New York’s Home Front
This article is from the archive of The New York Sun before the launch of its new website in 2022. The Sun has neither altered nor updated such articles but will seek to correct any errors, mis-categorizations or other problems introduced during transfer.

He may have garnered even fewer votes than Fernando Ferrer, and he may have come across as more than a little bit nutty, but the mayoral candidate of the Rent Is Too Damn High party, Jimmy McMillan, did have one good point: The rent is too damn high in New York. Cooler heads prevailed in the voting booths and Mayor Bloomberg won a second term, but the housing issue remains. In the midst of the election night festivities, a senior adviser to the mayor was already being quoted in the New York Times as saying that Mr. Bloomberg is planning to push forward with his campaign promise to build 165,000 new units of low- and moderate-cost housing.
Not so fast. New York’s housing market has been changing dramatically, especially since the 1997 rent reform passed in Albany. These changes, and particularly the rise in homeownership rates, may even have benefited Mayor Bloomberg’s quest for re-election, as we noted recently in our editorial “New York’s New Electorate.” But New Yorkers need more fundamental reforms than attempts merely to coerce landlords into renting more units at below-market rates. It isn’t necessarily true that developers and owners want to price working-class New Yorkers out of the market. But all too often, failed policies leave them with few alternatives.
At its heart, New York has a supply and demand problem. A 1999 study by researchers at New York University’s Furman Center for Real Estate and Urban Policy found that between 1980 and 1996, the city’s population increased by 309,267 persons, or about 120,000 households. But the supply of housing failed to keep pace, growing only 53,416 units. Nor were there enough vacant units in 1980 to absorb the extra households, as evidenced by the fact that the city’s vacancy rate fell during that 16-year period to 3.6% in 1996 from 5.2% in 1980.
An update of that study released earlier this year found some improvement – over the past few years, the annual number of new housing units has surpassed the annual inflow of new New Yorkers for the first time in decades. Between 2000 and 2003, the city’s population increased by an average of 22,888 individuals, or about 8,800 households, a year, while an average of 13,808 new units were certified for occupancy each year during the same span, an increase of almost 68% over the average between 1990 and 1999.
But the news isn’t as rosy as it at first appears. The NYU report notes that because population growth outpaced supply for so long, the market still features a lot of “pent-up demand.” In addition, increases in the gross housing stock are partly offset by demolitions of the city’s many older units. The pace of demolition has accelerated of late, reaching 2,250 buildings in 2003 from 717 in 1999. And much of the recent construction has been fueled by historically low interest rates, but those rates are already on the rise.
How has the city come to this juncture? Availability of land on which to build new housing is one culprit. Vacant parcels are at a premium. The NYU researchers report that 711 million square feet are currently vacant, of which 69% is zoned residential. But of that residential land, less than 11% is zoned for medium- or high-rise buildings; the majority is set aside for one-, two-, or three-family homes. Part of the problem is that zoning hasn’t kept up with the economic times. For example, a recent report prepared by Regina Armstrong for the Manhattan Institute found that 15% of the land in the city is still zoned for manufacturing use even though manufacturing is now only 6% of the city’s economy. To make matters worse, the city has been “downzoning” neighborhoods to preclude denser development that might change their “character,” a former general counsel of the city’s planning department, Norman Marcus, tells The New York Sun.
The problems don’t end when an ambitious and resourceful developer finds a parcel on which to build. The city has stubbornly resisted efforts to adopt a common International Building Code now in use in 44 states and around the world, favoring instead its 700-page behemoth. This exceptionalism means, among other things, that developers must pay more for materials, partly because new materials must go through a time-consuming and inefficient approval process unique to New York. Another consequence of the code, as the head of the Manhattan Institute’s Center for Rethinking Development, Julia Vitullo-Martin, has noted, is to help increase labor costs by, for example, mandating that any plumbing business in the city be majority-owned by a city-based master plumber. This rule effectively limits competition – and raises prices – for plumbing work.
Not that the code is the only contributor to high labor costs, another contributing factor in the city’s slow growth of housing stock. According to the 2005 NYU study, labor accounts for half of the hard cost of new housing construction and, despite recent relative declines, was still 52% more expensive than the national average in 2003. A major problem on this front is union work rules. Although hard data are not available, anecdotal evidence suggests that as much as 50% to 60% of housing construction is unionized. Various rules can combine to mandate a dozen or more (mostly idle) additional workers for each site; the teamsters alone, the NYU researchers found, require a foreman on site when shipments arrive in order to make sure the drivers are members of the union.
In other words, New York’s housing market has a simple problem: The housing supply isn’t big enough. Simply cutting deals with developers to rent some new units at below-market rates will solve none of these underlying causes for that problem. That might work for some tenants in the short term, but over the long term it is just window dressing. Many of these problems have lingered for years because solving them would involve taking on entrenched special interests. Mayor Bloomberg has just been elected with an overwhelming mandate and claims that, thanks to his self-financed campaign, he isn’t beholden to anyone. Fundamental housing reform could prove to be the single most important way to leverage both of those advantages.