How Cuomo would undermine his own smart offices-to-housing plan
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No one can say for sure, but as few as 12 percent of Manhattan office workers are physically at their desks. There are cities with somewhat higher rates of office return, but the work-from-home wave is buffeting the value of commercial real estate across the nation. In San Francisco, Pinterest paid $90 million just to break a lease on 490,000 square feet of future office space — underscoring the point that firms are willing to pay now for future savings.
So the idea of finding new uses for older office buildings would seem to make sense. That’s why Gov. Cuomo has proposed that empty city office buildings be given state help to gain new use as apartments. It’s a smart idea — if the governor plays it right. Sadly, his rhetoric thus far suggests he won’t.
Converting offices to housing or another use is something New York City’s Real Estate Board has long advocated, and the move could, indeed, bring new life to empty streets. But the governor describes an approach that will run counter to the goals of attracting new residents and raising new tax revenue.
His emphasis is on creating “affordable and supportive housing.” That’s generally development code for subsidized apartments for select income groups and buildings set aside for those suffering from mental-health issues.
The reality of the post-pandemic real-estate market begs to differ. Now is not the time to forgo tax revenues to support more subsidized housing: Rents are falling off a cliff citywide. Indeed, it’s the right time to end rent regulation, and some 16,000 units are vacant in Manhattan alone.
Cuomo is not wrong that Gotham — along with San Francisco, Los Angeles, Portland and Seattle — must do something about its street homeless crisis. But expecting new residents to be drawn to market-rate units in mixed-income developments, and to live cheek-by-jowl with those suffering from behavioral health and substance-abuse problems, is wishful thinking.
Case in point: the use of the Upper West Side’s Lucerne Hotel as a homeless shelter, which sparked massive opposition and court action in an ultra-liberal neighborhood. A way must be found to get the mentally ill off city streets across the nation, but it should involve a rediscovery of asylums, complemented by supportive housing, which has on-site help, for those who are demonstrably not a threat.
Keep in mind, converting office buildings to apartment use is definitely possible. It happened in a big way post-9/11 in lower Manhattan. But as developers will tell you, it’s logically complicated: Building layouts may not work and thus require expensive gut renovation.
And many owners are already burdened by mortgages based on office rents; they will have to add new borrowing costs on top of the old.
City and state have to recognize, too, that new apartment building would be greatly aided by a new property-tax regime that no longer taxes multifamily buildings disproportionately. More one-off tax abatements and subsidies just add to real estate crony capitalism. The right approach: Rezone whole office districts and see what the market wants to do. Who knows — it might be affordable. The challenge today is to encourage demand, not to micromanage what is allowed to be built.
More than anything, it’s past time to take for granted that cities can “build it, and they’ll come,” to borrow the much-borrowed “Field of Dreams” mantra.
City residents across the country are fleeing high housing costs, crime, violent political unrest and street homelessness. Working from home appears to be nothing short of a revolution. That means that for cities to compete, they must provide safe and clean streets, crime-free parks and effective schools.
Disorder, unlicensed food vendors and cigarette sellers dogging the neighborhood will kill any renascent demand.
Mayoral candidates such as city Comptroller Scott Stringer — who has said he’s running to stop the “gentrification-industrial complex” — are living in an alternate universe. The bankruptcy filing for a group of Upper West Side and Harlem apartment buildings by Emerald Equity Group, which advertises itself as investing “in developing areas,” is a leading indicator: Big cities are facing strong, new competition for residents from the despised heartland.
To win this new recruitment war, cities must provide good governance and stop assuming they can place unceasing and expensive demands on the market.
Howard Husock is an adjunct scholar at the American Enterprise Institute and a contributing editor of City Journal.
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