Market Urbanism

Liberalizing cities | From the bottom up

“Market Urbanism” refers to the synthesis of classical liberal economics and ethics (market), with an appreciation of the urban way of life and its benefits to society (urbanism). We advocate for the emergence of bottom up solutions to urban issues, as opposed to ones imposed from the top down.

Affordable Housing for the Rich and the Failure of Zoning Bonuses

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In the past I have not been kind to affordable housing programs. I have a lot of deeper problems with them that I’ll get to in a minute, but I think the extraordinarily high upper income limits on some of the projects are indicative of the broader problem of the essentially arbitrary and random (literally – they’re usually decided by lottery!) nature in which they’re doled out. In a way, even when the beneficiaries are blatantly undeserving, everybody wins – politicians get votes, and affordable housing advocates get paid. Everybody, that is, except market-rate renters, but when’s the last time they ever voted somebody out of power for sabotaging their interests?

Even with an upper income limit of $192k for the affordable units, they still can’t sell ’em

Anyway, your latest affordable housing outrage story comes from New York City (where else?) – specifically 138th Street in Harlem, where the 73 units at Beacon Towers are almost all under contract, and Curbed claims that most of the remaining units are income-restricted “up to $192,000”!!! Oh yeah, and they can’t even find enough people who qualify.

Which brings me to another point: the Beacon Towers are not towers, and are certainly not any kind of beacon. They’re eight stories tall, and considering we’re talking about new construction in Manhattan, I’m going to take a wild guess and say they built right up to the zoning envelope. The immediate neighborhood is a mix of turn-of-the-century five- and six-story walkups (but little in the way of even cornice lines), some post-war towers-in-a-park-style buildings that reach up to 15 (!!) stories, along with a smattering of parking lots and other woefully underused lots. As Robert Fogelson wrote in Downtown, the New Yorkers of 1900 fully expected that by 2000, the whole island of Manhattan would be a river-to-river block of commercial skyscrapers. Perhaps that was unrealistic even if there had been no zoning code, but I bet they’d be shocked to know that a hundred years into the future and we’re still building 8-story buildings in Manhattan.

To be sure, bad zoning laws and not affordable housing mandates are to blame for the fact that taller buildings aren’t allowed in America’s most desirable city. But wasn’t this something that affordable housing was supposed to alleviate? Urbanist boosters of the mandates often tout “density bonuses,” or allowing developers to build a little more in exchange for subsidized units, as a way of eking out a little more density from the zoning code. Clearly that didn’t work in this case.

In fact, back during the 2005 Chelsea rezoning, affordable housing advocates were actually successful in getting the district’s allowed density reduced, “in order to provide more incentives for developers to apply for higher density under the inclusionary housing program.” In other wards, completely subverting the original voluntary “density bonus” idea. I suppose it was inevitable – the “density bonus” concept was forged by planners as a way of achieving their goals by enlisting the support of affordable housing activists, but they failed to recognize that the whole scheme is really just an incentive for affordable housing activists to push for downzonings. After all, they are ideologically disinclined to trust in market mechanisms, and certainly don’t care about increasing the market-rate housing supply, which often comes in the form of new luxury construction.

Anyone else know of other instances of this happening? Is it systemic, or are most affordable housing advocates not that cynical? (…or do the zoning committees stop them?)

Comments

  1. Stephen Smith wrote (numbering, added text within brackets and added emphasis is mine — BH):

    [1] “To be sure, bad zoning laws and not affordable housing mandates are to blame for the fact that taller buildings aren’t allowed in America’s most desirable city. BUT WASN’T THIS [i.e., bad zoning laws that restrict the construction of high density construction (?)] SOMETHING THAT AFFORDABLE HOUSING WAS SUPPOSED TO ALLEVIATE? [2] Urbanist boosters of the mandates often tout “density bonuses,” or allowing developers to build a little more in exchange for subsidized units, as a way of eking out a little more density from the zoning code.”

