Gov. Hochul talks clean energy (photo: office of Governor Kathy Hochul)
It’s time to Upgrade New York.
Last summer Governor Hochul signed the Utility Thermal Energy and Jobs Act, sponsored by Senator Kevin Parker and Assemblymember Latoya Joyner, which passed unanimously in the Senate and nearly unanimously in the Assembly. This first-in-the nation law — supported by the New York State Building and Construction Trades Council, New York State AFL-CIO, utilities, climate justice organizations, building industry representatives, and environmental groups — is a critical first step to rapidly decarbonizing our buildings at a neighborhood scale with Thermal Energy Networks, while preserving and creating middle class jobs. The transformational law is being duplicated in a number of states here in 2023.
Now, the Legislature can and must build off this success to Upgrade New York.
During Climate Week, the Governor proclaimed New York must lead by example and directed state agencies to adopt a BuildSmart NY program, administered by the New York Power Authority, to achieve significant emissions reductions from state-owned buildings, campuses and facilities by 2025. Buildings are the largest source of emissions in New York state, contributing over 32% of all pollution. Rapidly eliminating on-site emissions from the state’s buildings should be a top priority as the state seeks to meet its ambitious climate goals.
One of the largest owners of buildings in New York is the state itself – with a buildings portfolio of more than 400 large campuses and facilities that spans across every region, each with multiple buildings that rely on oil and gas for heat, hot water, and cooling. Some of the highest emitting facilities include Empire State Plaza; Upstate & Downstate Medical Centers; SUNY Stony Brook, Albany, Buffalo, and Binghamton; and CUNY’s Brooklyn, City and Hunter Colleges.
The Legislature can lead by example to upgrade New York this session and mandate that all state buildings, facilities, and campuses fully decarbonize by eliminating on-site emissions by 2040. The Legislature can deliver immediate results by approving the funding necessary to ensure that projects to eliminate on-site emissions from 15 of the highest-emitting state-owned campuses are shovel-ready by 2025 – which would cut the overall pollution from state-owned buildings by 40%.
Because these high-emitting state campuses and facilities have multiple buildings, they are prime candidates for Thermal Energy Networks (TENs). TENs connect multiple buildings together with each other in a shared network that allows transfer of energy with thermal sources like geothermal boreholes, surface water, and even wastewater. TENs are super high efficiency systems that won’t strain the electric grid even during peak seasons. More importantly, TENs provide a true transition for the very workforce that currently install and maintain fossil fuel equipment and piping systems.
Investing in and building TENs at state facilities and campuses will serve as anchors that will preserve and create middle-class jobs and will ensure New York’s union workforce will be at the forefront of the state’s clean energy transition.
In order to ensure long-term careers for existing and new union members, the Legislature should include robust labor standards and require at least 40% of overall investments and benefits from the work of decarbonizing state, buildings, facilities, and campuses go to residents of New York communities disproportionately impacted by climate change (DACs) as defined under New York’s Climate Law. Utilizing the NYC Building and Construction Trades model of direct entry into apprenticeship programs will allow residents of DACs to gain access to union careers and a pathway to the middle class.
Creating this pipeline of work to decarbonize over 400 campuses and facilities over the next decade is a critical first step that will lead to jobs, recruitment into unions’ direct entry programs, pre-apprenticeship program grants, stipends, and wrap-around services to remove barriers. A long-term pipeline of work is sensible policy that creates the necessary workforce certainty that is required to determine training needs, recruit workers into programs, train workers in time, and build the highly trained workforce necessary to decarbonize our state.
The Legislature can lead again and enact this budget to appropriate the necessary funding, establish requirements for 15 state campus and facility shovel-ready projects by 2025, and mandate that all state-owned buildings facilities and campuses eliminate on-site emissions by 2040.
By doing so, legislators can chart the next frontier to build healthier, climate-resilient communities and create equitable middle-class union careers that ensure New York has the skilled workforce of tomorrow to realize our clean energy future.
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Lisa Dix is the New York Director of the Building Decarbonization Coalition. John Murphy is the International Representative for the United Association of Plumbers, Pipefitters and Sprinkler Fitters in NY.
