New York's City of Maybe

Happy Tuesday and welcome to another edition of Rent Free. This week's stories include:

• Colorado's banner year for housing reform.
• An upscale Los Angeles grocery store sues to stop new housing.
• Democratic lawmakers urge the White House to hurry up and issue new fair housing regulations.

But first, our lead story is a deeper dive into the proposed zoning overhaul in America's largest city.

How Big of a Deal Is Eric Adams' 'City of Yes'?

New York City Mayor Eric Adams has pitched his housing plan—officially the City of Yes for Housing Opportunity—as "a little more housing in every neighborhood." Housing wonks say it's an apt description.

The sprawling list of proposed reforms, updates, and tweaks to the city's zoning code that started the city's "public review" process late last month will add significant amounts of housing, but not as much as the ultra-expensive, undersupplied city needs, they say.

"Change comes incrementally," says Eric Kober, a scholar at the Manhattan Institute and former New York City planner, of the plan. "It would result in a significant increase in housing supply, let's say on the order of 20 percent. It's not nothing and worth doing if this is actually doable."

The city estimates Adams' City of Yes proposal will enable the development of 108,000 units over the next 15 years. That's about a fifth of the units planners estimate the city needs.

The proposed list of reforms includes eliminating minimum parking requirements for new residential construction, allowing smaller apartments on large lots near transit and along commercial corridors, permitting homeowners to turn their backyards and garages into accessory dwelling units, and giving density bonuses to projects that include below-market-rate housing units.

Developers would be allowed to construct buildings exclusively made up of smaller units, like studios and one-bedroom apartments. Currently, the city effectively requires developers to include some multi-bedroom units in their projects by setting minimum average unit sizes.

Alex Armlovich, a housing policy researcher at the Niskanen Institute, says that the elimination of parking minimums would be particularly productive.

New York already zones a lot of land near subway stations to allow for apartments, but parking minimums make it financially infeasible to build them. In addition to the land it eats up, a single parking space can add tens of thousands of dollars in construction costs. Eliminating parking minimums would allow more of these projects to pencil out.

"I call it parking freedom," says Armlovich, noting that some of the fine print of Adams' proposal might actually make it easier for developers to add parking as well.

Because eliminating parking minimums doesn't change the underlying zoning, it also doesn't trigger New York's Mandatory Inclusionary Housing (MIH) policy, which slaps often-ruinous affordability mandates on housing projects that benefit from rezonings.

Armlovich is less impressed by the mayor's proposal to allow smaller apartments near transit stops. The three-to-five-story developments envisioned in the current plan are smaller than the six-story apartments the city traditionally allowed prior to its infamous 1961 downzoning.

Allowing larger apartments near transit would give a more significant boost to housing production while minimizing negative impacts on parking and traffic congestion. "That's the one thing that would put up some really big numbers and not cause any objective harms," he says.

New York's environmental review law requires major rezonings to go through the "public review" process, which gives community boards and borough presidents opportunities to weigh in on the changes. Adams's proposed rezoning will then be vetted by the city's planning commission before being voted on by the city council.

This all gives a lot of opportunities for opponents of zoning reform to derail the process or propose unproductive amendments. The fact that Adams is proposing a city-wide rezoning makes it more difficult to win over individual neighborhoods with promises of capital funding and other carrots.

There's a lot of room for things to go wrong.

Nevertheless, the Adams administration put a lot of effort into getting buy-in on its housing proposal prior to releasing a detailed plan. What's on offer is a positive step for the city that would have been unthinkable even a few years ago, says Kober.

"In the 38 years that I worked for the city, these were all things that would have been politically impossible to propose," he tells Reason. "If more housing is built, and the world doesn't end, it creates a setting in which perhaps more things can be done."

The 'Colorado Comeback'

The Colorado Legislature disappointed zoning reform advocates last year when it failed to pass a major housing omnibus bill proposed by Gov. Jared Polis. Lawmakers are making up for lost time this year by passing many elements of the 2023 omnibus as one-off bills this session.

This year, the Legislature has passed a "transit-oriented development" bill requiring local governments in the state's urban areas to allow denser housing near transit stops and approve that denser housing without endless public hearings. Other bills passed by the legislature would eliminate parking minimums in urban communities and require local governments to allow accessory dwelling units in single-family zoned neighborhoods.

Woot woot! https://t.co/0UJCOI2rH5

— Jared Polis (@jaredpolis) May 9, 2024

These bills would still leave it in the hands of local governments to update their zoning codes. Localities will also get a lot of wiggle room to set their own standards under the new state laws. Both features leave open the potential for local governments to drag their feet on implementing the state reforms or defanging them with lots of poison pills.

