Methods 1 Final Project | December 2021

Jonathan Bloom

Introduction: A Contentious Rezoning

In April 2016, the New York City Council approved a comprehensive rezoning plan for East New York, Brooklyn. Known as the East New York Neighborhood Plan, the project upzoned broad swathes of the neighborhood, allowing for denser construction near transit hubs as well as in residential areas. The stated goal was to increase affordable housing, job opportunities, and community resources.

The plan forced developers to build a certain amount of permanently affordable housing units in order to take advantage of new medium-density zoning, in a signature policy called Mandatory Inclusionary Housing (MIH). Proponents promised that the MIH would stimulate development of 1,200 units of affordable housing over the first two years, and that 50% of all new housing would be affordable to low- and moderate-income residents. Below is a map of the parts of East New York zoned for MIH in 2016:



The rezoning’s passage was marked by intense community opposition (Whitford 2016; Iverac 2016). Local mobilization against the rezoning was strong yet ultimately unsuccessful, reflecting what geographer Sam Stein refers to as the double standard of city housing policy: in impoverished areas, planners use zoning as a catalyst for market-rate development to solve the housing crisis, while using the same tool in wealthy neighborhoods to constrain development (Stein 2019, 90).

The protests did succeed in winning several key concessions from City Hall. For example, the city committed to legalizing basement apartments, as well as creating a job training center and a public school (Khurshid 2017). But these concessions are ultimately not legally binding, and residents have continued to protest to hold officials accountable (“East New York Organizations Rally Against ReZoning Development That Has Been Empty On Investment and Jobs Promises” 2020).

How can we assess the impact of a rezoning? We know that upzoning tends to increase property values in the rezoned area (Stein 2019). In the case of East New York, real estate speculation started as soon as the first hint of rezoning became public knowledge. The mere prospect of an upzoning set off a “speculative frenzy” as soon as DeBlasio won the mayorship. Speculators bought and sold property in East New York at a rapid pace, driving up land prices 63% in 2015 alone, and raising rents by 16%, before the rezoning even took effect (ibid., 101-102).

In terms of post-rezoning impact measurement, Freemark (2020) found that increases in housing prices in a Chicago-area upzoning occurred within two years of the zoning changes, which he attributes to rapid capitalization by real estate interests. He also found that the upzoning did not generate meaningful increases in housing unit construction within five years of policy implementation. In other words, he found that prices increased while supply remained flat.

Now that we are approaching six years since the East New York rezoning, the time has come to assess its analyze from a housing availability and affordability perspective.

Research Questions

In this report, I aim to assess how the 2015 rezoning of East New York and surrounding neighborhoods impacted housing production and affordability. I’m particularly interested in learning whether Mandatory Inclusionary Housing stimulated meaningful affordable housing production.

In early 2020, HPD estimated that just 503 affordable units (out of the promised 1,200) had been created. However, supporters of the rezoning claim that the benefits extend beyond the direct construction of these units. They claim that market development will stimulate knock-on supply effects, resulting in lower costs overall. One member of the Brooklyn Borough President’s office said as much when he admitted that the city knew that the impact on housing “was going to take time for market absorption.” (Kully 2020).

As we enter 2022, with looming changes in City Hall and rezoning throughout the city, it is important to reevaluate the success of the 2016 East New York rezoning from the perspective of habitability. The larger goal of my research is to interrogate whether local governments can stimulate affordable housing creation through the private market via zoning changes.

Data Sources & Analysis

I used a combination of ACS data, NYC DOB permit data, and federal low income housing tax credit data to answer these questions. I cleaned and filtered this data and combined it with NYC Planning’s neighborhood tabulation area (NTA) map as well as a map of the East New York MIH zone in order to determine the impact of the rezoning on East Brooklyn in a number of ways.

Rezoning & Housing Supply

New construction in New York City requires a permit from the Department of Buildings in order to proceed. Thus, examining permits is one way to assess whether a rezoning has stimulated housing construction in a particular area. To start, I looked at residential new construction permits issued across East Brooklyn for the six years before and after the rezoning.

I wanted to explore whether MIH and associated upzoning impacted the number of permits issued. To that end, I compared the proportion of permits approved after the rezoning both inside and outside of the MIH area. The results are striking. Roughly 50% of permits were approved after the rezoning outside of the MIH area, while a full 84% were approved post-rezoning inside the MIH area.

This is a strong indicator that MIH did provide an incentive for developers to request permits to build in the upzoned area. That is, MIH zoning does not seem to impede development and may encourage new permit requests that, by nature, must include affordable units.

