CITY LIMITS INVESTIGATES HOUSING:
HIGH COSTS INTERFERE WITH PLAN

In December of 2002, when Mayor Michael Bloomberg announced his first affordable housing plan, the new Yankees and Mets stadiums existed only in the dreams of owners George Steinbrenner and Fred Wilpon. A walk along the Greenpoint-Williamsburg waterfront would show plenty of development potential – but no new high rise apartment buildings. The phrase "Atlantic Yards" had yet to enter the city's popular lexicon. And it wasn't until eight days after the mayor unveiled his five-year, $3 billion, 65,000-unit housing plan that the first designs for the Freedom Tower were released.

More than four years later, the mayor's affordable housing goals have expanded: In late 2005 Bloomberg's new plan upped his promise to include 165,000 units by 2013 at a cost of $7.5 billion. The city has changed as well: The stadiums, waterfront skyscrapers, new Ground Zero, and Atlantic Yards projects that were mere visions four years ago are now just a few of the major development efforts either underway or in the pipeline. New subway tunnels are being excavated and multibillion-dollar water and sewer projects are going forward, while around the five boroughs a wave of private construction is transforming neighborhoods one parcel at a time.

The development surge is a powerful sign of a strong city economy. But it comes at a price, namely the increasing cost of constructing all those new additions to the city's skyline and streetscape. Inflation on New York's major construction projects ran at close to 1 percent per month last year, as steel, copper, and concrete prices – pumped by local demand and shaped by global economic forces like growth in China – continued their five-year climb. That means marquee projects like the Freedom Tower will be more expensive to build. It also means that affordable housing is going to be more costly to create or preserve. The effect of rising construction prices on affordable housing development is explored in greater detail in the first issue of the new quarterly, City Limits Investigates, Hard Costs: The Rising Price of an Affordable New York.

The Department of Housing Preservation and Development (HPD) contends that without raising its subsidies or expanding the plan's $7.5 billion budget, it can still meet the mayor's goal. But affordable housing developers, designers, and analysts say that, coupled with swelling land prices, the rising cost of construction threatens the Bloomberg plan. "Construction costs are killing us," says Paul Freitag, an architect with Jonathan Rose Companies, a builder developing several affordable housing projects in Harlem and the Bronx. "I think it's particularly tough in the case of affordable housing where you're looking for public subsidies to fill the gap."

The impact of higher costs on affordable housing development is complex. While it's possible that rising prices could limit the number of units produced, subtler effects are more likely. Developers might cut back on the quality of construction or the size of units. "Instead of using brick, we'll use stucco, or we originally plan to have a community room but now we realize we can't afford to put that in the project. We wanted ceramic tile in the kitchen, now we're putting in vinyl tile," says Drew Kiriazides, housing development director at Pratt Area Community Council. "I think the effect is to reduce the longevity of the development, which leads to higher operating fees in the future. You suffer down the line."