US & Canada

Buddy can you spare $2m? New York's housing crisis

Architects plans for new housing Image copyright ODA
Image caption Plans for new housing near Brooklyn Bridge

"It was the best of times, it was the worst of times." The opening words of Charles Dickens's A Tale of Two Cities.

The book's title was used by Democrat Bill de Blasio in his successful campaign to become mayor of New York in 2013.

He argued that under his billionaire predecessor, Michael Bloomberg, the city had become divided and divisive.

The best of times had been enjoyed by the wealthy, the worst by the squeezed middle class and the poor.

And nowhere are the divisions felt more keenly than in housing.

Like London, property prices in New York have gone turbo-ballistic, as global capital in search of a safe haven has rocketed in.

Property has ceased to be somewhere you live, and become a commodity.

Apartment blocks are the new safety deposit boxes - often standing owned but empty.

Handy for the portfolios of the super-rich, but for the rest, whose wages have stagnated while rents have risen, it's a disaster.

Cost of living

Last year, the average price of a home in Manhattan hit $1.87m (£1.22m) . Developers target the lucrative high-end market, where margins can be spectacular, and most families spend over a third of their income on rent.

It is a toxic mix intensifying inequality in the city.

Image copyright Getty Images
Image caption Alicia Glen is overseeing the new housing plan

And in New York, your money doesn't go far.

According to a 2009 report by the Center for an Urban Future, a person earning $60,000 a year in Manhattan had the same standard of living as someone making $26,000 in Atlanta.

At the heart of the De Blasio plan to unify the two cities is an ambitious programme to create 200,000 affordable housing units over 10 years, capable of housing more than 500,000 people - more than the entire population of the city of Atlanta.

And at the heart of that programme is his Deputy Mayor for Housing and Economic Development, Alicia Glen, a friend of mine for more than 20 years.

The former Goldman Sachs executive is overseeing a $41bn project refurbishing 120,000 affordable units and building 80,000 new ones, with about $8bn in public money and $30bn of private capital.

But how do you attract that kind of private capital?

You use the "Robin Hood fiscal plan", taking from the modern day villainous rich, also known as property developers, and giving to the new deserving urban poor - in this case the families of, for example, hotel workers, teachers, firefighters, who might earn anything from $15,000 up to $100,000 per year.

The Sherwood Forest approach hinges on mandatory inclusionary zoning, where neighbourhoods are rezoned, and developers who want to build in them have to set aside about 25% of new apartments for people on modest incomes.

Image copyright AP
Image caption Bill de Blasio has launched a 10-year housing plan

"Right now, the market is extremely hot, some may say 'frothy'," said Ms Glen.

"So what we've said is we want to reinvest some of that froth, back into affordable housing.

"So if you [the property developer] otherwise would have made a 70% return, perhaps you'll make a 40% return."

I met the deputy mayor at Brooklyn Bridge Park, an area of regenerated waterfront, which focuses the issues and the angst of the affordable housing debate.

Here, $35m dollar apartments sit cheek by jowl with mixed affordable units.

And guess what? Some of the millionaires aren't happy and are suing the city of New York.

"Let's talk about what it really means," said Ms Glen.

"It means that very, very high income New Yorkers really don't want to live next to people who are not just like them and I think this is a sad, sad chapter in the history of a lot of cities, but at the end of the day, it is sort of about, 'We don't want those people in our neighbourhood,' and that's just something we're not going to tolerate."

Supply is not meeting demand:

  • There are nearly one million households who earn less than 50% of the median income for the New York area, or just under $42,000 for a family of four
  • There are only 425,000 housing units available with rents suitable for that income level
  • Between 2005 and 2012, rents rose by 11% while renters' incomes stagnated, after adjusting for inflation
  • In 2012, almost 55% of all rental households were rent-burdened (spending more than 30% of their incomes on housing costs)
  • More than 30% of rental households were severely rent-burdened (spending more than 50% of their incomes on housing)

Source: Housing New York: A five-borough, 10-year plan

Poor doors

In June, the De Blasio administration moved to ban the most visible sign of inequality in housing, the so-called "poor door", where developers design buildings with one door for the rich and another (usually around the back) for those in affordable apartments.

Although in 2009 De Blasio himself voted for the measure that allowed "poor doors", he has now gone to war on what is seen by some as an "apartheid" of amenities for rich and poor, where affordable tenants are not seen and not heard by their richer neighbours.

Ms Glen said: "Under our new zoning and land use and planning programmes, if you are a renter in the building, whether you are a market rate or affordable housing renter, everybody walks through the same door. I mean that's just not the kind of city we are, right?"

Image copyright Getty Images
Image caption New York Mayor Michael Bloomberg was accused of divisive housing policies

It is not as if Mayor Michael Bloomberg had no plan for affordable housing.

On the contrary, his plan, described by the New York City Housing Authority as "the largest municipal affordable housing plan in the nation's history", set about preserving 165,000 affordable units to house 500,000 people.

So it is not perhaps surprising that some criticise the De Blasio plan for a lack of ambition in not doing enough at what is seen by many as a critical turning point for the city's housing crisis.

I suggested to Ms Glen that something more seismic needed to be done. Why 25% affordable housing, why not 50%?

"We have to be aware of what the market will bear, and the last thing you want is to disincentivise all development," she said.

"You have to be flexible, but you also can't push too far because then nobody will build a building and we will have thrown the baby out with the bath water."

She went on to stress that a multipronged approach was being employed, which includes a drive to increase minimum wages.

"It was the spring of hope, it was the winter of despair," continues Dickens in his Tale of Two Cities.

The De Blasio plan certainly offers some hope to those who despair at the crippling cost of their housing.

But will it be a game changer for New York's long-suffering renters?

As they say in the city that never sleeps: "Man, that's a big ask."