Empower developers to help solve New York's housing crisis

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It is hardly news that New York City has a housing problem. Affordable property for average New Yorkers remains a scarce commodity. In fact, recent statistics indicate that the housing crisis is only intensifying. Census figures released last month show that the city’s population is worryingly bloated, having ballooned already to a level previously forecast only in 2020.

Meanwhile, rental vacancies in New York stand at a paltry 3.5%. Property in the city is simply not keeping pace with the needs of its residents.

Mayor Bill de Blasio insists that his ambitious 10-year plan to construct 80,000 affordable apartments and 160,000 market-rate units is on track. Yet, the city’s population is booming beyond expectations and the housing squeeze remains as tight as ever. In a revealing recent interview, even the director of the Department of City Planning admitted that Mr. de Blasio’s decade-long housing scheme won’t be enough.

There is no quick fix or single factor which will solve New York’s housing woes. However, the de Blasio plan relies heavily on funding construction from the public purse, including an eye-watering$8 billion from City Hall. Although the mayor is clearly committed to the cause, a more nuanced approach is required. Purchasing fresh bricks and mortar sounds all well and good, but it is expensive, cumbersome and insufficient.

City Hall must instead complement the de Blasio plan with a concerted attempt to smooth the process for eager developers. And it doesn’t require out-of-the-box thinking, either. (Micro-apartments have made headlines, but it is questionable whether there will be demand for them.) Instead, there are plenty of developers looking to transform properties with two to eight units into smart condos in attractive areas of the city. This is exactly the type of accommodation which usually eludes the young professionals and families fueling New York’s population growth.

And yet, these developments are too often hampered or delayed by City Hall’s evident reluctance to issue building permits. Rick Chandler, commissioner of the New York City Department of Buildings, has made progress since his appointment last summer, helping pave the way for a 14% increase in permits in 2014. However, this must be viewed as a positive first step rather than a target met. Although the number of permits issued has increased each year since 2008, it remains way below the rates of 2005 to 2008. The 2014 boost saw permits approved for 20,329 residential buildings, a figure easily eclipsed by the 33,170 permits issued back in 2008. One onlyneed reflect on the estimated 8,300 or so “filing representatives,” better known as expediters, hired by builders to stand in line at the Department of Buildings, to comprehend the inefficiency that persists.

The government is understandably cautious when it comes to large-scale, multi-unit developments, which are often at the mercy of banking and market conditions. However, a different attitude is required when it comes to smaller developments. Typically completed in two or three years, they are less dependent on complex loans, more straightforward to monitor and less likely to be delayed. In other words, they can quickly add quality inventory for regular New Yorkers.

For City Hall, this is the ideal equation and the kind of initiative it should be eager to encourage. And yet, it is these projects in particular which suffer from Buildings Department foot-dragging. Arecent performance report from the Mayor’s Office of Operations revealed that Alteration-1 applications (one of four types of construction permits), which include interior conversions typically at the heart of small-scale developments, are delayed 16% longer than other building applications.

This anomaly can be partly attributed to an increase in Alt-1 applications stemming from the economic upturn. Evidence suggests that last year and in 2013, about half of the total building permits issued were for Alt-1 applications, compared with one-third in 2007. Yet the actual number of annual Alt-1 permits issued had not increased during that time. General permit processing is also likely slowed down by the city-wide building code changes which took effect at the start of 2015. The inevitable adjustment period has only prolonged the permit application process. And there is little doubt that February’s bribery and corruption scandal, which engulfed more than a dozen Department of Buildings employees, has damaged the agency’s capability.

However, when you consider that between 2008 and 2012, agency staff was cut to 1,000 from 1,200 employees, it seems that there is a longer-term problem at play. City Hall apparently failed to anticipate New York’s construction boom and simply remains ill-equipped to handle the demand.

In short, during the same period in which New York’s housing squeeze has tightened, the Buildings Department has seen its proficiency curbed. The correlation is unmistakable. Rectifying the situation requires not only additional resources for the agency but also a clarification of its priorities. Small-scale development must top the list. Global investors will continue to pour their wealth into New York real estate. However, they are well aware that they could see a relatively quick return on modest residential developments, rather than throw their lot in with bigger, more ambitious and inherently riskier projects. And there is little doubt that there is a genuine demand from tenants. New Yorkers are screaming out for quality new housing. The only significant factor standing in the way? City Hall’s bureaucratic will. The time has come to loosen the administrative shackles.

Source: http://www.crainsnewyork.com/article/20150515/OPINION/150519907/empower-developers-to-help-solve-new-yorks-housing-crisis

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