.

The affordable units and the market-rate units can be built on different sites.

The affordable units can be mere conversions of current low income housing to permanent low income status (with renovations).

DCP proposes IZ on Houston, Delancey and Avenue D, within a contextual R8-A zone, 120 foot height cap.

Without inclusionary housing: FAR 5.4.

With inclusionary housing (20% affordable housing): FAR 7.2.

Affordable = 80% of NYC area median income (AMI).

I hope some of you find this useful for understanding current zoning discussions. It was originally published on my blog Save the Lower East Side


Blogger Carla said...

It is a good thing that the 80% of the housing in New York can be considered affordable. There are only a few countries where the percentage is even higher: Argentina, for instance. I was there a few years ago and saw many buenos aires apartments that were being offered for less than 1000 pesos per month. There, 90% of the housing is considered affordable. They have less homeless people than the amount they had two years ago!

10/31/2012 10:43 PM  

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