Image credit: Stroock & Stroock & Lavan LLP
At the CityLaw breakfast on August 28, 2015, Carl Weisbrod provided an update on the de Blasio Administration’s housing plan, which Weisbrod described as now in its “toddler” stage. The de Blasio program is the most ambitious of its kind in the country, and the biggest in New York since the Koch Administration. Today, the City is managing the problems of success: continued growth and a shortage of housing. Conversely, in the Koch era, the City was planning for shrinkage, had abundant vacant land, and much abandoned housing.
A key element of the de Blasio Administration’s housing program is mandatory inclusionary housing. Unlike the current voluntary inclusionary housing program, through which developers receive a FAR bonus for providing affordable housing, the new program will be mandatory: If a developer wants to build residential, the developer will have to include some affordable housing in the project.
Still, mandatory inclusionary housing will only apply in areas that are rezoned to increase housing capacity, whether through a private application or through an application that is sponsored by the Department of City Planning or another government agency. The Department of City Planning intends to begin public review for the first such rezoning – East New York – in September. Other rezonings in the pipeline are Jerome Avenue, Flushing West, Bay Street Corridor, Long Island City Core, and East Harlem. The Department of City Planning is not currently looking to rezone areas that were upzoned during the Bloomberg Administration.
The Department of City Planning expects to have the proposed mandatory inclusionary housing text prepared by late September. The proposed zoning text will provide three formulas for affordable housing:
- 25% of floor area made affordable for residents with incomes averaging 60% of AMI ($46,620 for a family of 3);
- 30% of floor area made affordable for residents with incomes averaging 80% of AMI ($62,150 for a family of 3); and
- a “workforce housing” option with 30% of floor area made affordable for residents averaging 120% of AMI ($93,000 for a family of 3), which will not be available in Manhattan Community Boards 1-8.
The City Planning Commission and the City Council will determine which option will be required at a particular site, based on an evaluation process that will be set forth in the zoning text. As with the current voluntary program, mandatory inclusionary housing will be available through both on-site and off-site affordable units.
Ross F. Moskowitz, NYLS ’84, is a member of the CityLand Advisory Board. Image Credit: Stroock & Stroock & Lavan LLP.
In response to concerns over mandatory inclusionary housing’s constitutionality, Weisbrod describes mandatory inclusionary housing as part of a “well-reasoned” land use plan, as the City has taken a careful look at housing and has involved developers and lenders in the planning process. Additionally, mandatory inclusionary housing is not an exaction, as development will need to be financially feasible under mandatory inclusionary housing and developers will still be able to obtain an adequate return on their projects. Upzonings, direct housing subsidies, and indirect subsidies such as the revised 421-a program will offset some of the costs to developers of providing affordable housing.
As Weisbrod noted, the City has a strong incentive to ensure that developers obtain an adequate return on their investments. Absent an adequate return, developers will be unlikely to build, limited affordable housing will be generated, and the City’s plan will not succeed. Increasing housing production is central to the City’s housing plan. As Weisbrod and the de Blasio Administration move forward with mandatory inclusionary housing, they will have to balance carefully the interests of tenants, developers and affordable housing advocates and rely on a strong housing market to ensure that their housing policy is successful.
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By Ross F. Moskowitz, a Partner in the Real Estate Practice Group of Stroock & Stroock & Lavan LLP, John B. Egnatios-Beene, a special counsel in Stroock’s Real Estate Practice Group, and Theodore D. Clement, an associate in Stroock’s Real Estate Practice Group.