How To Address New York City’s Housing Shortage

For New Yorkers squeezed by a cost of living crisis, finding an affordable place to call home is a principle concern. This holds true, not only for young people, but for everyone from the least advantaged to the middle class. Housing inequality may well be the most significant contributor to rising economic inequality in the city.  Many New Yorkers believe that politicians are insufficiently addressing the scale of the housing crisis. 

Experts are striving to develop new ideas to tackle this challenge. Some have identified parking lots owned by the New York City Housing Authority which could potentially be used to build around 15,000 homes for seniors. Others propose simply relaxing permitting requirements and zoning restrictions to encourage increased housing construction - in accordance with health and fire safety, of course. They also advocate abolishing rent regulations, addressing disparities in property tax treatment within and between various classes of residential properties, and generally lowering property taxes.

Demand-side initiatives such as subsidies and financing solutions cannot bridge the housing gap on their own. Instead, cities urgently require an increase in home building to ensure that housing shortages do not hinder economic growth or stoke social tensions. However, as experiences over the past decades in many of the world’s growing cities have demonstrated, this is often easier said than done.

Governments are universally the largest landowners in any city. However, they often neglect the value of their holdings and the management strategies that best serve taxpayers. These shortcomings result in real costs. It is challenging for anyone in government, opposition political parties, or the electorate to hold individuals accountable for the management of these “invisible” assets or to question whether they are still necessary. Consequently, cash-strapped public bodies tend to avoid decisions that private sector actors would be confronted with—such as whether they can better meet their needs through improved utilisation or the sale of existing assets.

Why is there such a reluctance to challenge the government on its asset management? Perhaps political leaders have enough on their plates with current issues and limited resources. There may also be misguided incentives: which government department would pursue hidden assets if it believes that discovering them could lead to demands for increased spending or create a mandate to sell or manage them more effectively? Furthermore, the task may simply be too extensive or drawn-out to engage elected officials, who typically have shorter-term perspectives.

Most cities do not know what real estate assets they own, partly because these are owned and managed in a fragmented manner. Local governments do not possess a consolidated understanding of their assets, let alone a comprehensive balance sheet that puts a fair market value on them. The Governmental Standards Accounting Board’s (GASB) misguided accounting standards allow the resources of America’s state and local governments to be mismanaged and wasted, with their obligations obscured.

Today’s governments have largely overlooked the significance of accurately inventorying and valuing their assets. This issue, stemming from governmental accounting systems, hinders proper valuation and effective asset management. A swift, cost-effective solution is to uncover hidden assets through ‘asset mapping’ and manage them professionally, insulated from short-term political influence. With a consolidated balance sheet in hand and a proper understanding of their market value, it would be possible to design a business plan for how best to use these assets and evaluate which could be better redeployed for housing, either through conversions or brownfield developments.

Emphasising that governments possess the largest source of available land may appear to be a simplistic solution to the challenge of increasing supply. To boost supply, the most effective approach would be for local authorities, as the owners of such a vast portfolio of real estate, to consolidate publicly owned assets into a common investment vehicle—an ‘urban wealth fund’.

A properly designed fund should not be modelled on the Port Authority of New York and New Jersey, which serves as a prime example of how not to proceed.

Rather, this fund or holding company should be managed transparently and held accountable, separate from any short-term political influence. It would be guided by a city mandate but directed by dedicated professional staff to ensure political independence. Given its size and potential construction volume, this entity, provided it has a professional governance structure, would be positioned to innovate and enhance the efficiency of housing production.

As a publicly-owned holding company, it will collaborate with the private sector on each individual construction project, sharing both the risks and rewards, and aligning the interests of all stakeholders. This will greatly help to eliminate the barriers to streamlining the complex execution of relevant tasks, from urban planning and infrastructure development to land use regulation, financing, delivery, and contracting approaches.

This sounds challenging, but it can be done. Two examples - Hamburg’s HafenCity GmbH, and parts of Copenhagen that were revitalised by the City & Port Development Company - have used this development mechanism. These efforts increased the amount of residential housing and funded vital infrastructure such as schools, universities, and the Copenhagen Metro.

Just as a company or a household would look at its balance sheet when managing its wealth, so should a government – benefitting all of society.

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