Testimony on Mandatory Inclusionary Housing

Thomas J. Waters

Testimony of Tom Waters
Housing Policy Analyst, Community Service Society

Public Hearing on Mandatory lnclusionary Housing

New York City Council Committee on Land Use, Subcommittee on Zoning and Franchises

February 9, 2016

Thank you for this opportunity to comment on the proposed zoning text amendment creating a mandatory inclusionary housing program. The Community Service Society is an independent nonprofit organization that addresses some of the most urgent problems facing low-wage workers and their communities here in New York City, including the effects of the city’s chronic housing shortage.

Mandatory inclusionary housing is an appropriate use of the city’s zoning power to further the public interest in an adequate supply of affordable housing. It is also a creative response to the fact that the city has a dwindling stock of developable land to use as a resource for its affordable housing activities. On the other hand, inclusionary zoning raises a number of important problems as an affordable housing strategy, because of the way it links affordable housing development to market development.

The de Blasio administration’s affordable housing plan is predicated on the idea that rezonings in neighborhoods like Jerome Avenue and East New York can stimulate investment in market rental development, and that some of this investment can be steered into the creation of affordable housing. In the early years of the envisioned redevelopment of these neighborhoods, most or all of the new apartments built will be subsidized affordable housing, but at some point the city hopes that developers will begin to build market rentals, and affordable housing can be piggy-backed onto these projects through the inclusionary zoning provisions. This will only work if the new development induces new demand for housing in the neighborhood from people with higher incomes and the ability to pay unsubsidized rents on new construction. But this new demand will inevitably apply to the existing housing stock as well, leading to rent pressures on the neighborhoods’ low-income residents.

The affordability benefits from a rezoning must be enough to mitigate the rent pressures that result from redevelopment. And that means that they must target the households most at risk: those with the lowest incomes.

More than a third of the city’s households have incomes that the federal Department of Housing and Urban Development describes as “very low,” below 50 percent of the statistic known as HUD Area Median Income – about $38,000 a year for a family of three.  More importantly, almost three quarters of the households facing excessive rent burdens (more than 30 percent of their income), are in that income category. And in many of the neighborhoods that will be affected by inclusionary zoning, the figures are even higher. In the area within two blocks of the Jerome Avenue rezoning study area, 65 percent of households have incomes below 50 percent of HUD AMI, including 44 percent of households below 30 percent of HUD AMI. Out of rent-burdened households in that area, 88 percent have incomes below 50 percent of HUD AMI, including 65 percent below 30 percent of HUD AMI.

Yet these same neighborhoods may end up being rezoned with “option 3” under the mandatory inclusionary housing proposal, which would require 30 percent of apartments be affordable, but allow the affordable apartments to be targeted to households making up to 120 percent of HUD AMI, or $93,000 a year for a family of three. Even if this option is removed, as it should be, the affordable apartments set at 60 or 80 percent of HUD AMI will still be out of reach for most neighborhood residents.

City housing officials have pointed out that they can build on the affordability levels in the inclusionary zoning requirements by adding subsidies such as Low Income Housing Tax Credits and low-interest loans. This is true and important, but once rezoned neighborhoods become more attractive to higher-income people, developers will become less willing to accept these additional subsidies and the lower rents that result. An inclusionary zoning policy for these neighborhoods must include provisions that ensure that developers continue to include housing that fits the needs of the community, even after it ceases to be economically necessary to do so.

Many of the city’s low-income neighborhoods have opposed the mandatory inclusionary housing proposal that we are considering today, through their community boards, and they have done so because they lack confidence that rezoning-based redevelopment will meet their most pressing needs. The City Council ought to take this message seriously and amend the proposal so that it includes firm commitments to include housing that matches community needs, even if that requires the use of subsidies.

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