In the final mayoral debate, Zohran Mamdani was chided by both his opponents for not taking a stance on several ballot proposals intended to streamline housing development in the city.
Ballot Questions 2-4, vehemently opposed by the City Council, ask voters to approve measures that fast-track affordable housing and the permitting process, in part by reducing council oversight.
New York City’s next mayor will walk onto the job and into the worst housing shortage the city has seen in over 50 years.
At first glance, it seems like something Mamdani, who is running on an affordability agenda, would support, but similar initiatives have been tried with limited impact.
In 1969, Massachusetts passed Comprehensive Permit Act: Chapter 40B. It allows developers to bypass zoning laws to build larger apartment buildings as long as they include at least 20-25% long-term affordable units in areas where fewer than 10% of the supply is income-restricted.
A 2016 paper from the Terner Center at UC Berkeley hailed Chapter 40B as a success but noted it was still “far short of solving affordability challenges writ large.” Recently, there has been talk of expanding Chapter 40B.
California enacted a Chapter 40B-inspired reform in 2018, Senate Bill (SB) 35. Like Chapter 40B in Massachusetts, SB 35 targets underserved regions for low-income housing. Developers can bypass local oversight if projects include at least 10% or 50% below-market-rate units, depending on the affordable supply in the area.
In 2023, the Terner Center published a report on the effects of SB 35. It found that from 2018 to 2021, about 18,000 affordable housing units were expedited, primarily in the San Francisco Bay Area and Los Angeles County. It took longer for SB 35 to affect less populated areas.
Despite this, the researchers believed more needed to be done.
Forbes ranks California second-highest in median rent, $1,956, behind Hawaii, $2,423. Massachusetts is fourth, $1,806, after New Jersey, $1,828. New York is fifth at $1,745.
The main idea driving support for the proposals is simple supply-and-demand economics. More units should mean less stress on the market, which, in theory, would ease prices. This idea has been studied several times.
Supply and demand research
An NYU Furman Center investigation found that for every 10% increase in supply in NYC, units within a 500 ft. radius lowered rents by 1%, and a study in German markets indicated a 0.4-0.7% decrease in rents for every 1% increase in stock.
The German study also found that the supply increase, even in luxury housing, reduced prices for low-income housing before affecting the higher-priced market.
Both studies found caveats.
The NYU study references the “amenity effect,” wherein luxury housing attracts new amenities, making the area more desirable and driving up surrounding rents. However, the researcher noted the amenity effect was absorbed by the decrease in rent from the supply increase.
The German study noted that the supply’s effect wasn’t linear. In other words, a 10% increase in stock wouldn’t necessarily equate to a 4-7% decrease in rents.
New Rochelle, just north of New York City, streamlined affordable housing development hurdles in 2015. The town’s median rent has gone up 1.6% since 2020, while New York City, Newark, Hoboken and Jersey City median rents increased 25% or more in the same time period.
New Rochelle’s changes to the approval process were included in a comprehensive rezoning plan, however. It’s also less built up than NYC, so there’s more room to grow.
Why oversight matters
The city’s vacancy rate is 1.4%, but for housing with rent under $1,100 a month, it’s 0.39%. For “low rent” units, between $1,100 and $1,649, it’s 0.91%. “Moderate rent” units, from $1,650 to $2,399, are at 0.78%.
Meanwhile, luxury apartments have a vacancy rate of 3.39%.
Unless the housing stock increases by a specific, yet undefined number, oversight is essential to ensure the right kinds of units are built in the right places.
Ballot Questions 2 and 3 would place responsibility for development approvals on fewer people with less direct involvement from elected officials. Passing Ballot Question 4 would mean even less oversight from elected officials.
Question 2 employs a good strategy of targeting low-income housing development in underserved areas, which typically means high-priced neighborhoods since these lack affordable housing. The initiative is also limited to subsidized projects.
In theory, Question 2 should work, but it’s been tried twice in Massachusetts and California. Both states remain the most expensive in the country, even though one initiative took effect over 50 years ago. It’s impossible to know how much worse their housing markets would be without those efforts.
The NYU study found that when high-rate housing increased in high-demand neighborhoods, the effect on rent prices was modest. However, adding expensive housing to lower-rent areas actually caused rents to go down.
Question 2 reverses this process, in theory, adding affordable units to expensive areas. Even if the board responsible for tracking affordability by region gets it wrong, only affordable housing will be fast-tracked anyway.
Question 3 lessens oversight, but with guardrails based on the project’s size and environmental impact, not affordability. It also doesn’t target specific zones, though the maximum size depends on the area’s housing supply.
That would allow luxury housing to be built in already expensive areas, doing little for New Yorkers other than increasing the already higher vacancy rate for luxury apartments.
The German study suggests that substantially increasing supply could reduce rents regardless of the units’ affordability, but Question 3’s limits on project size may prevent that outcome.
Question 4 prevents the City Council from blocking affordable projects. An appeals board would review actions from the council disapproving or modifying applications. Problems could arise if development proposals aren’t legitimately beneficial.
Mamdani’s absence of a stance implies he believes that it could go either way.
When it comes to the housing crisis, the more units produced, the greater the relief to the market, but at the end of the day, even with existing subsidies, the government can’t force developers to produce projects. They can, however, build more public housing.
