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					Balanced Housing
for a Smart Region:
Policies for Addressing the
Housing Problems of the
New York Metropolitan Region


        July 2006
Balanced Housing for a Smart Region:
Policies for Addressing the Housing Problems of
the New York Metropolitan Region
is part of an ongoing collaboration between the Citizens Housing and Planning Council
(CHPC) and Regional Plan Association (RPA) to analyze housing problems, propose
solutions, and support policy implementation in the New York-New Jersey-Connecticut
metropolitan area. The goal of the partnership is to provide a regional, interdisciplinary
perspective on a challenging set of issues that cut across political and geographic
boundaries. The first product of the collaboration, Out of Balance: The Housing Crisis
from a Regional Perspective, measured how well the region was meeting objectives of a
balanced housing market that provides affordable, quality housing choices across
income, racial and geographic boundaries. This second report takes a more in-depth
look at the questions raised by these findings and provides recommendations for a
metropolitan housing strategy.

Balanced Housing for a Smart Region was researched and written by Frank Braconi,
Elaine Toribio, and Jeffrey Otto of the Citizens Housing and Planning Council with the
assistance of Christopher Jones and Alexis Perrotta at RPA. Jeffrey Ferzoco of Regional
Plan Association designed the maps.

CHPC and RPA extend their gratitude to the Fannie Mae Foundation, Ford Foundation,
Washington Mutual, Surdna Foundation, Independence Community Foundation,
GreenPoint Foundation, Wachovia Foundation, the Met Life Foundation, and Bank of
America for their crucial financial support for this study. CHPC particularly thanks
Sheila Maith for her steadfast support of this project.
                      Board Members            Daniel Z. Nelson
                      Sandra Acosta            Daniel Nissenbaum
                      Mark Alexander           David L. Picket
                      Debra C. Allee           Rebecca Robertson
                      Frank J. Anelante, Jr.   Bernard Rothzeid
                      Naomi S. Bayer           Peter D. Salins
                      Alan R. Bell             Marian Sameth
                      Stanley Berman           Philip Schorr
                      Robert F. Borg           Denise Notice Scott
                      Diane Borradaile         Avery Seavey
BOARD OF              Howard Chin              Ethel Sheffer
DIRECTORS             Peter Claman             Paul D. Selver
                      Nina DeMartini-Day       Jane Silverman
President             Sylvia Deutsch           Carole S. Slater
Marvin Markus         Ruth Dickler             Ann M. Soja
                      Elaine Dovas             Mark Strauss
Secretary
                      Douglas D. Durst         Michael D. Sullivan
Sander Lehrer
                      William Frey             David J. Sweet
Treasurer             Mark E. Ginsberg         Robert V. Tishman
Robert Berne          Elliott M. Glass         William Traylor
Vice Presidents       Simeon H.F. Goldstein    Gerard F. Vasisko
Shirley Bresler       Colvin W. Grannum        Philip Weinberg
Robert S. Cook, Jr.   Amie Gross               Adam Weinstein
Robert W. Jones       Rosanne C. Haggerty      Alan Wiener
Deborah Lamm          James A. Himes           David J. Wine
Henry Day Lanier      Kent Hiteshew            Barry Zelikson
Michael D. Lappin     William N. Hubbard       Howard Alan Zipser
Frances W. Magee      Marc Jahr
Hal K. Negbaur        Carol Lamberg            CHPC STAFF
Vincent L. Riso       Charles S. Laven         Senior Policy Analyst
Robert C. Rosenberg   Robert O. Lehrman        Elaine R. Toribio
Richard J. Scheuer    Jeffrey E. Levine
                      Mark A. Levine           Policy Analyst
Flora Schnall
                      Kenneth K. Lowenstein    Jeffrey L. Otto
Robert W. Seavey
Richard C. Singer     Marvin A. Mass           Program Associate
Mark A. Willis        John McCarthy            Marsha Nicholson
Louis Winnick         Lucille L. McEwen
                                               Bookkeeper
                      David McGregor
                                               Jane Schneiderman
                      Howard D. Mendes
                      Ronay Menschel
                      Felice L. Michetti
                      Ron Moelis
                      Preston C. Moore
                                            Michael C. Finnegan
                                            Timur Galen
                                            Michael Golden
BOARD OF DIRECTORS                          Mark B. Goldfus
                                            Maxine Griffith
                                            Kenneth T. Jackson
Chairman
                                            Ira H. Jolles
Peter W. Herman
                                            Richard A. Kahan
                                            Richard D. Kaplan
Vice Chairman and Co-Chairman, New Jersey