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Housing in the offing (photo: Ed Reed/Mayor's Office)
We all benefit from an inclusive city that allows all types of people, not only privileged residents, to live with dignity and security. Yet, New York City continues to become an even more impossibly expensive place to live, disproportionately displacing communities of color, “essential workers,” artists, cooks, security guards, drivers, retail workers, and their families.
If we truly want to overcome this disparity, a plan to provide housing for all must deliberately aim to fund the true cost of building enough low-rent units to meet the needs of lower-income residents.
The lag in supply of new low-rent units will otherwise cause rents for these residents to continue to rise, forcing further departures. Regrettably, neither housing plans put forth by elected officials nor existing affordable housing programs are adequate to respond to the scale of this crisis.
Nevertheless, a realistic and feasible strategy to build enough affordable housing does exist. The direct subsidy of private-sector development of low-rent units with public funding is a cost-effective and efficient means to accomplish the essential goal of providing quality housing for all.
In response to the crisis, elected officials have set targets in the hundreds of thousands of housing units. While the word “affordable” has been deployed in press releases, the specific number of low-rent units geared to the lower-half of households by income to be built in the city is yet unclear. The worry is that fulfilling a promise to build new housing of any sort, while challenging, admirable, and necessary, would not provide for those most in need, in danger of displacement, or vulnerable to homelessness. Importantly, even on their own terms, detailed support has not been provided to demonstrate how these proposals would produce enough low-rent units to manage the crisis.
The laundry list of proposed zoning and regulatory reforms is meant to be builder-friendly and to streamline the approval process. While these policies may help reduce the power of wealthy enclaves to oppose affordable housing, they would also reduce the ability of vulnerable residents and marginalized communities to protect the neighborhoods from the detrimental effects of gentrification where they can still afford to live.
Most significantly, these proposals do not do nearly enough to address the most significant constraint to providing enough housing to lower-income households – the high cost of land and construction in New York City.
Conventional wisdom tells us that housing construction has not kept up with population growth. To the contrary, new housing has largely matched the increase in total households. From 2010 to 2020, the city gained 144,000 new households while building more than 186,000 new units. That net gain in total households, however, is deceiving.
In that time period, over 238,000 households earning in the top third of income arrived, while 94,000 in the bottom two-thirds departed, according to Census data. This outcome has been driven by a rise in the real median rent from $1,200 to $1,500 per month — a 25% real world increase on an expense that typically consumes 30% to 50% of a lower-income household’s income.
The notion that a less-constrained market and upzoning will spur enough construction to meet overall housing demand — including the need for low-rent units — is fundamentally flawed.
Developers will not construct apartment buildings for which revenues do not cover costs; nor will they construct more apartment buildings than they can rent. Because newly-constructed housing will always compete with pre-existing housing, no matter how many units are built, new construction cannot fill overall demand. Available pre-existing units will more often be filled by an influx of higher-income newcomers than by already overly-rent-burdened lower-income residents. As a result, residents who cannot afford the inevitable rise in rents are pushed out.
But what about existing affordable housing programs? These programs, most notably the 421-a tax exemption, Low Income Housing Tax Credits (LIHTCs), and zoning area bonuses, are not able to provide enough low-rent units to meet the city’s needs.
The inappropriately named “Affordable New York,” the last iteration of the 421-a tax exemption, ensured a portion of below-market units in new buildings geared to households earning “up to 130% of Area Median Income,” a level that nevertheless corresponds to the top 20% of New York City renters. While reinstating the expired program is crucial to continuing to ensure that the supply of market-rate rental housing is maintained, the exemption did nothing to increase the supply of truly “affordable” low-rent units.
For more than 35 years, the primary method of financing new affordable housing has been based on LIHTCs, a complex Rube Goldberg-type system of federal, state, and city sources requiring no or minimal private investment. While funding the construction of thousands of low-rent units, this program is capped at the federal level, limiting the number of units built annually. The economies-of-scale necessary to reduce administrative and construction costs for the most part preclude their use for projects with under 50 units, narrowing the number of available sites that can be used.
In addition, zoning area bonuses for the construction of low-rent units, known as Inclusionary Housing, are attractive because government expenditure is not required. Here, free additional zoning area for developers is meant to offset a portion of below-market rental units in new otherwise market-rate buildings. Another advantage of the free additional area is that project feasibility is not contingent on land price variation throughout the city.
