‘Poor doors’ inevitable in Manhattan real estate

07/25/2014 5:51 PM

07/25/2014 5:52 PM

Everybody’s mad about the “poor door.” This is the name critics have bestowed upon the separate entrance for the affordable-housing units at a planned new luxury building on the Upper West Side of Manhattan. Those who pay market rates would have access to extra amenities – gym, pool, Hudson River views – as well as their own doors and lobby.

Newsweek calls the scheme “Dickensian.” The West Side Rag, which was on the story before the city approved the plan, compared the proposal to “Downton Abbey.” Mayor Bill de Blasio has said that there is nothing he can do – the building is nearing completion – but that he wants to make sure this kind of thing doesn’t happen again.

My heart is with the critics. The poor door is a little outrageous. But some of the outrage may be (to use the current argot) merely optical. More to the point, the separate entrance for the cheaper units – hardly unheard of in Manhattan real estate – is in part a consequence of the very inclusionary policies that New York is trying to enforce.

Critics are reluctant to acknowledge that the “poor door” only does explicitly what the city already does implicitly. Manhattan isn’t a place where the well-to-do live cheek by jowl with those of modest means. New York isn’t quite the most economically segregated city in the United States, but it’s very near the top of the list.

Research released earlier this year by the University of Toronto used tract figures from the U.S. Census Bureau to calculate how segregated the poor are in 350 metropolitan areas. Residential segregation by income is worst in New England, along the Eastern Seaboard to Washington and in large chunks of the Midwest.

Among large metropolitan areas, New York City ranked sixth from the bottom, trailing only Milwaukee, Hartford, Cleveland, Philadelphia and Detroit. Even when all 350 metropolitan areas are included, New York is 20th-worst. In other words, most affluent New Yorkers don’t need a special entrance. They tend to live nowhere near those of moderate means.

New York has a response to all of this, of course. According to news reports, the city plans to place the poor “in middle-class neighborhoods and the more affluent in high-poverty spots.” The irony is plain. A problem largely caused by overplanning is to be resolved through more planning. What’s needed, the city seems to think, is bureaucratic study to determine who should live where.

Here, politics and economics point in different directions. Like other constraints on development, inclusionary zoning policies operate like a tax on construction. The tax in turn raises the cost of new housing, increasing the pressures on those of moderate means. In many areas of the U.S., housing sells for little more than the cost of building it. In large heavily regulated cities and suburbs, as economists have long understood, prices run much higher.

It’s clear why high-end builders like the programs, but it seems odd that progressives support them. According to the New York Post, the developer of the building in question, Extell Development Co., saved more than $21 million in taxes on five of its luxury buildings in the first year alone by complying with the inclusionary zoning rules. As part of its reward for including the moderate-income units in its new building, Extell will receive credits for an additional floor of market-rate units. The company reportedly plans to sell the credits, probably for millions, to another developer that will use them on a project in the area.

Not a bad haul.

Supporters of affordable housing often worry that in the absence of such regulations as the “inclusionary zoning” rules, developers will build only for the well-to-do. I share the worry. Economic integration is in most cases a desirable good. Too often, however, what prices those of moderate means out of major cities isn’t income but regulation.

As Matthew Yglesias points out in his excellent monograph “The Rent is Too Damn High,” scarcity itself is anti-egalitarian, because the rich will always outbid the poor – but it isn’t just space to build that’s scarce in our cities. It’s also permission to build. Writes Yglesias: “Politicians of both parties who like to complain about ‘regulation' and ‘red tape' ought to spend some time looking at the specific area of the economy where red tape and regulation are most prevalent.”

He’s talking about development.

Markets aren’t perfect, and there will always be a case for some government intervention in housing. But it’s never been clear to me why the intervention shouldn’t simply consist of giving people of low and moderate income the means to rent wherever they like. Constructing units of affordable housing – whether within a luxury building or as part of a separate development – involves relying on experts to decide where the poor ought to live.

If instead we give them money or vouchers, people of moderate means can decide for themselves. Just like the affluent do.

Stephen L. Carter, a Bloomberg View columnist, is a professor of law at Yale University.

© 2014, Bloomberg News

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