When we look at the architecture of New York, we can see that the city is not a single economic city. Property taxes are the city’s largest source of revenue, and both New York City and New York State are working to increase property taxes through changes in zoning, planning policies, reinterpretation of zoning and building ordinances, rebuilt economic Taxes and credits, public-private joint ventures and private real estate deals for major political donors to subsidize new developments are just some of the options.
All these multi-billion-dollar developers provide billions of dollars in direct and indirect subsidies. This is a temporary list of views on New York’s “blocking” construction. Note: The first three rules of real estate are traditionally “location, location, location.” The following discussion of affordable and unaffordable housing is specific to the New York City of our time.
Large real estate company
In New York City and New York State, no group is more powerful than the wealthiest developers, represented by the New York Real Estate Board. Its members are among Gov. Andrew Cuomo’s biggest donors; they give Gov. Kathy Hochul more money, and in less time. In New York, former Mayor Bill de Blasio has been embroiled in a series of scandals related to developer donations.
Lobbyists for big real estate companies write legislation in Albany. Big real estate companies always have a lot of representation on city planning boards and state and city economic development offices. Like lobbyists in Washington, D.C., individuals from the big real estate companies have their hands full on both public and private matters, serving state and city agencies while occupying high-paying jobs in real estate development. The result was a political culture around Albany and New York City Hall that believed that what was good for the big real estate companies was what was good for New York.
Sam Stein chronicles the rise of the big real estate companies in his book Capital, Gentrification, and the Real Estate Nation. He pointed out that New York once had financial capital, real estate capital and industrial capital. But big real estate companies conspire to drive industrial capital out of town because real estate developers and investors have different goals than industrial companies. Industry wants cheap factory land and cheap housing for workers. Developers and real estate investors want ever-increasing land prices and housing profits.
Big project
When construction of the World Trade Center and Battery Park City—the two largest developments in Manhattan at the time—began in New York state, they used public agencies authorized to issue bonds to finance the projects. Battery Park City was profitable and contributed a lot of money to the state treasury. The WTC office building was less profitable until the Port Authority sold it for a decent price in 2001 (shortly before 9/11).
Despite the success of these projects, in the 21st century, New York City and New York State are more inclined to adopt a post-Reagan public-private model for large-scale development. Two of the projects, Atlantic Yards in Brooklyn and Hudson Yards in Manhattan, are built on the open railroad. By any measure, Atlantic Yards hasn’t done well in its nearly 20 years of existence. “Affordable housing” there isn’t competitive with market-priced housing. The developer was unable to meet its obligation to complete the project by 2016. Moreover, the plan to build most of the affordable rental housing on the platform above the railway bureau has also been delayed.
At Hudson Yards, the city has spent billions subsidizing Ross-related companies’ development projects that have underperformed since the pandemic. Often referred to as “Houston on the Hudson”, it is very unpopular with New Yorkers.
Hudson Yards has city-subsidized supertall office towers. Even before the pandemic, Hudson Yards took more than three-quarters of its office tenants from buildings in Midtown Manhattan because of excess space in large office towers. With more vacant office space than ever since Covid-19, no one knows how office buildings will be used in the future. Still, New York state is proposing to subsidize nine more supertall towers around Penn Station, next door to Hudson Yards.
Supply and demand
The problem with New York is that it promotes the wrong kind of development, not that the city and state are preventing it. To borrow the words of then-Mayor Bloomberg, these lavish buildings made the city a luxury you had to pay for. Supertall buildings at Hudson Yards and Billionaires Row have pushed up land prices across Manhattan, making it impossible to build middle-class or low-cost housing. Also, tall buildings cost significantly more per square foot to build than 8- or 20-story buildings: Between the cost of land and the cost of construction, only very expensive apartments are profitable.
NYC and the big real estate companies speciously argue about the supply and demand theory of affordable housing, saying that building any type of apartment will somehow infiltrate apartments that are affordable to all—as if the glut of Mercedes-Benz S-Class luxury The sedan will lower the demand for the $16,000 Kia Rio as well. But after 20 years of “markets” and city subsidies, mostly luxury and ultra-luxury condos, we can see that in New York’s modern global market, this is as unreal as the Laffer curve of Reaganomics.
Affordable Housing
History has shown that the only way to make affordable housing accessible to all is to build sufficient affordable housing for all who need it. The U.S. came closest to having enough affordable housing in the boom years of the post-World War II decades, when the federal government brought about an unprecedented alleviation of income inequality and built federally subsidized affordable housing. Looking back, we can see that other federal actions, such as funding the interstate highway system, caused massive exodus from the city. This, in turn, has driven down the cost of urban land.
The regrouping of New York and other global cities has brought land prices back to historic highs, preventing the development of housing projects that most residents can afford. Elsewhere in the Western world, the most successful models for overcoming this problem are cities like Amsterdam and Vienna, which combine public and private financing methods to create rental apartments that most people can afford.
In 2022 we have a climate crisis, a health crisis, a jobs crisis, a housing crisis, an inequality crisis, what many consider a political crisis, and possibly a growing crime problem – none of which will be achieved by building more luxury apartments and super high-rise office buildings. There is a supply and demand problem: There is overwhelming demand for affordable housing for the average New Yorker, and public-private partnerships will never provide a solution. We need to return to the development approach of harnessing the power of the state for the benefit of all.