New York Housing Crisis: A Postmortem of Governor Hochul’s Housing Compact

Despite obstruction on the state level, New York City can still build more homes

NEW YORK, NY – Housing advocates in New York are reeling from Governor Kathy Hochul’s failure to advance her politically risky New York Housing Compact, which would have facilitated construction of 800,000 new housing units over the next decade. What went wrong? In a new issue brief for the Manhattan Institute, senior fellow Eric Kober offers a postmortem and makes recommendations for moving forward amidst historically high housing prices in the New York City region.

Kober, a former housing director at the New York City Department of City Planning, writes that while Hochul’s proposals were largely in keeping with pro-housing land-use regulatory reforms that have succeeded in other states, they failed in part because of the state’s political structure and electoral incentives. These caused local legislators to prioritize the preferences of incumbent, anti-development homeowners, Kober writes, over those of younger workers and potential new residents, who are increasingly priced out of the downstate market. Yet even despite a recalcitrant state legislature, Kober insists New York City can still mitigate its own housing crisis, offering suggestions for progress within the bounds imposed by state laws.

Mayor Eric Adams has announced his own goal of building 500,000 new units in the Big Apple in ten years. While that objective may be lofty against state-level headwinds, Kober zooms in on policies the mayor can rethink in order to approach it—and mitigate the dystopian contrast between the region’s glittering wealth, outmigration of priced-out workers, and seemingly intractable homelessness. His recommendations include:

• Relieve infeasible burden of Mandatory Inclusionary Housing (MIH): In the absence of a Section 421a tax-incentive revival, the city must create a ministerial process to waive MIH requirements for residential developments that do not qualify for tax exemptions.
   
• Rethink “Zoning for Housing Opportunity”: Given that this policy counts on state legislation that we now know won’t materialize in 2023 nor in the foreseeable future, the city’s package needs to be recalibrated to focus on actions that can result in increased housing production regardless of state action. This could include:
  • Taking full advantage of existing special provisions in state law allowing conversion of nonresidential buildings to housing;
  • Pursuing zoning changes to facilitate construction of small rental apartment buildings, which are taxed more favorably than larger buildings;
  • Encouraging construction of new condominium apartment buildings, which also enjoy favorable tax treatment.
     

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