Jason M. Barr September 13, 2022
New York is a resilient city. In 1975, it was left for dead when President Gerald Ford failed to help stave off its Fiscal Crisis. But, the rise of high-tech and high-skilled industries has reinvigorated its economy, while the drop in crime has brought back consumers and tourists alike. Then, when the Covid-19 Pandemic hit, the commentariat was, once again, predicting the death of Gotham. Yet, the city endures.
New York’s problems today are, in some sense, crises of success rather than failure and abandonment, like in the 20th century. Housing is more unaffordable than ever. Too many people are chasing too few units, and prices have soared. On its streets, too many drivers are overwhelming roads never designed to handle such capacity. Decades of economic growth enabled by fossil fuels have put us on the brink of climate change catastrophes.
And what is New York City doing about these things? It’s playing Pin the Tail on the Donkey.
That is, Gotham is groping its way forward with half-baked policies that hardly address the problems at hand. The decentralized nature of its governance also means that agencies and authorities operate with little consideration that housing, transportation, and climate change are inextricably linked.
Thanks to its wealth and determination, New York may well muddle its way to the future. But this is wasteful, unnecessary, and will cause undo suffering.
Time for a New Master Planning Philosophy
It is time for a new master plan based on 21st-century thinking, not like the master plans of old that tried to tame the city or to micromanage what happens on every block. Rather, a city is a dynamic system of interrelated parts that feed back on each other and evolve based on changing forces both from within and outside the region. These forces create a type of order–a kind of controlled chaos, that should be embraced rather than squashed. A new master plan is needed that “listens” and adjust policies and investments as the times change in order to encourage improvements, adaptation, mobility, and growth without adding unintended harms.
Since New York’s renaissance began in the 1990s, there has been a pervasive sense that rising housing prices are the norm, and nothing can be done to change the tide. There is a deep mistrust of developers and the free market for housing since the thinking goes that if left unchecked, the market will exacerbate gentrification and cause prices to rise even higher.
As a result, the government has cobbled together a suite of policies that ignores the necessary solutions and worsen the problem. First has been the doubling down on rent stabilization. This policy only makes sense if you believe access to New York’s housing is a zero-sum game. Rent stabilization remains in effect if the citywide vacancy rate remains below 5%. But it remains below 5% in large part because of stabilization!
The other programs rely on subsidies to incentivize the development of affordable housing units. Sure, they have helped the lucky few who get access, but they have not addressed the fundamental problem–a demand-supply imbalance.
Over the decades, New York has erected many barriers to prevent the housing market from doing its job. Rent stabilization is only one problem; overly restrictive zoning is another. In Gotham, more than two out of every three residential properties are either above or very close to their allowable floor area caps. That is, it’s illegal or impractical to add more housing on these lots.
By law, the City prevents new housing and then blames developers for not providing it. When prices go up, it “punishes” “greedy” landlords by enacting price controls.
Stuck in Traffic
New York’s transportation situation is just as bad as its housing market. Regarding automobiles, no new roads have been constructed since the 1960s when Robert Moses was in power. But the system was never designed to handle the traffic of a metropolitan region with 19 million people and their truck-based freight. Too many cars are “chasing” too few roads, resulting in massive congestion, frustration, waste, and harm. Meanwhile, the MTA is struggling to get its straphangers back.
More broadly, the larger transportation network is run by a hodgepodge of agencies. The Port Authority oversees bridges and tunnels from New Jersey, and the Department of Transportation oversees bridges, tunnels, and roads within Gotham. Then there’s the MTA, which oversees subways, buses, and commuter rail. There is practically no coordination between them, even though they all provide the same product—mobility.
Climate Change Catastrophes
On September 1, 2022, Crain’s New York Business ran the headline, “One year after Ida, New York leans into nature-based climate strategies.” The article discusses how the City is increasing the number of “bluebelts”—natural wetlands that can absorb water from surges or torrential downpours.
This is certainly a promising program, but when you think about it, it’s just another example of how New York is groping its way to climate change resiliency. Bluebelts can only be one minor fix in very specific neighborhoods. The broader resiliency strategy thus far has been piecemeal and ad hoc: add to the bluebelt here, beef up a shoreline there, build a seawall here, etc. There is no larger framework, nor any consideration of how its actions will affect the cost and access to housing.
Yes, learning by experience and tweaking policies on the ground are important parts of the equation. But when you look at what’s being done, it’s clear that New York is taking the path of least political resistance—it “sneaks in” its resiliency projects where residents are not likely to complain. Hardly a rational plan.
The VEAM Principle
It’s high time that the City updates its thinking about how cities work, how policies should be enacted, and how governance should be structured. It’s high time that Gotham creates a new master plan for the 21st century. The plan should be based on economic realities and not on visions of utopia or catering to narrow special interests. Such a plan should adhere to what I call the VEAM Principle.
