Citizens Budget Commission Releases Strategies to Boost Housing Production in the New York City Metropolitan Area to Improve Affordability and Enhance Competitiveness

Report Recommends Changes to City and State Policies Including Zoning, Planning, Building and Construction Codes, Property Taxes, and Tax Breaks

The Citizens Budget Commission (CBC) today released a report identifying strategies to boost the sluggish rate of housing production in the New York City metropolitan area. In the wake of the Covid-19 pandemic, policies that increase the supply and diversity of housing will have economic and social benefits and should be part of any strategy to help rebuild a more affordable New York City.

Between 2010 and 2017 New York City’s housing stock grew less than 4 percent, slower than most large cities, including San Francisco. Housing supply did not keep pace with job growth, as employment grew 22 percent during the same time period. An inadequate supply of housing has contributed to increased competition for scarce housing resources, resulting in rents outpacing incomes, an increasing number of over-crowded households, and a rapidly declining number of units affordable to low- and moderate-income households.   

“Shaping a housing market to meet all New Yorkers’ needs requires a concerted effort from the City and State,” said Andrew Rein, President of the Citizens Budget Commission. “While the current economic crisis may slow construction in the near term, enacting policies now to increase production will catalyze a more competitive and equitable housing market as the economy recovers. Building more housing for various types of households can help make the New York region more affordable and competitive for generations to come.”

New York’s low housing production stems from decades of City and State policy choices–some deliberate, others unintended– that have slowed the pace of new construction in many neighborhoods. Key among them are the City’s planning actions and zoning code that have limited the city’s ability to grow and adapt. 

Other hindering factors and policies include high land and construction costs; obsolete construction and building codes; caps in State law on floor area ratio, which limits density; unique construction liability statutes; and a distortionary and inequitable property tax system that taxes multifamily buildings at a higher rates than comparable owner-occupied housing.

A further impediment is lack of State policies to promote housing production in suburban communities. Housing production rates in New York’s downstate suburbs (Westchester, Rockland, and Long Island) are among the lowest in the country, and far lower than in metro-area New Jersey and Connecticut suburbs and the suburbs outside San Francisco, Boston, and Washington DC.

To increase the supply of housing, the CBC makes six recommendations:

City Actions

1. Plan for growth with a comprehensive, citywide housing strategy.
   • Following the example of peer cities that build more housing, New York City should have a citywide housing plan that quantifies the city’s current and future housing needs at all market segments, identifies the gap between these needs and existing zoning capacity, and sets ambitious but achievable citywide production goals, including by market segment.
2. Zone for growth by updating the zoning code to increase capacity.
   • The uneven distribution of development sites, coupled with the preponderance of low-density zoning, will make it difficult to boost housing production without rezonings that increase opportunities for as-of-right development throughout the city.  A citywide approach also would avoid the contentious, expensive, and time-consuming neighborhood-by-neighborhood rezoning strategy, in which some neighborhoods make room for new development while others maintain zoning rules that block growth.
3. Modernize outdated building code provisions.
   • The City should continue to revise outdated or unique code requirements that increase costs and adopt strategies to encourage construction industry innovation.

State Actions

4. Pass laws to encourage municipalities to zone for growth.
   • State lawmakers possess considerable, though rarely exercised, power over laws that allow local governments to establish zoning and land use regulations. New York State lawmakers could require municipalities to zone for both more housing and a wider variety of housing, including accessary dwelling units and multifamily residences, particularly in areas near commuter rail stations.
5. Reform laws that disincentivize housing production.
   • Some New York State laws increase the cost to build new housing. Examples include the Scaffold Law, which mandates an absolute liability standard for construction insurance; the cap on floor area ratio; the Multiple Dwelling Law, which makes many small multifamily buildings less economically feasible than single-family homes; and the recently-amended rent stabilization laws, which apply to many market-rate units built in middle-income neighborhoods under the Affordable New York tax incentive program, commonly referred to as 421-a.
6. Enact property tax reform.
   • State lawmakers should pass reforms to make the City’s property tax system more equitable and efficient. Comprehensive tax reform should include provisions to reduce the high tax rate on multifamily rental buildings relative to single family homes and other owner-occupied units.

Read the full report here: https://cbcny.org/research/strategies-boost-housing-production-new-york-city-metropolitan-area.