EconHack 2024 — Affordable Housing
3rd Annual EconHack @ Pace University.
2024 Winners
1st Place — Team JSLT
2nd Place — Team The Rent is Too Damn High
3rd Place — Charlie
The Problem: Affordable Housing in NYC
As New York City continues to grow, the demand for affordable housing has become increasingly urgent. However, the development of new housing projects often faces challenges related to zoning regulations, land use policies, and community opposition. Municipal governments are seeking innovative solutions to address the housing affordability crisis while ensuring sustainable urban development.
Propose a novel policy intervention that addresses at least two of the following objectives:
- Increase the availability of affordable housing units for low-income and middle-income residents
- Promote inclusive urban development that considers environmental sustainability and community well-being
- Mitigate displacement risks and preserve neighborhood diversity and cohesion
Requirements
- Utilize data analysis to inform your policy proposal, including insights on housing market trends, demographic patterns, and urban development dynamics
- Provide evidence-based justifications for the effectiveness and feasibility of your proposed intervention, drawing from reputable sources and case studies
- Consider potential trade-offs and unintended consequences of the policy, and propose strategies to mitigate them
- Collaborate with your team to develop a comprehensive policy framework, including implementation strategies, stakeholder engagement plans, and performance evaluation metrics
Context
Like many places around the United States, population growth is outstripping the supply of housing. New York City added around 200,000 new homes between 2010 and 2020, while its population increased by around 630,000. As demand outstrips supply, housing costs have increased faster than wage growth, especially since 2021. Rental prices have rapidly increased as availability has decreased, and purchasing prices of new homes have increased with stagnating inventory.
This problem is not new to NYC, and many policies have been enacted — particularly since the 1930s — to combat the supply constraints in a growing city. Below we summarize a few policies that have been enacted in the past. Each policy has been fiercely debated among New Yorkers with benefits and costs. Some have been more efficient than others, some more equitable than others; your job is to help figure out the balance between efficient and equitable outcomes for low- and middle-income New Yorkers. We detail examples of policies below, but don’t discuss the pros and cons — that you will have to research on your own.
Tax Incentives
421a Tax Incentive. To receive the 421a tax break under the program, also known as Affordable New York, developers had to make a certain percentage of units “affordable” to people and families at different levels of income. Affordable in this case meant that rent should not exceed 30 percent of a household’s income.
- Developers received 100% tax exemption for up to three years during construction, plus a 100% exemption for 35 years after construction is complete, provided that they comply with one of three 421-a options.
- For all other buildings that do not qualify for the enhanced-affordability option, these buildings would have a tax exemption for 3 years during the construction process and 35 years after construction ends, provided that they comply with one of the three other 421-a options. However, the 100% exemption would only apply during the first 25 years after the completion of construction.
- 421a expired in 2022, but Hochul proposed 485x to replace it (New York Times).
Rezoning
Many areas of NYC have been rezoned from industrial or business districts to mixed business and residential zones. Mandatory Inclusionary Housing (MIH) policies require a share of new housing in medium- and high-density areas that are rezoned to promote new housing production to be permanently affordable. If developers build in certain areas, it requires permanently affordable housing set-asides for all developments over 10 units or 12,500 zoning square feet, or, as an additional option for developments between 10 and 25 units (or 12,500 and 25,000 square feet), a payment into an affordable housing fund.
- There were over 5 million applications for the lottery in 2022. Applicants have about a 1 in 590 chance of winning the housing lottery.
Government-Sponsored Building
NYCHA housing authority. The largest public housing authority in North America. It started in 1934 after the Great Depression, but expanded rapidly with federal and state funds between 1945 and 1965, during which NYCHA built, maintained, and developed housing directly for low-income households.
- NYCHA serves 360,970 residents in 177,569 apartments across 335 conventional public housing and PACT developments. There are 330,118 residents in 161,585 apartments within 274 conventional public housing program (Section 9) developments, and 30,852 authorized residents in 15,984 apartments within 61 PACT developments.
Subsidies
Section 8 housing. Created by the Housing and Community Development Act of 1978, the Housing Choice Voucher program, also known as Section 8, provides assistance to eligible low- and moderate-income families to rent housing in the private market.
The program works as a rental subsidy that allows families to pay a reasonable amount of their income toward their rent. Eligible families receive a voucher to begin searching for housing. Generally, families will pay no more than 40 percent of their adjusted monthly income toward their rent share. NYCHA pays the remaining amount to the owner on the family’s behalf. This payment to the owner is known as the Housing Assistance Payment.
- NYCHA administers the largest Section 8 program in the country, with approximately 85,000 Section 8 vouchers and over 25,000 owners currently participating.
Price Controls
Rent control. A form of rent regulation which limits the rent an owner may charge for an apartment and restricts the right of any owner to evict tenants. Rent control tenants are generally in buildings built before February 1, 1947, where the tenant is in continuous occupancy prior to July 1, 1971. The vast majority of rent-regulated units in NYC are rent stabilized rather than rent controlled.
Rent stabilization. In New York City, apartments are under rent stabilization if they are in buildings of six or more units built between February 1, 1947, and December 31, 1973. Rent-stabilized apartments are most often located in buildings containing 6 or more units built before 1974. The roughly 1,006,000 rent-stabilized homes make up about 28 percent of the overall housing stock and 44 percent of all rentals.