    – – – – – – –

    Regarding [1]

    Benjamin Hemric writes:

    I could be wrong here, but I don’t think the reason for providing density bonuses for the construction of “affordable” housing was “ever” to alleviate low supply (and resulting high rents) due to overly restrictive zoning (which creates a shortage of supply). Or, in other words, I don’t think it was “ever” to get around bad zoning laws seen as overly restrictive.

    The rationale, instead, has “always” been to ensure that neighborhoods remain sufficiently diverse to stay healthy over the longterm — to alleviate the [supposed] problems to a district of over-gentrification, so to speak. (See Rationale #2, below.) And the provision of zoning bonuses has “always” been seen as a way of getting private developers to contribute to this goal at “no cost” to the city. Furthermore, in order to have developers provide such housing without creating neighborhoods that are [supposedly] overly dense, densities are lowered (when this is politically feasible) for all those but those developers willing to build affordable housing.

    It’s always seemed to me that “everyone” has been upfront about this all along.

    In think it helps to remember that, as mentioned in a previous comment, there appear to be basically three different and distinct rationales for affordable housing programs, and creating affordable housing through zoning bonuses has always seemed to me to be a product of Rationale #2 — NOT Rationale #1.

    Here are the three rationales:

    Rationale #1 — It is [supposedly] important for government to assist in the construction of low- and moderate-income housing because such housing is something that the marketplace [supposedly] cannot (or will not) provide. (This rationale is based upon the idea, so it seems to me, that overly “greedy” landlords and market failure — NOT overly restrictive zoning — are the underlying reasons for the inability of the marketplace to provide such housing.)

    Rationale #2 — In order for city neighborhoods to be truly healthy over the long haul, it is supposedly important that they be reasonably socio-economically diverse, and various forms of government intervention (e.g., zoning bonuses, etc.) are needed to accomplish this diversity because the marketplace is [supposedly] incapable of providing the needed diversity on its own.

    Rationale #3 — It’s important to our society, as a matter of social justice (and also, practically speaking, for long-term economic health) that geographical entities (incuding areas that aren’t cities) provide housing for the poor and the middle-class (particularly minorities) that have been excuded via overly restrictive zoning regulations.

    – – – – – – – –

    Regarding [2]:

    Regard [2], while it’s true that SOME boosters may tout “density bonsues,” as a way of eking out a little more density from the zoning code, I don’t this “ever” was the original rationale behind density bonuses for affordable housing. In other words, bonuses were originally provided, so it seems to me, to create diverse neighborhoods, — not to provide affordable housing in general.

    Benjamin Hemric
    Wed., April 27, 2011, 9:20 p.m.

    P.S. — As usual, I hope people won’t mind if any future posts of mine in this thread, if there are any, are done as independent comments (i.e., outside the nesting feature).

  2. I’m sure you’re right when it comes to most planners, but I have definitely heard urbanists (albeit not terribly influential ones) making the argument that inclusionary zoning is specifically a remedy for what they call “exclusionary zoning” (which is obviously where the term IZ comes from) – in other words, regular zoning. It seems to me that this rationale implicitly admits that to some extent IZ is there to solve gov’t failure, not market failure, although I understand the multifaceted nature of the program and people’s intentions, and I’m certainly not trying to argue that this is the majority opinion among IZ advocates.

    In any case, regardless of the rationale, would you not agree that using the term “density bonus” to apply to a place that has been intentionally downzoned so that developers will have to use the bonus is misleading, and that downzoning a place where you expect a “density bonus” to be applied runs counter to the stated goals of the “bonus”? After all, at that point it’s not really a “bonus” in any meaningful sense…

  3. Stephen Smith wrote:

    I’m sure you’re right when it comes to most planners, but I have definitely heard urbanists (albeit not terribly influential ones) making the argument that [“inclusionary zoning’] is specifically a remedy for what they call “exclusionary zoning” (which is obviously where the term [incusionary zoning] comes from) – in other words, regular zoning.

    Benjamin Hemric writes:

    In a sense, I think you and our language, too, are victims of marketing terminology here.

