Over the past couple weeks, a media tempest has swirled up, devoted to the notion that there is discrimination against poor people in New York City real estate. Scandalous! The rich and poor residents of a building under construction on Manhattan’s Upper West Side, in a high-end development called Riverside South, will have to use separate entrances to their collective home. Outlets ranging from Forbes to Al Jazeera jumped on the story. Google News turns up over 17,000 results for the term "poor door." And newspapers like London’s Guardian have discovered examples of class segregation in their own cities. Again: shocking!
The building in question, One Riverside Park, is such a potent symbol of all that we fear about the plutocratization of New York City, that if it didn’t exist, some editorial cartoonist would have to draw it. So it has, predictably, generated endless headlines about the shameful nature of a city where the poor are forced to scurry in the back way. All true, up to a point. But it’s an example of an extremely complex situation—driven by years of policy that is designed to goad the private sector into producing lower-cost housing—reduced to dumb political theater. The developers may look like the villains in this morality play, but the real culprit is a decades-old determination to extract the "public" from public housing.
The story first broke in August of last year when the New York Post featured an artist’s rendering of a glassy new building with screaming red captions: "RICH DOOR on Riverside Blvd." and "POOR DOOR in back alley."
The story re-emerged in late July when the city —now led by Mayor Bill de Blasio, who campaigned on a promise to end New York’s "tale of two cities"—signed off on the portion of One Riverside Park that contains 55 rental units for families making $35,000 to $50,000 a year, situated behind a 33-story market rate condo with 219 with prices starting at $2 million (and penthouses for $20 million). The city certified that the developer, Extell—best known for One 57th Street, a 90-story tower designed by French architect Christian de Portzamparc—had met the requirements of Bloomberg-era "inclusionary housing policy." That meant that the apartments accessed by the poor door were sufficient to give the developers the right to build taller. (A bonus Extell chose not use on this particular project.)
This is far from the first building in New York where issues of class play a prominent role. Take a look at the new waterfront in Williamsburg, Brooklyn. Toll Brothers, developer of 30-story market rate towers there, got tax breaks and a zoning bonus to build affordable housing. The low-cost units are tucked behind the towers in a squat 113-unit structure called Palmer’s Dock, whose tenants don’t get access to the development’s pool or Jacuzzi.
This setup is borderline virtuous compared to what happened with Battery Park City, the 92-acre Manhattan mega-development built on landfill from the construction of the World Trade Center. In a 1969 agreement between Mayor John Lindsay and Governor Nelson Rockefeller, the new development was supposed to have two-thirds of 15,000 apartments reserved for families of low and moderate income. By the 1980s, Battery Park City emerged as a luxury development with a billion dollars of the revenue it generated earmarked to create affordable housing elsewhere. That would have been great if it had happened. But over the years, the amount spent on low-income units dwindled and those units—1,557 of them according to one count—were built in Harlem and the Bronx. Rich borough, poor borough.
For One Riverside Park, Extell did what a developer does: It worked the angles. It took advantage of the 421-A program, invented back in 1971 when New York City was sliding toward bankruptcy. It was intended to promote construction on underused or undeveloped sites. In 1985, as the real estate market heated up, the most desirable parts of Manhattan, between 14th Street and 96th Street, were put in an exclusion zone. To be eligible for 421-A in the heart of Manhattan, developers had to include affordable housing, at least 20%. So the 80/20 model that is now commonly used by New York City developers, particularly on rental buildings, was born. Up until 2007, the 421-A program generated "certificates" that allowed developers to build affordable housing in neighborhoods far removed from their market rate buildings. In 2007, the 421-A laws were revised. The tax breaks were applied to more NYC neighborhoods, including upper Manhattan and the outer boroughs. And developers could no longer shift affordable housing off-site, essentially legislating mixed-income neighborhoods.
The other program that Extell dipped into, inclusionary housing, generally mandates that the affordable units be in a separate building, usually elsewhere in the same community. Or they can be in the same building, but must then be evenly distributed throughout the building. Or—and here’s the loophole—they can be clustered in what the city calls a building "segment," which then has to have a separate entrance. A "poor door." In return, developers get the right to build more square footage than zoning permits.
Presumably Extell went for the "segment" option because they could build the affordable units, all rentals, with less expensive finishes than they’d lavish on $2,000-a-square-foot condos. So, depending on how you look at things, Extell is a Dickensian bad guy, or is simply playing the game. And maybe the real problem here is the game.
For much of the 20th century, the city, state, or federal government funded housing for impoverished New Yorkers. This policy began with the First Houses in 1936, the first public housing in the U.S., a cluster of updated tenements in the East Village built by the newly formed New York City Housing Authority. NYCHA went on to build some 334 projects, with over 178,000 apartments. However, large-scale public housing went out of fashion in the 1980s. Since then, the approach to affordable housing in New York, and throughout the country, was to encourage private developers to build low-income housing—often small groups of townhouses—with tax credits and other financial goodies.
So public housing gave way to privately built affordable housing driven by incentives. Which sounds admirable, but it’s not terribly efficient. A recent report from the Real Estate Board of New York showed that from 1984 until 2012, 33,000 units were built in Manhattan under the 421-A program in buildings that include at least 20% affordable units. 6,883 of those units were affordable. That’s 6,883 affordable units in 30 years. Meanwhile, the New York City Independent Budget Office did a survey last year and found that 150,000 units of housing in New York City received 421-A tax exemptions worth $1.1 billion in annual tax revenue.
Contrast those numbers with Mayor de Blasio’s goals for affordable housing, creating 80,000 new units and preserving 120,000 more, a $41 billion undertaking, with uncertain funding. The plan is to use the same toolkit: inclusionary housing bonuses and 421 a tax breaks adjusted with what the Mayor calls a "carefully crafted approach." In other words, we’re likely to see more rich door/poor door scenarios under De Blasio rather than fewer. (Although De Blasio is advocating a 20/30/50 formula, so there may also be a middle class door.)
The question is this: In a real estate environment as vigorous as New York’s, do developers really need tax incentives to build? And could the billion dollars worth of taxes that developers (and condo owners) are excused from paying annually instead be collected and spent on building a more equitable city? Instead of being horrified when developers play the cards they’ve been dealt, maybe we should be playing a whole different game.