Analysis of de Blasio’s Big SoHo/NoHo/Chinatown Lie
We have a new video for you! But first, let us recapitulate how we got here…
An extremely profitable displacement plan is what de Blasio wants to give SoHo/NoHo/Chinatown landlords for Christmas. The City Council’s Zoning Subcommittee is about to vote on it and likely determine its fate. From the outset, the City has rationalized this gift by claiming that it will produce much needed affordable housing in wealthy neighborhoods that have too little of it. For the City, the prospect of new affordable housing has served as both shield and sword. On the one hand, it has helped the administration cast the plan’s many destructive effects — the displacement of long-time residents, the demolition of historic buildings, the departure of small businesses, the sacrifice of public airspace for private gain — as a small price to pay for the reward of affordability. On the other, it has helped city officials label those who opposed the plan as anti-affordable-housing racists. Unfortunately for those hoping to ram the proposal through, however, the plan is so bad that only those who stand to gain from the upzoning (and their henchmen) support it. Everyone else, including all local groups and numerous tenant, housing, and preservation groups, have come out against it.
As we have documented throughout the process, the magnitude of the upzoning creates an irresistible incentive to harass, buy out, or otherwise push out rent regulated tenants in order to demolish the buildings where they reside, and develop projects that take full advantage of the enormous windfall granted by de Blasio’s plan. As a result, even if the promised affordable housing were built, it would not make up for the loss of existing rent regulated units in the area. Consequently, far from making these neighborhoods less expensive and more inclusive and equitable, it would have the opposite effect. It would make them less affordable and less socio-economically diverse than they currently are. If that’s the case even if the projected affordable housing is built, then consider the plan’s impact if it is not.
Mandatory Inclusionary Housing (MIH), the de Blasio Administration’s signature affordable housing program, has been widely regarded as a failure. In theory, it is supposed to produce affordable housing without any further public subsidy than the potential value generated by upzonings. The program forces developers hoping to realize that value through new construction to apply a small portion of their new-found wealth to the production of affordable units. The problem has been that these upzonings have taken place in neighborhoods where the strength of the real estate market does not support the cross-subsidy of affordable housing. As a result, most MIH projects thus far have required multiple layers of additional public subsidy. To make matters worse, the affordable units required under MIH tend to be more expensive than housing in those neighborhoods — housing that the upzonings put at risk of demolition. This dynamic has led critics to call MIH a tool of displacement and gentrification. Perhaps inspired by such criticism, the City looked for its next target among already-gentrified neighborhoods where the real estate market could cross-subsidize affordable housing and thought it found an answer in SoHo/NoHo/Chinatown.
The possible application of MIH to SoHo/NoHo/Chinatown, however, has not resolved the program’s multiple deficiencies. For one, however wealthy these neighborhoods might seem, hundreds of its residents live in rent regulated housing, would face the threat of displacement under the plan, and are actually too poor to qualify for MIH affordable housing. Second, while the strength of the real estate market in these neighborhoods is more than enough to cross-subsidize affordable housing, it makes it more profitable not to do so. We have explained in several reports (here too) that in every site where the City projects the construction of affordable housing, the plan allows more market rate development to take place when the affordable housing is excluded. This led us to conclude that the proposal disincentivizes the production of affordable housing.
In response, the City has simply asserted, without any evidence, that developers would choose nonetheless to build residential development and meet the affordable housing requirement, rather than opt for all-market alternatives. Along these lines, a local developer testified a few weeks ago at a City Council hearing, indicating the number of affordable housing units that a project on his sites would yield according to his financial model. Inspired by his testimony, we decided to take a closer look ourselves by building our own model. Our report shows the results.
The model finds that, based on market assumptions, the internal rate of return for an MIH project on those sites would be less than half that of a market rate condo/office development. It also shows that even if you lowered the amount of allowable commercial square footage in the area by 33%, the condo/office scenario would still remain far more profitable than an MIH project. We estimate that similar analysis throughout the neighborhood would reach comparable conclusions, demonstrating yet again that affordable housing has never been a realistic goal of this plan, but rather a rationalization by de Balsio to offer up yet more neighborhoods for fat developers to suck on the public teat.
Help send this plan back to the drawing board.
Tell City Councilmembers to follow the facts and reject the SoHo/NoHo/Chinatown upzoning, displacement plan.
Call your Councilmember and tell them to vote NO. Tell them the changes to the plan being contemplated aren’t enough, the plan needs to be scrapped and begun again.
Get your Councilmember’s name and phone number here.
Call City Council Speaker Corey Johnson and urge him NOT to support this deal in ANY form: 212-564-7757 and 212-788-7210.
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