    Outside of New York City (such as in its surrounding suburbs), there has been outright exclusionary zoning (e.g., minimum lot size requirements, etc.) meant to exclude the less affluent, especially those belonging to certain minority groups. And “true” inclusionary zoning (as I understand it) is zoning in such areas that allows for the kind of higher density housing that is forbidden in other parts of the same locality. The rationale for the kind of affordable housing allowed by this zoning is Rationale #3 in my previous comment.

    However, New York City as a city has never practiced exclusionary zoning — the poor have never been , to say the least, totally zoned out of New York City — so inclusionary zoning, in the original sense of the word, has never been needed in New York City.

    But, it seems to me that the term inclusionary zoning was “stretched” to include efforts in New York City to provide low- and moderate housing in neighborhoods where the zoning isn’t excusionary at all — but where marekt demand is so high that rents have become too expensive for low- or moderate-income people. (This is Rationale #2.)

    – – – – – – – – – –

    Stephen Smith wrote:

    “It seems to me that this rationale implicitly admits that to some extent [inclusionary zoning] is there to solve gov’t failure, not market failure . . . ”

    Benjamin Hemric writes:

    “True” inclusionary zoning is meant to address governement failure; “NYC-type” inclusionary zoning is meant to address [supposed] market failure.

    – – – – – – – – –

    Stephen Smith wrote [added emphasis is mine — BH]:

    “In any case, regardless of the rationale, would you not agree that using the term “density bonus” to apply to a place that has been intentionally downzoned so that developers will have to use the bonus is misleading, and that downzoning a place where you expect a “density bonus” to be applied runs counter to the STATED GOALS of the “bonus”? After all, at that point it’s not really a “bonus” in any meaningful sense . . . ”

    Benjamin Hemric writes:

    Although I can see your point, I think bonus has meant something different to most people (at least in NYC) all along. (And the stated goals have been different.) I think for most people, “bonus” is, more or less, a synonym for “incentive” — as in “incentive zoning.”

    As mentioned in a previous recent comment, the 1961 zoning code provided bonuses (incentives) for the construction of office buildings with plazas. Later bonuses provided incentives for the construction of theaters in the theater district, for arcades in the Lincoln Center area, for indoor “parks” (e.g., the atrium in the Citicorp Center?), etc. So when bonuses were offered for “affordable housing,” this was only an extension of a pretty longstanding tradition.

    Perhaps because people have never REALLY accepted Jane Jacobs’ observation that high densities are, more often than not, healthy for city districts, (given the presence of certain other coniditions), people have really focused more on what the City gets for giving a “bonus” (the incentive), rather than in the benefits of high densities themselves. These things that the City “gets” are the goals; the goals aren’t increases in densities.

    Benjamin Hemric
    Thursday morning, 4/28/11, 12:25 a.m.

  4. Outside of New York City (such as in its surrounding suburbs), there has been outright exclusionary zoning (e.g., minimum lot size requirements, etc.) meant to exclude the less affluent, especially those belonging to certain minority groups. And “true” inclusionary zoning (as I understand it) is zoning in such areas that allows for the kind of higher density housing that is forbidden in other parts of the same locality. The rationale for the kind of affordable housing allowed by this zoning is Rationale #3 in my previous comment.

    However, New York City as a city has never practiced exclusionary zoning — the poor have never been , to say the least, totally zoned out of New York City — so inclusionary zoning, in the original sense of the word, has never been needed in New York City.

    But, it seems to me that the term inclusionary zoning was “stretched” to include efforts in New York City to provide low- and moderate housing in neighborhoods where the zoning isn’t excusionary at all — but where market demand is so high that rents have become too expensive for low- or moderate-income people. (This is Rationale #2.)

    Well, I have two things to say about this. The first is that I think you might be correct in the sense that the original implementation of inclusionary zoning did hew to this definition – I think it was Montgomery County, MD, which is a place that is dominated by single-family detached zoning. As for what the original intent of the IZ laws in NYC was, you may be right about that, but it doesn’t seem like there is any relevant distinction at this point. IZ programs all seem to be crafted slightly differently, but the overriding goals and political motivations seem similar to me.