V: The Value of Land
First is the value of the land. Land values represent the value of geography. Central places are more valuable than suburban ones. Blocks near train lines or parks are more valuable than those further away. And where land values are highest, more housing should be allowed and encouraged.
Because the zoning framers feared density, they set up a city where most of its land is forced to remain low density. As a result, there is hardly any flexibility for high-amenity neighborhoods to increase the amount of housing. In many places, the zoning codes are the same whether a property is one block or one mile from a rail line or large park. It makes no economic sense.
However, the main problem of dense development is that it creates a host of negative externalities or harms that affect residents and visitors. Tall buildings can create shadows, and density can create congestion on the streets. City planning needs to minimize the damage without hurting residents.
Historically, in the name of limiting shadows and congestion, the City has resorted to building bulk limits. But this is a very blunt instrument because it creates housing scarcity and simultaneously curbs the negative and positive externalities.
If shadows from new construction are a problem, tax shadows or tax bulk or height above some “reasonable” level that gives back resources to the community to improve the quality of life.
In New York City, rent stabilization remains in effect if the citywide rental vacancy is less than 5%. But rather than saying, “vacancy is too low, we need to implement price controls,” how about we imagine a world where citywide vacancy is always say 10% naturally—a world where there is so much housing and so many choices that rents are inherently affordable without unnecessary restrictions. The government needs to have more faith in the invisible hand. That’s not to say it can’t use a velvet glove to help adjust things from time to time.
The goal of transportation policies should be to move the most amount of people with the least amount of congestion. This means rail, subways, roads, and the prices of using each should be coordinated to give people several choices and limit congestion. The more options people have, the more naturally they will eschew their cars. The key: all elements of the transportation system are linked—cars, buses, subways, commuter rail, walking, cycling, and scootering are all different forms of mobility and should be treated as such within a larger mobility framework.
Just as importantly, transportation goes hand in hand with housing—rail lines and subway stops should have more housing because not only is the land more valuable, but it also makes life easier for thousands of people. The City can’t just build a route to connect Queens and Brooklyn and say that it solved a problem. The new line will drive up the cost of housing and land. Without upzoning along the corridor and beyond, the affordability problem will worsen.
Elements of A Master Plan
A master plan, of course, is a detailed document. But here, I offer some key elements that adhere to the VEAM Principle.
The current zoning system, enacted in 1961, was based on the belief that density was bad. Today, cities embrace density for all its benefits. Thus, Gotham needs a zoning plan that reflects this. This could be done in, say, one of two ways. The first would be to upzone all neighborhoods initially and then provide local “bump ups” in the allowable floor area ratio (FAR) based on land values. Let demand dictate density.
The second possible strategy is to eliminate floor area ratios altogether and have developers pay impact fees or externalities charges that are a function of land values and current density. In suburban neighborhoods, the fees would rise dramatically, say after the fourth floor, whereas in Manhattan, fees would rise after, say. 30 stories. This way, the externalities are paid for without stifling needed housing construction.
Zoning regulations have also prevented the City from enacting transit-oriented design (TOD) policies. In many neighborhoods along the subway lines, it’s impossible to densify. A genuinely forward-thinking plan would encourage densification along the subway and commuter rail (which would also naturally increase ridership).
Congestion Pricing Everywhere
New York is on the brink of establishing “congestion pricing” for cars and trucks entering lower Manhattan (though parochialism may kill it yet). However, it’s not really a congestion charge since the fee will not move up or down based on how many cars want to enter (that’s a toll). Again, this plan illustrates the lack of systematic thinking. It charges only one price and is very localized, applying only to those entering Manhattan south of 59th Street (and does not consider that parking or traffic just outside the zone will likely become that much worse).
I have written on this subject before, so I will only say that a proper congestion pricing system goes citywide. It charges tolls on all the highways, bridges, and tunnels based on actual usage during the day. And fees for highways are linked to mass transit—if roads become crowded, the costs of using buses or subways fall simultaneously. Integrate the entire system.
Climate Change Impact Maps
New York should produce climate change impact maps that show the likely damages from surges, flooding, and other shocks. The maps will give property owners the information they require, and will also suggest needed government investments for resiliency. The maps would work alongside the zoning maps and transportation plans so that a master resiliency plan does not backfire by harming other aspects of city living and affordability.
Tie Services Upgrades to Density
Upzoning and TOD mean higher-density neighborhoods. The master plan needs to outline the process by which local services, such as schools and parks, automatically get upgraded as the local population increases. This way, the government agencies are prepared ahead of time, and residents can rest assured that population increases will not reduce their quality of life.