We can also use permit data to assess the zoning’s impact on housing typology. Did the rezoning push developers to build denser, mult-family housing? To help answer this, I added permit type (1-3 family vs. 3+ family housing) to the proportionality chart, in order to see whether MIH impacted density.

Again, it appears that the rezoning did promote an increase in density. More concretely, permits issued after the rezoning within the MIH area tended to be for denser housing than permits issued outside that area.

The above data indicate that MIH zoning may increase permit requests, and those permits tend to be for denser housing. Whether this meaningfully impacted neighborhood affordability is a open question that I will attempt to answer below.

Affordability Assessment

Proponents of rezoning often insist that upzoning will increase affordability by both stimulating construction of affordable units. They claim this will occur both directly in the upzoned area as well as in the surrounding neighborhood. Enticing private developers to increase housing supply will reduce rents for everybody. In this section, I attempt to measure affordability to see whether this is true.

Non-Profit vs. For-Profit Development

There are multiple ways to examine affordability in a given area. One is by looking at non-profit building permits issued, which are presumably more affordable than for-profit development. Using the DOB permit dataset, I assessed non-profit permits issued in East Brooklyn, both inside and outside the MIH zone, for 6 years before and after the rezoning took effect.

Under the assumption that non-profit developments are more affordable than for-profit ones, a high proportion of non-profit permits would be a marker of affordability. Thus, I compared the proportion of non-profit permits after the rezoning, inside and outside of the MIH zone.

Only 1.9% of post-rezone permits issued inside the MIH zone are from non-profit developers, compared to 8.1% of permits outside this area. While this may seem to indicate that MIH reduced non-profit development, it is important to note that the number of post-rezone non-profit permits is extremely small across the board, meaning it is unlikely to be statistically significant. Also, not every building that includes affordable housing will be developed by a nonprofit, especially under MIH. Supporters of the rezoning claim that MIH will result in the construction of affordable housing by for-profit developers.

It’s also worth noting the cluster of of nonprofit single family homes on Vandalia Ave in Spring Creek, to the bottom left of the map. This the the newest Nehemiah home development.


Changes in LIHTC Developments

Another way to indirectly measure affordability is to assess federal Low Income Housing Tax Credit (LIHTC) projects. LIHTC is a voluntary program gives developers a tax credit for building affordable units as part of a project. I was interested in whether the rezoning impacted the proportion of affordable units, or the number of LIHTC developments, in East Brooklyn.

To start, I pulled LIHTC projects in East Brooklyn for the three years before and after the rezoning (2013-2019).

It’s clear from this visual that there are no LIHTC buildings built since 2013 that overlap with the MIH area. The database does report how many low-income units are part of each development, however, which allowed me to the calculate the proportion of low-income units before and after the rezoning.

While there was a slight increase in the proportion of low-income units after the rezoning, the numbers were so close that they are not likely to be statistically significant (97.0% low-income units pre-rezoning vs. 99.5% post-rezoning).


Rent Changes in East Brooklyn

Rent is a more direct way to assess affordability. The American Community Survey (ACS) measures rent by census tract, allowing us to compare median rent at two different timepoints. The below map shows the census tracts where median rent increased between 2015 and 2019:

Rent increased in most parts of East Brooklyn, including in the area zoned for MIH. Diving deeper into the rent data, I evaluated the census tracts where rent increased the most:

I wanted to evaluate whether the rent change inside the MIH rezoned area (black box) was different from the rent change in the rest of the East Brooklyn neighborhoods. The results were very interesting.

I found that rents inside the area zoned for MIH increased nearly twice as much as rents outside that area between 2015 and 2019. This is strong evidence that rezoning, even with MIH, causes an increase in rents relative to the surrounding area. However, it is important to note that the “inside MIH” bucket includes data for the entire census tract, even if that tract only overlaps with MIH zoning in a small area. I will tolerate the issue for this project- after all, the rezoning would likely impact the nearby parts of these census tracts, even if they are outside the MIH area. However, further research will be necessary once 2020 census data is returned in order to reduce margins of error and utilize more precise block-level data.

Summary

This preliminary research indicates that the East New York rezoning positively impacted both housing construction and the density of that construction. It may have failed to increase affordability, however, as rents continue to increase throughout the neighborhood. In fact, the rezoning may have negatively impacted affordability, raising questions as to the efficacy of MIH as an intervention for the housing crisis.

Next Steps

Limitations

It’s important to recognize several key limitations of this research:


Data sources:

Median Contract Rent: U.S. Census Bureau, Median Contract Rent, 2015 and 2019 American Community Survey 5-year estimates*, retrieved December 2, 2021 using the tidycensus R package.