Zoning area bonuses, however, don’t work where market rents aren’t high enough to cover costs. Yet, in expensive areas of the city, they are inherently inefficient because the fully monetized value of the zoning area bonus is not realized in the inherent subsidy.
What’s more, the stipulated reduced rents are either not high enough to cover their added construction cost or not low enough for lower-income households. Indeed, from 2016, when New York City’s Mandatory Inclusionary Housing (MIH) program was enacted, only 2,065 units had been approved under MIH as of January 2020 – even before the construction slowdown caused by the pandemic struck.
The key to producing enough affordable housing in New York City is to contribute the additional funding to cover the cost of building the necessary number of new low-rent units. This is where the direct subsidy of private-sector development with public funding can make up for the shortage of new low-rent units that the market will not provide. Direct subsidies, in effect, would reduce the overall cost of development projects so that low rents are sufficient to compensate private investment.
Together with standard equity investment and debt financing, direct subsidies would avoid LIHTC financing and its cap altogether and could be used for any sized project. In addition, direct subsidies would significantly reduce bureaucracy, the overall cost to the government, and the time required before construction can start.
By leaving subsidies in place upon completion, a developer could even be encouraged to hand over a new building to a tenant co-op ownership association in exchange for an investment return suitable to the inherent risk undertaken.
Along with the same tax exemption for LIHTCs and 421-a, a direct subsidy of $175,000 per unit, an amount comparable to what the city’s housing agencies (HPD/HDC) already supplement to LIHTC projects, would yield a range of new low-rent apartments. This range could include studios with rents of $1,200 to $2,100 per month with a weighted average of $1,750 per month and two-bedrooms from $1,650 to $2,600 per month with a weighted average of $2,250 per month.
In conjunction with existing programs, direct subsidies totaling $1.5 billion annually would fund the additional construction of 8,500 new low-rent units per year — equal to the number of lower-income households that left the city annually between 2010 and 2020.
Funding can be found by rectifying the ingrained unfairness of a regressive property tax system that over-taxes multi-family rental buildings in comparison to co-ops, condominiums, and single-family homes. For example, currently the value of luxury condominiums and co-ops are assessed for tax purposes the same as nearby rental buildings. As a result, the overall effective tax rate on their real-world value is 30% lower than for rental buildings, with an increasingly disproportionate share of this disparity allotted to higher valued properties. In other words, gentrification, and correspondingly displacement, are effectively now being subsidized.
Simply equalizing the effective tax rate on condominiums and co-ops would yield an additional $1.95 billion annually. Reforming the property tax on single-family homes would yield even more.
To augment these funds, like MIH provisions, developers of luxury buildings could purchase zoning area bonuses at market prices directly from the city. Monetizing the actual market value of zoning area bonuses could fund the construction of twice as many new low-rent units than by offering the free zoning area in MIH. In addition, fees could be charged for building above certain height thresholds to compensate for the effects of extremely high towers.
Ultimately, providing affordable housing for all New Yorkers is a choice — our collective choice, not to be left to individual spirits. Our underlying incentive is to sustain a New York that is home to diverse culture and communities. To solve the housing crisis, we need to come to grips with its price tag. An actionable plan needs a measurable goal, an understanding of its cost, and a way to pay for it all. The direct subsidy of new construction of low-rent units with public funding will ensure supply will meet demand even when the market alone cannot.
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David Finehirsh is the Principal of Urban Artisan LLC, a development firm in New York.
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Gov. Hochul pitches her housing plan (photo: Governor's Office)
You can’t talk seriously about Governor Kathy Hochul’s proposed New York Housing Compact without acknowledging with respect that she is the first Governor in decades to try to get localities in the state to take on at least some of their fair share of housing need.
It is also clear from examining one set of her proposed “preferred actions” that she understands the exclusionary effect of lot-size minimums, height limits, lot coverage restrictions, and parking minimums on the ability to construct multi-family housing. More transit-oriented housing, more accessory dwelling units (ADUs), every locality (and every community district) having to pitch in: all solid goals.
