The Housing Being Built in New York Doesn’t Meet the Needs of New Yorkers

Why aren't we building more yet?

Why aren’t we building more yet?

Earlier this week, Crain’s reported that while spending on residential construction is poised to soar to $10.2 billion this year, up from $6.8 billion in 2013, a much larger proportion of that money will be directed to high-end luxury units, producing just 20,000 units, down from the approximately 30,000 per year that were built annually during the last boom cycle.

These days even developers of luxury rentals projects, which remain very much in demand among resident New Yorkers, have a difficult time bidding against high-end condo developers, who can afford to pay far more per buildable square foot.

The problem with this all these posh, sprawling condos, as a recent report on micro-units and accessory dwellings from NYU’s Furman Center illustrates, is that they aren’t meeting the needs of people who actually live in New York. The city demands cheaper, smaller housing units, with 57 percent of all adults in the city identifying as “single,” according to the U.S. Census Bureau, and 54.5 percent of the city’s population classified as rent-burdened—or paying more than 30 percent of their income on rent—in 2011, up from 40.7 percent in 2000.

At the same time, there is a scarcity of new-construction one-bedrooms, The New York Times reported earlier this year, with the number falling from 26 percent of new-construction units in 2010 to just 16 percent in 2013. Studios, meanwhile, are often reserved as staff suites in ultra high-end developments, the 21st-century alternative to the maid’s room rather than an entry-level housing option.

Building more micro-units, the report argues, while they present regulatory as well as potential market and social challenges, would be a very direct way of bringing the city’s demographics in line with its housing stock, two things that have, over the years, become increasingly out of step. (Exactly what, we might speculate, could be expected to happen as an inevitable result of a housing market that is more and more under the sway of non-resident investors.)

The report attributes the rise in illegal housing in cities like New York, San Francisco and Seattle to the fact that the housing market is  not meeting the needs of residents—as we’ve discussed before, the micro-units slated to rise in Kip’s Bay will be far from the city’s first sub-400-square-foot residences—and that is, in part, because of regulatory burdens that limit density or impose per-unit parking requirements.

“The misalignment between the nature of the stock and the needs of renter households has been exacerbated by land use regulations and building codes that have not kept pace with evolving housing demands,” the report states.

Though a sizeable share of “single” adults are far from single in that they have romantic partners with whom they chose to live, the report points out that many others are sharing apartments with roommates or living with their parents because they can’t afford to live alone.

And whereas SROs once met the needs of impecunious New Yorkers, including many new arrivals, looking for a no-frills living arrangement, new construction was outlawed in 1954. (Of course, a dwindling number of SROs, protected by rent regulation, still exist today, though they long ago lost their vital role in the housing market.) At the same time, the population of single adults has continued to rise, spurred on by the fact that Americans are living longer than they did a half-century ago and far less of them are getting married.

Still, the potential impact of downgrading the minimal allowable dwelling size—and grappling with questions of funding—has meant that few, if any, units have been constructed in the cities (Austin, Denver, San Francisco, Washington D.C. and New York) studied in the report. For example, New York’s first micro-unit development, being developed by Monadnock, nArchitects and Actors fund on city-owned land in Kips Bay, will include just 55 units. (Monadnock closed on construction financing this spring.)

Some fear that micro-units will bring either “sketchy” elements or gentrifiers into neighborhoods, or both, creating in the words of one Crain’s columnist, a “gentrified urban slum.” More worrisome is the fact that micro-units in many cities frequently rent at higher rates per square foot, though at lower total monthly rent levels, than larger apartments, according to the report.

But at this point, for better or worse, the impact of micro-units looks to be far from revolutionary—New York’s first micro-units will average 300 square feet, not all that far below the legal 400 square foot limit the “affordable” units will rent at $940 to $1,800 a month, while the market rate units will be priced at $2000 to $2,1000 a month—even as their construction will no doubt help to fill a growing hole in the housing market.