Taking On Affordable Housing

NEW YORK CITY—For New York to continue to thrive, it needs affordable housing. This means not only for the people in the city getting priced out but also for young people, college grads and those with talent to move here to fill jobs, said Seth Pinsky, EVP and fund manager for metro emerging markets at RXR Realty. For a decade, he served as the president of the New York City Economic Development Corporation and before that was a senior advisor to Mayor Michael Bloomberg.

As a panelist at the Ariel Property Advisors “Coffee & Cap Rates” bi-annual discussion about New York City’s investment sales market, Pinsky said generally the fundamentals of the city are strong. It enjoys near record population, employment and visitorship. But he said it also faces three critical challenges:

(1) Affordability – It’s getting more difficult for young middle class people to find affordable housing. Separately, it’s also tough for the very poor who have a hard time finding housing, who live in substandard housing or make sacrifices with medical care, food and education for housing, with some driven to homelessness. “We have to figure out a way to address this affordability crisis. Both as a humanitarian issue and also as an economic issue because talent is the key to everything for us,” Pinsky commented.

(2) Infrastructure – Acknowledging part of the problem is the negative effect of positive growth, Pinsky said nonetheless New York City is overly burdening its infrastructure. He pointed to the electricity blackout of Manhattan’s West Side earlier this month, worsening subway service and problems with roads. “We have to invest in, maintain and expand infrastructure to accommodate growth,” he stated.

(3) Politics and Government – Pinsky said the hostility to growth and development in all fairness partly has been the real estate industry’s fault. “We’ve done a very poor job explaining why it’s important. And a lot of things the real estate industry has done in the last several years has been self-interested. I think it’s time for the real estate industry to get back into the business of thinking what’s good for the city as being good for the industry,” he commented.

He noted this was not only the right way to think about things but also in a long run a way to build goodwill, making it easier to get things done.

“It’s probably not even worth taking the time to talk about the problems with Washington. But immigration, the tax policy, all of those could have a dramatic impact on the city as well,” said Pinsky.

“Immigration is a huge part of the growth of New York City. Anyone who touches our world of construction, from small contractors to large contracting firms, feels that lack of labor force. Whether it’s unskilled or skilled, largely in the last 10, 20 years labor has been filled by immigrants,” added panelist Scott Metzner, president and founder at Janus Property Company. “It’s something our industry should also get behind.”

Panelist David Schwartz, co-founder and principal, at Slate Property Group, added that the only way to solve the affordable housing problem was to look at it regionally. “New York City can’t alone build all the housing and make it affordable for all the people who need it. It just won’t work.”

Citing a Regional Plan Association Study, Pinsky asserted development in the suburbs at moderate density around the transit nodes in the city’s region could create 250,000 new housing units, which could create a huge reservoir of workforce housing—critical to the city’s future.

Panelist Michael Givner, executive director at Morgan Stanley, pointed out now with the growth of last mile properties, approximately 50% has been e-commerce revenue. Dating back to 2000, e-commerce has grown at a 15% annual clip, he said.

As another challenge, now multifamily is competing with industrial property. With the rise of internet shopping, multifamily assets are no longer necessarily the highest and best use for warehouse properties outside but with close access to the city.