Unfortunately, the Governor wanted to believe that “buy-in” could be achieved with an approach that, by any sober calculation, does not actually require heavy lifting from localities; that bends over backwards to give localities enormous lead-time for compliance; and that features more carrots than sticks. As they release their one-house budget resolutions this week, the Assembly and Senate are apparently pretending in their initial negotiating positions that an all-carrots approach will, magically, be sufficient.
It never works that way. I know from seeing the federal government eschew enforcement of the central, end-exclusionary-zoning provision of the historic 2009 Westchester housing desegregation consent decree won by the Anti-Discrimination Center in favor of the buy-in approach. The result? Local politicians of both parties unrelentingly resisted change anyway, and the promise of the decree was lost.
So don’t be looking for localities to be welcoming affordable housing because they can reduce the overall volume of housing to be built by doing so. There must be a required minimum component of affordable units in each development so that each is mixed-income and can contribute to easing the affordable-housing crisis. That’s true both in transit-oriented-development (TOD) areas, where under Hochul’s plan development appears to not have any affordability requirement to be a “qualifying project,” and in the equally important non-TOD areas. Failure to build affordable housing in non-TOD areas will leave vast areas of the suburbs as grotesquely racially-segregated as they are now.
And to the extent that we ultimately get to the point that certain projects can be “fast-tracked” in non-compliant localities (not before 2027, and not before 2030 for those localities who come to permit ADUs and split-lots), a choice of requiring 20% of units at or below 50% of area median income (AMI) or 25% of units at or below 80% of AMI will have an entirely predictable, segregation-perpetuating result. Most everywhere, the 80% AMI threshold will be chosen, with the only exception being those community districts in New York City that already have high concentrations of low-income housing.
To adequately deal with the municipal resistance that is sure to come, the Housing Compact’s new legal mechanisms to shorten the process between proposal and resolution are welcome — but insufficient. History tells us that resistance will continue because municipalities know that, in the end, the ‘worst’ that can generally happen is that they will be ordered to do only what they should have done years earlier.
There are two simple mechanisms to create disincentives to the standard practice of delay, appeal, and delay some more. First, the proposal does not allow costs against the locality or its officers in proceedings before the planned “Housing Review Board” unless there is a finding of gross negligence, bad faith, or malice. In fact, localities and their officers should be made to think twice before rejecting development projects (or keeping them stalled) by the prospect of costs and attorney fees being awarded whenever it is determined that the project should have been allowed to move forward.
Second, the result of a rejection that is ultimately overturned should not only be the requirement that the project be approved. A ‘penalty’ that is a multiple of the units that had been delayed should be added to the locality’s obligation, with the penalty increasing with the delay that the locality has imposed.
In a similar vein – and knowing that resistance will come whenever requirements kick in – there is no reason for there to be an initial three-year safe-harbor extended to localities. Developers should be given an incentive to proceed now – at least in respect to localities that have regularly not been meeting what are the new targets – and desperately needed affordable housing will come into the pipeline more quickly.
To help facilitate that, the state itself needs to play a more active role in developing and facilitating specific projects in specific exclusionary areas. That includes working with for-profit and not-for-profit development partners to meet the state’s interest in creating affordable, segregation-reducing housing.
This can already be done independent of the Housing Compact under an existing state-law doctrine named after a case called County of Monroe. This doctrine allows for the setting aside of local zoning restrictions because of the state’s more substantial interest in this sort of housing development. (Committing to the deployment of County of Monroe for state-assisted and coordinated construction of affordable housing in localities where it is not wanted is far more critical than anyone has yet appreciated. The Governor needs to be clear to state legislators and to municipal officials that the status quo is no longer an option and that all a failure of cooperation in passing or implementing a real Housing Compact will yield is less municipal influence over the shape and location of projects that will be built anyway.)
Part of the state’s role – and here, again, both carrots and sticks are needed – will be taking on localities who deliberately fail to invest in water and sewer infrastructure precisely to avoid the creation of new housing.
The proposed Housing Compact doesn’t need to be watered-down as the “never-build” forces of the status quo maintain; rather, it needs to be strengthened.
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Craig Gurian is executive director of the Anti-Discrimination Center. On Twitter @pursuethefacts.
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