The Business of Affordable Housing: An Op-Ed from CEO Michael Zisser

Jun 29, 2015 |

The following op-ed regarding the business of affordable housing was written by our Chief Executive Officer Michael Zisser and posted on Crain's New York Business Online on June 26, 2015, and appeared in the print issue of Crain's on June 29, 2015.


Affordable housing's abiding mythology
Is the 80-20 model a viable cross-subsidy strategy?

By Michael Zisser

The urban-planning world has perpetuated a myth that has distorted public policy, reduced ­affordable-housing production and damaged the sustainability of what were once middle-class communities.

I refer to so-called 80-20 housing, in which developers receive property-tax exemptions under the 421-a program in return for setting aside 20% of units in new projects as affordable, while the remaining 80% are market-rate.

With little public funding available to build affordable housing, the 80-20 model is seen as a viable cross-subsidy strategy. More important, planners and politicians see a social benefit in mixing income groups in an egalitarian environment. Such is the gospel. Such is the myth.

But this model denies that predominantly middle-class/working-class communities can be, and are, ­socially and economically stable. New York City is filled with such examples, though rarely are they the products of public planning or intervention. Neighborhoods like Hudson Heights in Manhattan and Sunnyside in Queens have sustained ­middle-class communities for decades. Strengthening and expanding these communities should be a priority.

Second, the need for affordable housing in New York City exceeds the supply by so much that the 80-20 model is insufficient. A six-month extension of 421-a just reached in Albany appears to accept Mayor Bill de Blasio's proposed ratio of at least 75-25. That is a step in the right direction, but even if all new developers combined their affordable units and moved them to places like Brownsville and East New York, Brooklyn, it would barely make a dent in the demand for quality, affordable housing in those areas.

Third, projects with a high percentage of expensive units, especially if concentrated in certain changing communities, inevitably cause secondary gentrification. They trigger land speculation (leading to high-priced sales of empty lots and tenant harassment to render buildings vacant), increased commercial rents and the loss of retail establishments catering to the former customer base.

Finally, unfortunate planning and development tactics often accompany these projects. These include the two-entry feature, in which low-income residents have a "poor door" and lesser amenities (which the mayor's plan forbids); the transfer of air rights (development potential) from one community to another, in which the receiving community has little or no say in the resulting increased density; increased segregation of economic groups, not just by buildings, but by sections of the city; and insufficient public commitment to increasing the supply of affordable housing by more direct funding strategies.

The mayor's laudable plans to build 50-50 developments on New York City Housing Authority land and revise the 421-a tax-exemption program may address some of these issues. Right now, however, prevailing affordable-housing policy is too single-minded. It has become a smoke-and-mirrors approach that does not serve the economic and social health of our city.

Michael Zisser is the CEO of University Settlement and The Door, nonprofits that assist vulnerable New Yorkers. He is a ­former chairman of Pratt Institute's ­Department of City and Regional Planning.


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