Transition Requires Compensation
Rethinking and reorienting policies means change. However, people naturally resist it because they fear the new outcome will be worse than the status quo. Thus, Nimbyism is a tremendous barrier to moving New York to a better place.
As I have argued elsewhere, a new master plan needs to spell out how transitions will proceed in a manner that makes people better off. One way to do this is to compensate those who will be harmed, such as offering land value insurance for homeowners and subsidies to renters who need to move when their building is redeveloped.
The Steps to a Better New York
What are the steps needed to create and enact such a master plan? The first thing is leadership—perhaps the scarcest commodity of all. The process would begin with the mayor and with a paradigmatic shift in thinking—that the metropolis is a complex system that, if guided properly, can generate order without design.
The mayor needs to assemble all the relevant agencies, authorities, and local, state, and federal leaders and have them map out the elements of governmental coordination. New York needs to build the capacity for systematic thinking and action.
A Blue Ribbon Panel of 100
The next step would be for the mayor to convene a Blue Ribbon Panel of 100 respected leaders and accomplished community members to create the master plan. A diverse panel, chaired by a seasoned but impartial public servant, would give its output legitimacy, as the plan must be fair and not favor one group or industry over another.
Having the panel issue the plan makes an essential statement that change is a community effort. It says, “Let’s collectively imagine a world where housing is more affordable, where traffic and transportation woes are not a constant part of daily living, and where we don’t need to live in constant fear of flooding.” Imagine that!
Its members could come together to engage in systematic thinking. Parks representatives will hash things out with housing advocates. Climate change experts will hash things out with transportation representatives, real estate developers will hash things out with social service providers, and so on.
Selling it to the Public
With a plan in hand comes the hardest part of all: selling it to the public. The pervasiveness of Nimbyism and the widespread cynicism about government effectiveness make any significant policy change nearly impossible. The Blue Ribbon Panel and city and state leaders must demonstrate how the plan will improve New Yorkers’ lives—that housing will be more affordable, transportation will be faster, and climate change damage will be minimized. The Panel can sell the plan without succumbing to parochialism.
The Future Today
We have, unfortunately, created a crisis of creative thinking—a kind of a prisoner’s dilemma world where protecting our self-interest seems preferable to working towards the common good.
As as the nation grew wealthier, its citizens asked its leaders to help preserve their gains. Governments thus have erected barriers to slow down or prevent dramatic urban changes. This, however, has cemented the notion that the expensive and congested status quo is preferable to any and all possible changes, even those that have the potential to create great good.
Despite what we tend to think, the status quo is not inevitable. But moving to a better world involves leadership and a deeper understanding of how cities function and succeed. I believe it can be done.
Read my Skynomics Blog posts about New York City housing here.
 I’m grateful for Alain Bertaud’s masterful book, Order Without Design: How Markets Shape Cities, which has inspired the ideas in this post. I do not, however, profess to speak for him or am I attempting to directly represent his views.
 For the sake of brevity, in this post, I avoid the discussion of real estate taxation, but any new master plan should consider a land value tax program.
 This is a tall order, given that the city government can’t even update its FEMA insurance flood maps since Hurricane Sandy hit in 2012.
 It’s not clear to me how eliminating bumper-to-bumper traffic, for example, is worse than the status quo.
Scott Baker says
Good article in describing the symptoms, but you missed one of the greatest tools for solving the disease of all: the Land Value Tax. The current real estate property tax is really two taxes, one on land, or location in dense urban areas like NYC, and one on buildings. The second part should be dropped since it makes no sense to tax the things that we want more of: buildings where people can live and work. To make up for that, and to encourage using land to its highest and best use, the locational value should be taxed to close to its full rental value. Other, productivity-sapping taxes on wages, sales, true capital, should also be greatly lessened or abolished too.
Our website gives plenty of examples of where Land Value Taxation could help provide more city revenue, create more housing, and reduce sprawl, hoarding and speculation; land is the biggest cause of economic crashes too, so NYC could lead the way in reducing cycles driven by land speculation.
It’s been done before. In the late 1920s-early 1930s, then Governor Al Smith excerpted all but the first $5,000 worth of a building from taxation ($5,000 was worth a lot more back then), powering a building boom that was 4X the national average. It’s why we still have so much pre-war housing today.
Our group, Common Ground-NY, has a white paper summarizing >230 studies showing building permits and building soars whenever a LVT-type legislation is enacted (no legislation is “pure” so there are variations in the laws, but the results are still clear: Land Value Taxation works, and works consistently wherever it has been applied).
This Henry George idea is making a comeback, with more modern versions called Value Capture of Site Value Collection, and is used all over the world to fund cities, urban development, and mass transit – congestion pricing is a form of Land Value Taxation too, just on a temporary use basis.