Local authorities do not restrict the resale of rental housing and refinancing of loans. Local officials are focusing on rental rates, housing quality and other aspects of the traditional rental business. In the current situation, investments in rental housing can generate profit. But the solvency of tenants and the equity capital of landlords have lost decisive importance. The fate of the market is in the hands of the federal and local governments!
Incredible! But government actions are part of the reason for the poor state of the Bronx rental housing market. In fact, the federal government supports landlords to enable them to rent housing to poor tenants at unprofitable prices. This constrains the market, but helps local governments play socialism and buy the loyalty of voters in New York and elsewhere!
May you live in interesting times
Is the current situation good or bad? Tenants live in housing for which they have no money. But the housing is so uncomfortable and dilapidated that it creates negative emotions. Landlords constantly live in debt and do not become real owners of the housing they rent out. This kills the desire to repair and, especially, build housing. Banks make money on dilapidated and uncomfortable real estate. The technical condition of the property is constantly deteriorating and this property is no longer affordable for most tenants. This makes it possible to call such earnings dubious. The authorities retain the loyalty of voters. But this loyalty is becoming smaller every year due to the decreasing availability and quality of housing.
This situation cannot last forever. Because worn-out real estate will collapse. And this will be the end for everyone. To renovate real estate in a free market, the authorities will have to refuse to support the majority of tenants. Otherwise, private capital will not build. But refusal to support tenants will collapse the government's ratings. Since many residents of the Bronx will be forced to leave New York without money for rent. In order to keep these people in the city, it is necessary to build public housing, which would then be rented out at preferential rates to the poor population. This is the only real way to renew real estate and maintain housing affordability without social disruption.
Paradox. But the main obstacle to construction is public opinion. The authorities themselves ruined their reputation. Officials do not speak frankly about the reasons for the unaffordability of housing and often offer the population unfair deals in the construction market. This behavior already has political consequences. Support Bruckner rezoning and the construction of an affordable housing project to Throggs Neck were one of the reasons for Marjorie Vela'zquez's defeat in the elections in the New York City Council in the 13th district. (15) It was a bad experience.
This happened because the authorities tried to manipulate people, and did not offer favorable terms of the deal. Among the reasons why area residents did not approve the housing project to Throggs Neck were fears of a worsening life. 339 new apartments would be built in an area where there is a shortage of school places, poor transport accessibility, insufficient sewerage capacity, floods, and so on. In such conditions, give people 90 affordable apartments and bringing another 250 new families into the area is not an attractive deal! Apparently this has happened before. After all, from 2014 to 2021, the volume of construction of affordable housing in this area was almost 20 times less than the city average. (20) This means that during all these 7 years the authorities have not made an interesting proposal to residents for construction in the area.
But New York has a successful history of mass housing construction. This construction took place under conditions similar to those found in the Bronx residential real estate market. Then the authorities carried out large-scale construction after receiving public approval. This is the "First Houses on the Lower East Side of Manhattan" project. Construction of public housing on the site of an old private Victorian slum in the East Village, Manhattan. The project was implemented in 1935 by the New York City Housing Authority (NYCHA). Construction was stimulated by the issuance of special bonds for slum clearance, as well as tax benefits. Construction materials from demolished houses were also used.
The successful implementation of the project even required the confiscation of private property with the payment of compensation. The owner of two multi-family houses tried to challenge this decision in court, citing the constitution. But The New York State Court of Appeals, the highest court in the state, upheld the confiscation. In a court decision it was said that the Housing Authority could seize private property: "Whenever there arises, in the state, a condition of affairs holding a substantial menace to the public health, safety or general welfare, it becomes the duty of the government to apply whatever power is necessary and appropriate to check it." (16) Great wording for modern homeowners of old Bronx homes, isn't it?
Subsequently, the construction of public housing continued. But other financing instruments have already been used for this. In the middle of the past century, for this in New York, grants for construction and operating subsidies from the federal government were used. Total from 1935 to the early '90s 175,000 units of public rental housing were built in New York City. Part of this real estate then became federal property. But all this property is still in use! (17)
Public housing has not been actively built in New York City for almost 35 years. However, now the renewal of this project could be very useful for the Bronx. However, the authorities and residents need to improve on the experience of the last century! We are talking about complex development and not infill development. Otherwise, everything will end up like in the case of Throggs Neck.
Complex development this is when all the properties in the entire area are demolished. Not only residential buildings are being liquidated, but also old schools, hospitals, roads, etc. Along with new housing, new schools, hospitals, shops, parking lots, and parks are being built. Roads and even metro lines are being built. New housing - new social infrastructure. A new area is being built from scratch. The number of residents is increasing, but the quality of life is also improving. Therefore, local residents approve of such projects.
But this requires such efforts from the authorities that officials have not yet known. It is necessary to resettle the residents of the demolished property during the construction of new housing. And these are tens of thousands of people. It is necessary to speed up the issuance of construction permits. Build new factories for the production of building materials. Since usually the available capacities are not enough for such a large construction. Find thousands of workers for construction and settle them. Raise tens of billions of dollars for financing, and so on. It's not as simple as building a couple of houses on Throggs Neck. Complex development is usually done with the support of the state budget. Since such projects are of national importance and are too expensive for the city budget to pay for it.
Construction like this has never been done in New York. But such construction is being done in many megacities of other countries. Marvelous. But in many foreign cities, infill development similar to the project to Throggs Neck is prohibited. That is the infill development of residential real estate is prohibited. Only complex development of territories is allowed. Developers are prohibited from building housing if schools, stadiums, hospitals, shops and other social infrastructure are not built for the residents of new houses. Since it is not profitable to build social infrastructure for a small number of residents, developers either do large residential construction projects or not building at all! This is true! Infill development is an attempt by a developer to make money from the residents of the area. And complex development is when everyone wins, both the developer and the local residents!
But infill development is not prohibited in New York. Things are even worse! Infill development has become the most popular dishonest deal offered by city authorities! But complex development is not known to New Yorkers. Therefore, targeted development injections have become the signature style of the local administration.
The Bronx is the place where bad practices can be disrupted most effectively. The area is ideal for complex development for the construction of public housing. 26% of Bronx residents live below the poverty line. (3) This means that these people are useless for landlords who want to make money! But many Bronx residents don't have the money to move to other boroughs of New York. Since in other areas of the city, rental housing is more expensive than in the Bronx. Only 1% of housing in other New York City boroughs is affordable to middle-income Bronx residents! (18) The Bronx has the highest rate of housing overcrowding. 5.7% of apartments are identified as overcrowded. This means that in such apartments there are 1.5 people per room. (19) The project of mass construction of public rental housing can be done by offering the residents of the Bronx a profitable deal with the complex development of the area!
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