    And anyway, I think it’s very logical to see zoning in NYC as being just as “exclusive” as in Montco, despite the fact that NYC isn’t zoning everything down to single-family detached. After all, property is not valuable and does not become scarce for its exact proportions, but rather for the value humans place on it, which at the end of the day we can only measure by price. Measured by market prices, zoning in NYC is a far more “exclusionary” of income in that the gap between the cost of construction and the price of a building is much higher in New York than it is in Montco. Put another way, NYC is much more desirable than it is dense, though it is very much both.

  5. Stephen Smith wrote [editing and added text within brackets is mine — BH]:

    As for what the original intent of the [inclusionary zoning] laws in NYC was . . . it doesn’t seem like there is any relevant distinction at this point [between “true” inclusionary zoning and “NYC-type” inclusionary zoning]. [Inclusionary zoning] programs all seem to be crafted slightly differently, but the overriding goals and political motivations seem similar to me.

    Benjamin Hemric writes:

    From what I can see, people don’t, in fact, have similar overriding goals and political motivations. As previously mentioned, there seem to me to be (at least) three different and distinct real-life rationales for “affordable housing,” and it seems to me that various people have different “mixtures” of the rationales that they support/don’t support to various degrees.

    In discussions of affordable housing, people are often using the same words, but actually giving them different meanings, which then confuses the issue — and gives rise to essentially unproductive discussions.

    It should also be pointed out, by the way, that “affordable housing” and “inclusionary zoning” are not necessarily the same thing, either. For instance, when NYC builds “affordable housing” in a low-income neighborhood, this is not likely to be a result of “inclusionary zoning” but some other program. So, here too, I think more useful to make carefull distinctions among concepts that are, in fact, different.

    – – – – – – – – – – –

    Stephen Smith wrote [editing and added text within brackets is mine — BH]:

    And anyway, I think it’s very logical to see zoning in NYC as being just as “exclusive” as in [suburban Montgomery County], despite the fact that NYC isn’t zoning everything down to single-family detached [houses] . . . . Measured by market prices, zoning in NYC is a far more “exclusionary” of income[,] in that the gap between the cost of construction and the price of a building is much higher in New York than it is in [Montgomery County]. Put another way, NYC is much more desirable than it is dense, though it is very much both.

    Benjamin Hemric writes:

    The rationale for “true” inclusionary zoning is a “social justice” one — to rectify the fact that a jurisdiction has used zoning to not carry its “fair share” of poor people (and thus shift burden of the poor to cities like New York, or Baltimore, D.C., etc.).

    This has never been true of NYC at all. New York City has a wide variety of neighborhoods in various price ranges and densities. (And as Jane Jacobs might point out, unlike Montgomery County, the priciest neighborhoods tend to have the highest densities and least restrictive zoning.) Despite the higher than necessary cost of housing in NYC (admittedly due, in part, to overly restrictive zoning), it nevertheless has plenty of poor people — more than its “fair share.” So NYC is in no way, so it seems to me, “just as ‘exclusive’ ” as suburban Montgomery County.

    Also, while I agree that NYC has overly restrictive zoning and this results in prices that are higher than necessary, one can’t put all of the high costs of housing at the foot of overly restrictive zoning. For one thing (among a number of things), demand for housing is also a product of an economy that is seen as a beacon of opportunity. Remember, in bad economic times (e.g., the 1970s), much of NYC had basically the same zoning it has today. But the problem in those days was oversupply and you almost couldn’t give a lot of NYC housing away — e.g., the abandonment of thousands upon thousands of apartments during NYC’s economic decline. Now that NYC’s economy has recovered, there’s greater demand, but that doesn’t mean that it is all because zoning in NYC is (supposedly) “just as ‘exclusive’ as large-lot zoned Montgomery County.

    I think it’s more complex than that — and that it’s important to recognize the differences between various suggested causes and proposed solutions.

    Benjamin Hemric
    Friday morning, April 29, 2011, 12:55 a.m.

  6. Affordable housing is really great but building new buildings in New York sounds interesting.. Well i think it’s a win win situation in both ways.. Nice article you have, thanks!

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