All that's to say that time will tell how effective the new state laws will be at enabling more housing construction. Colorado's transit-oriented development bill does provide a carrot of state subsidies for localities that implement the law.

Read Reason's interview with Polis from earlier this year on zoning reform.

In Los Angeles, NIMBYs Try To Stop New Housing With yet Another Environmental Lawsuit

What do you get when you cross a luxury grocery store, a neighborhood association, and a hotel workers' union? An environmental lawsuit aimed at stopping the construction of hundreds of new apartments next door.

Earlier this week, the Los Angeles Times reported that upscale grocery store Erewhon is suing the city of Los Angeles over its approval of the redevelopment of a neighboring, shuttered hotel into a 520-unit, mixed-use development.

The city approved the project last month, over the objections of Erewhon, the UNITE HERE Local 11 hotel workers union, and the local neighborhood association, who all argued the existing hotel should be preserved.

Erewhon is claiming that the city violated the California Environmental Quality Act (CEQA) by approving the hotel redevelopment.

CEQA requires local governments to study the environmental impacts of rezonings and discretionary approvals of new development. The law also allows third parties to sue government bodies that approve new developments if they believe a thorough environmental analysis wasn't done.

As a result, the law has become a favorite tool of anti-development activists to slow down development or wring concessions about developers.

Democrats Urge Biden To Finalize Fair Housing Rules

Progressive lawmakers in Congress are urging the Biden administration to stop dragging its feet and finalize its long-in-the-works Affirmatively Furthering Fair Housing (AFFH) rule.

"The nation is grappling with a fair and affordable housing crisis. Finalizing the rule would pave the way to broader opportunities for historically disadvantaged families to establish themselves in communities where they can thrive," wrote Reps. Pramila Jayapal (D–Wash.) and Jimmy Gomez (D–Calif.) in a letter from last week that was co-signed by 26 other Democratic lawmakers.

The AFFH rule has been a major flashpoint in federal housing politics for the better part of a decade.

The Fair Housing Act requires that federal housing programs be administered in a way that affirmatively furthers fair housing. What exactly that means is anyone's guess, and for decades this provision of the Fair Housing Act went effectively unenforced.

In 2015, the Obama administration released an expansive AFFH rule that required jurisdictions to submit reams of demographic data which they were then supposed to use to develop plans for spending their federal housing dollars, changing their own housing regulations, and more.

Conservatives of all stripes criticized the 2015 rule as burdensome and overreaching. Local governments also complained that the rule required them to report a lot of information they didn't have.

Once in office, the Trump administration froze implementation of the 2015 rule and got to work on a replacement regulation that would steer federal resources to jurisdictions that enabled more development.

In 2020, Trump did a complete about-face and scrapped his own administration's proposed AFFH rule in favor of one that protected the "suburban lifestyle dream."

The Biden administration quickly revived the old 2015 rule. In January 2023, it released an updated rule that attempted to address some of the complaints about the original rule's unworkability.

With the clock running out on Biden's term, progressives are urging the administration to quickly finalize that rule.

Quick Links

• San Francisco's housing costs are so high that someone earning $109,000 a year now qualifies as low-income and deserving of subsidized affordable housing, according to California's new income limits for housing programs.
• Canadian musician Grimes urges the Austin City Council to approve a reform that will shrink the city's minimum lot size to 2,000 square feet. The city council will vote on the reform this week. Read past Rent Free coverage of Austin's zoning reforms here and here.

Hey Tx friends!!!
Austin will vote on Thursday to reduce lot sizes from 5,750 square foot to 2,000 square foot.

It would be amazing to allow ppl to have smaller more affordable housing lots and reduce housing costs in the city.

If u believe in this let ur elected officials…

— ???????????????????????? ⏳ (@Grimezsz) May 14, 2024

• George Mason University's Mercatus Center has a new policy brief on best practices for legalizing housing on faith lands and in commercial zones.
• The Institute for Justice (I.J.), a libertarian-leaning public interest law firm with a history of challenging local land use restrictions, is launching a new Zoning Justice Project aimed at reforming burdensome local zoning rules. "Whether a property owner wants to house the homeless or their own grandmother, they must navigate a labyrinth of unreasonable rules. The Zoning Justice Project exists to show that strong protections for property rights can empower Americans to create flourishing neighborhoods," said Ari Bargil, I.J. senior attorney and leader of the Zoning Justice Project, in a press release.
• A lawsuit trying to stop zoning reforms that ended single-family-only zoning in Alexandria, Virginia, is set to go to trial.
• Sen. Bernie Sanders (I–Vt.) releases a compilation clip of all the times he's blamed real estate developers for the country's high housing costs. One wonders, if you've said the same thing over and over again for decades about a problem that keeps getting worse, are you prescient or just consistently wrong?