Transit Growth Zones Would Raise Revenue for MTA, Encourage Private Housing Development

NEW YORK, NY – While New York City struggles to provide enough private housing under the burden of restrictive regulations, it also needs better subways and buses. The Metropolitan Transportation Authority is hampered by funding shortages and poor management: Better management can fix the acute maintenance crisis, but the long-term challenge of system expansion requires significantly more funding.

A new paper by Manhattan Institute Adjunct Fellow Alex Armlovich suggests a housing-public transit “grand bargain”— modeled after Manhattan’s Hudson Yards development.

Such a bargain would address both problems, allowing taller residential buildings near frequent transit hubs across New York City in exchange for more money for the MTA. Relaxing zoning rules for developers would be met with one-time fees and the ongoing higher property tax revenue generated by larger buildings.

Key components of the “grand bargain” include:

• Making housing more plentiful near public transportation hubs — “transit growth zones” — and channeling the fees and extra tax money from the new homes to the MTA via Payments in Lieu of Taxes (PILOTS).
• Defining transit growth zones as anywhere in the city that is within a quarter-mile or less of a subway stop, commuter rail station, or Select Bus Service (express bus) stop (approximately one-quarter of New York City)
• Armlovich estimating the grand bargain would encourage building 411,000 new private housing units over 10 years, as well as generating $54 billion in revenue for the MTA simultaneously.

This differs from a plan proposed by Gov. Andrew Cuomo for “transportation improvement districts” that would permanently capture property taxes on both old and new buildings within one mile of certain new subway stops. The governor’s plan would do this without input from the city, and without any land use changes to grow the tax base.

Rather than dipping into the city’s existing tax base, Armlovich’s plan would capture incremental fees and PILOTs only from new buildings up to one-quarter mile away from frequent transit points. The 15-year PILOTS on new development in this plan would add those new buildings to the city’s tax base after 15 years.

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