Praying for a way out

For the second time in a year, Gov. Kathy Hochul has failed to include a plan in the budget to address the crisis in affordable housing.  In last year”™s budget, she floated proposals to promote Transit Oriented Development and Accessory Dwelling Units. It was withdrawn amid furious opposition from the suburbs, including Westchester and Long Island.

This time, she offered an even more ambitious plan called the New York Housing Compact, which would have required zoning jurisdictions to increase the number of units by 800,000 in ten years and mandate increased density close to train stations. Now, according to a state official, the dire threat lack of affordable housing poses to the state”™s economy means that all options, including a potential lawsuit are “on the table.”

When her latest proposal went down in flames, Gov. Hochul quoted hockey great Wayne Gretsky, “You miss 100% of the shots you don”™t take.”

She is to be commended for tackling the fundamental cause of the housing crisis, which is sabotage of the housing market by local municipalities abusing home rule to restrict supply. The latest setback to restoring a market that is able to address the supply shortage highlights some realities that legislators prefer to minimize for political reasons.

The management guru Peter Drucker used to say, “Culture eats strategy for breakfast,” which is true when it comes to Westchester County housing policy.  Home rule has enabled Westchester County”™s villages and towns to restrict density ”” especially for multifamily housing ”” and it is this ingrained suburban culture that legislators need to respect if they wish to stay in office.

Therefore, the Kabuki dance by public officials over housing has heretofore consisted of blaming the public”™s lack of education and insufficient funding for affordable housing. Neither explanation is persuasive.

Education

For more than 30 years, legislators have indulged the fantasy that suburban homeowners, who have seen their houses increase 50% in value since 2015, will somehow voluntarily limit their home rule power by recognizing employers can”™t pay workers enough to compensate for the high rents and housing costs. In fact, nearly 50% of renters in the state are now “cost-burdened,” according to HUD. In Westchester, based on Zillow data, a Westchester household would have to earn $108,000 to afford a typical rental. The median annual incomes for households that rent are $60,000 to $70,000.

Funding

Governors before Hochul had always defaulted to a much easier “fix” –increasing money for “affordable housing.” But the dirty little secret is that building affordable housing is not affordable, and does not ameliorate the disparity between supply and demand.

Based on the most recent affordable projects approved by Westchester County, the average cost to produce a single apartment is $500,000, of which over $400,000 is taxpayer subsidy in the form of tax credits, grants and “soft loans.” What do the taxpayers get for that $400,000? The typical rent for an “affordable” two-bedroom apartment ”” defined as affordable to a household with income up to 60% of the Area Median Income ”” is only $146 less per month than the Fair Market Rent for Westchester County. Despite billion-dollar public expenditures for affordable housing, the impact on escalating housing costs has been negligeable.

New Rochelle

Proving that the law of supply and demand actually does operate in Westchester, The Pew Charitable Trusts examined the impact of thousands of new units approved in New Rochelle. It discovered that rents only increased 12% between 2017 and 2020, then declined by 5% from 2020 to February 2023, compared to 31% hikes across America.

The clear cause of the housing crisis, as recognized by the governor, economists, business, and housing groups is local constraint of new unit production under home rule.

Leaders of Hochul’s own party who killed the Housing Compact had to say something to deflect blame for collapse of the Housing Compact, and true to form they defaulted to blaming the reliable fall guys ”” developers.

In opposing the governor”™s “Housing Compact,” and New York Mayor Adams”™ similar proposal to build 500,000 units in the city, the State Assembly Housing Committee Chair Linda Rosenthal reportedly complained that the plans were ‘too reliant on tax incentives for developers” and gave away too much tax revenue for too few affordable housing units.

The governor and business leaders realize that the state”™s economy is rapidly running out of runway without significant change to home rule.

Legislators, I was told by state officials, are desperate to find some way to pass the governor”™s proposals limiting home rule without committing election suicide. Some quietly hope that the courts might intervene, as occurred in New Jersey with the Mount Laurel decisions. In 1983, the New Jersey Supreme Court outlawed economic discrimination in housing, requiring local governments to provide a minimum percentage of affordable housing opportunitiesin their jurisdictions.

Twenty years ago, with their cities nearly dead, Westchester embraced new urbanism, revitalizing White Plains, New Rochelle and Yonkers with new housing and retail. Today, the county”™s villages and towns need a similar makeover, which will be that much harder because of home rule.

Alexander Roberts is founder and CEO Emeritus of Community Housing Innovations, Inc., based in White Plains.