NYC Building Permits: NYC Department of Buildings, DOB Permit Issuance, retrieved November 12, 2021 from the NYC Open Data Portal.

The following modifications were made to the dataset:

  • In order to download a smaller file, I filtered it to only permits after 2009, only in Brooklyn, and only new buildings and major alterations
  • For buildings with multiple permits, I only looked at New Building (NB) codes and considered the most recent application to be the one impacted by the rezoning
  • I chose to focus on approved permits and approval date rather than request date. This is because approved permits are the most likely to be utilized.

Low-Income Tax Credit Database: Department of Housing and Urban Development, LIHTC Database, retrieved December 3, 2021 from the LIHTC Database Access.

*Note that this database only extends to the end of 2019. 2020 data will be added in Spring 2022.


Methods:

Percent change in median rent is calculated as the difference between 2019 median contract rent and 2015 median contract rent divided by 2015 median contract rent.

Rent increase simply checks whether to see median contract rent increased between 2015 and 2019.

Proportion of low-income units divides the reported number of low-income units by the total number of LIHTC units for a given project/area.

Proportion of permits requested after the ENY rezoning divides the number of permits issued after the rezoning (2016 and onwards) by the total number of permits issued in the given timeframe.

Proportion of non-profit units divides the reported number of non-profit permits issued by the total number of permits issued since the rezoning.

Proportion of 3+ family units divides the reported number of 3+ family permits issued by the total number of permits issued since the rezoning.


Works Cited

Ali Kully, Sadef. 2020. “Worries About the Pace of Progress Four Years After East New York’s Rezoning.” City Limits. May 28, 2020. https://citylimits.org/2020/05/28/worries-about-the-pace-of-progress-four-years-after-east-new-yorks-rezoning/.

Brand, David. 2021. “De Blasio Said East New York’s Rezoning Would Spur Industrial Jobs Boom. That Hasn’t Happened.” City Limits. November 15, 2021. https://citylimits.org/2021/11/15/de-blasio-said-east-new-yorks-rezoning-would-spur-industrial-jobs-boom-that-hasnt-happened/.

“East New York Neighborhood Plan.” 2015. Department of City Planning, City of New York.

“East New York Organizations Rally Against ReZoning Development That Has Been Empty On Investment and Jobs Promises.” 2020. East New York News (blog). December 14, 2020. https://eastnewyork.com/east-new-york-organizations-rally-against-rezoning-development-that-has-been-empty-on-investment-and-jobs-promises/.

“Final Environmental Impact Statement - East New York Rezoning Proposal.” 2016. Department of City Planning, City of New York.

Freemark, Yonah. 2020. “Upzoning Chicago: Impacts of a Zoning Reform on Property Values and Housing Construction.” Urban Affairs Review (Thousand Oaks, Calif.) 56 (3): 758–89. https://doi.org/10.1177/1078087418824672.

Hill, Cobble, and Boerum Hill. n.d. “A DISTRICT-BY-DISTRICT ANALYSIS OF WHAT WAS LOST, GAINED, & WHAT REMAINS,” 52.

Iverac, Mirela. 2016. “Protests Fire Up Over East New York Rezoning Plan.” WNYC. April 13, 2016. https://www.wnyc.org/story/protests-continue-over-east-new-york-rezoning/.

Khurshid, Samar. 2017. “The East New York Rezoning, One Year Later.” Gotham Gazette. March 23, 2017. https://www.gothamgazette.com/city/6825-the-east-new-york-rezoning-one-year-later.

Li, Xiaodi. 2020. “Essays on Urban and Real Estate Economics.” Ph.D., United States – New York: New York University. https://www.proquest.com/docview/2494858769/abstract/95610540A2FA4D30PQ/1.

Mast, Evan. 2021. “JUE Insight: The Effect of New Market-Rate Housing Construction on the Low-Income Housing Market.” Journal of Urban Economics, July, 103383. https://doi.org/10.1016/j.jue.2021.103383.

Philips, Shane, Michael Manville, and Michael Lens. 2021. “Research Roundup: The Effect of Market-Rate Development on Neighborhood Rents.” UCLA Lewis Center for Regional Policy Studies, February. https://www.lewis.ucla.edu/research/market-rate-development-impacts/.

Stein, Samuel. 2019. Capital City: Gentrification and the Real Estate State. Jacobin Series. London ; Brooklyn, NY: Verso.

Whitford, Emma. 2016. “10 Arrested Protesting East New York Rezoning Outside Councilman’s Office.” Gothamist. April 13, 2016. https://gothamist.com.