Last week, the New York Times asserted that a new report from the Furman Center for Real Estate and Urban Policy at the New York University School of Law “recommends that the city require developers to include lower-cost apartments in large apartment buildings in fast-growing neighborhoods.”
The study does give careful consideration to inclusionary zoning, under which the city would give developers incentives or mandates to set aside a certain fraction of apartments as affordable housing. It provides a detailed economic analysis of what kind of mandates might be feasible, under what circumstances. And it’s clear on its recommendation: “If the City implements any mandatory zoning program, it should proceed with caution.”
The study’s authors—UCLA Law School dean Michael Schill, ex-HPD official-turned-developer Jerry Salama, and housing finance expert Jonathan Springer—proceed to list six precautionary measures the city could take to ensure mandates’ success, should it proceed with such requirements. Among them: Build in a “safety valve” so that if certain market conditions change significantly in the future, affordability requirements would be automatically modified.
The city is not currently considering mandatory inclusionary zoning. The rezoning plan for the Williamsburg and Greenpoint waterfronts, set for City Council review next month, uses incentives to promote affordable housing development, and the city’s planning and housing departments have staunchly resisted calls for mandates from affordable housing advocates.
The report, “Reducing the Cost of New Housing Construction in New York City,” is an update of a 1999 study that influenced the Bloomberg administration’s housing policies.
Many of its recommendations repeat those in the earlier report, but it also includes something new: a call for tighter control over how developers use public money. The report recommends enforcement of prevailing wage laws, which require projects receiving certain government funds to pay workers at preset rates, higher than what the market pays for non-union construction work. Currently, enforcement is poor and abuse widespread; developers frequently pay workers much lower wages and then pocket the government funds.
It also asks the state legislature to revamp its Brownfield Cleanup Program. As City Limits has reported, the tax credits issued under the program are pegged to the entire cost of a development project, and not only the cost of environmental cleanup. What’s more, sites with very little contamination are eligible. As a result, high-end projects can reap tens of millions of dollars in state support. The report calls for the tax credit to be increased to a higher percent of costs—they currently start at 12 percent—but linked solely to the cost of remediation.
Waste and fraud are inflating costs overall, say the study’s authors. “We want to create a level playing field,” explains Springer, who describes the problem of prevailing wage nonpayment as “rampant.” Without serious enforcement, “you have a regulation that increases costs,” Springer says. “You open up the potential for corruption, for people trying to game the system. And that’s indeed what has happened.” The report calls for district attorneys, the Justice Department, state attorney general, and state and federal labor departments to increase investigation and enforcement of violations.
On brownfields, coauthor Salama says the extremely high price of the program—which is poised to cost many times more than the $135 million budget set by the legislature—has led to widespread concern about its long-term viability. That’s making it difficult for developers to secure private financing for construction on former industrial sites. “There’s a lot of uncertainty,” says Salama. “A lot of them own brownfields and are not doing anything because they can’t do anything.”