Real estate questions I get asked at inopportune times

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What the heck is this city rezoning thing?

So last week I was stretching before this drill class from legitimate hell and made small talk with someone to distract the fact that I was going to be physically destroyed over the next hour and then probably go eat an entire rotisserie chicken. Because apparently we are our professions, the conversation established that he was in finance and I was in real estate. Soon the group was huddling to start, and he casually asked “So what are your thoughts DeBlasio’s affordable housing plan?”

773ef3e7-0498-4935-b9c9-4ae04eb613e4Me, on the verge of the most lethal workout created, being asked a policy question:

 

 

 

+500 points – you read the Real Estate Section in the NYT. But wait…what? I’ve read a bit about the rezoning act, but mainly they’ve been very passionate opinion pieces, a source of news I have learned can backfire. One time, my dad told me that Kevin Durant was 100% replacing the Kevin Garnett/Paul Pierce void on the Celtics, which I regarded as common knowledge and advertised as such. This completely flopped and demoted my perceived sports knowledge to a level somewhere between Björk and Jessica Simpson. So, written in much calmer setting, here are my better researched thoughts on Blasio’s Rezoning Plan and it’s surefire influence the New York market.

The main point of contention from the perceptive of the real estate world is that Mandatory Inclusionary Housing would force residential developers building in rezoned neighborhoods to set aside a fixed number of units as “affordable”, at far below-market rate rents and with extremely strict income requirements. Developers are pushing back, declaring they would either not file for a rezoning or forgo building in the areas designated for rezoning without receiving generous tax breaks. Many developers are confidently claiming that if this plan is enforced, in the next three to five years, New Yorkers will notice rental supply – both market rate and affordable housing – will have dried up and prices will continue to climb.
To put this in perspective, let’s discuss one of the most talked about neighborhoods chosen for rezoning – East New York.  East New York is on the Mayor’s list of the first 15 neighborhoods to be rezoned.  According to the Mayor’s projections, the plan would generate 6,492 new apartments, 1.3 million square feet of retail, office space and community facilities in the 190-block area of East New York. This rezoning would require developers to set aside at least 25% of units in new developments for adorable housing. What the program fails to mention is the reality the ripple effect: there is strong evidence from past examples that this would drive more market-rate housing to the area, quickly pricing long-time residents out of their homes and quickening the rise in rental prices. The City Comptroller Scott Stringer conduced an extensive study and found rezoning could displace up to 50,000 residents, as the units created by the plan would be unaffordable for 55 percent of the neighborhoods residents. With the current rezoning plan, the number of housing units in East New York would increase by 6,492 apartments, a 51% jump. Through mandatory inclusionary zoning and subsidies, the proposal would demand that 3,447 apartments become affordable housing units, however only 1,724 of those units would be realistically affordable by current East New York residents.
There is no way to deny that while this will produce economically affordable homes for some, there will be highly disruptive consequences for “upcoming” neighborhoods on the cusp of development and the residents who have called those areas homes for generations. In a city where rental prices are astronomical and home ownership is intangible for most, I believe that the intention behind the plan is well and good, but in theory is it really going to solve the problem or is it going to create further housing crises?
So sweaty man from my work out class, that is my answer.

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