                                            Shirley Strum Kenny, Ph.D.
Christopher J. Daggett
                                            Matthew S. Kissner
                                            Robert Knapp
Vice Chairman and Co-Chairman, New Jersey
                                            John Z. Kukral
Hon. James J. Florio
                                            Susan S. Lederman
Vice Chairman and Co-Chairman,              Richard C. Leone
Connecticut                                 Charles J. Maikish
John S. Griswold, Jr.                       Joseph J. Maraziti, Jr.
                                            John L. McGoldrick
Vice Chairman and Co-Chairman,              Robert E. Moritz
Connecticut                                 The Very Reverend James Parks
Michael P. Meotti                           Morton
                                            Peter H. Nachtwey
Vice Chairman and Co-Chairman,              Jan Nicholson
Long Island                                 Bruce P. Nolop
Robert A. Scott, Ph.D.                      Kevin J. Pearson
                                            James S. Polshek
President                                   Richard Ravitch
Robert D. Yaro                              Gregg Rechler
                                            Thomas L. Rich
Treasurer                                   Claire M. Robinson
Brendan J. Dugan                            Elizabeth Barlow Rogers
                                            Janette Sadik-Khan
Robert F. Arning                            Stevan A. Sandberg
Hilary M. Ballon                            H. Claude Shostal
Laurie Beckelman                            Susan L. Solomon
Stephen R. Beckwith                         Luther Tai
J. Max Bond, Jr.                            Sharon C. Taylor
George Campbell                             Karen E. Wagner
Frank S. Cicero                             Paul T. Williams Jr.
Jill M. Considine                           William M. Yaro
Kevin S. Corbett
Alfred A. DelliBovi                         Directors Emereti
Nancy R. Douzinas                           Roscoe C. Brown, Jr., Ph.D.
Douglas Durst                               Robert N. Rich
Barbara Joelson Fife                        Mary Ann Werner
Regional Housing Advisory Committee
John Atkin, Regional Plan Association
Naomi Bayer, Fannie Mae NY Partnership Office
Robert W. Burchell, Center for Urban Policy Research, Rutgers University
Ross Burkhardt, New Neighborhoods, Inc.
William Carbine, NYC Dept Housing Preservation & Development
Rafael Cestero, NYC Dept Housing Preservation & Development
Thomas Dallessio, Regional Plan Association
Hendrick Davis, Habitat for Humanity - Newark
Joseph Devonshuk, Zoning and Planning Department, Fairfield, CT
Elaine Dovas, Housing Consultant
Peter Elkowitz, Long Island Housing Partnership
Marilyn Gelber, Independence Community Foundation
Philip Grossman, Banc of America Securities
Nancy Hadley, Office of Planning and Economic Development, Bridgeport, CT
Gary Hattem, Deutsche Bank Americas Foundation
Martin Johnson, Isles Corporation, NJ
Peter Kasabach, New Jersey Housing Mortgage Finance Agency
Marcie Kesner, Kramer Levin Naftalis & Frankel LLP
Sarah Lansdale, Sustainable Long Island
Stanley Moses, Department of Urban Affairs and Planning, Hunter College
Seila Mosquera, Mutual Housing Association of South Central Connecticut
David Muchnick, New York Housing Conference
Frank Piazza, Plainsboro Non-Profit Housing Corporation
Ilene Popkin, NYC Dept Housing Preservation & Development
Lee Porter, Fair Housing Council of Northern NJ
Merilyn Rovira, Fannie Mae NJ Partnership Office
Thomas Ruhle, East Hampton Office of Housing & CD
Cynthia L. Russell, Connecticut Housing Investment Fund, Inc.
Wanda Saez, Wachovia
Ethel Sheffer, APA NY Chapter
Lucy Voorhoeve, Council on Affordable Housing (COAH)
Joseph Weisbord, Fannie Mae NY Partnership Office
Marian Zucker, Suffolk County Department of Economic Development
                     and Workforce Housing
Table of Contents
                                                                                       Page
Summary                                                                                   i - vi
Introduction                                                                              1-7

I. Housing and Land Use in the Metropolitan Region                                       8 - 48

          Trends in Land Use and Housing Development                                    10 - 16
                            Patterns of Housing Development                                   10
                            Trends in Land Consumption                                        13
                            Commuting & Transportation                                        15
          Local Land Use Strategies                                                     16 - 37
                            Bridgeport, Connecticut                                           19
                            Montclair, New Jersey                                             23
                            Gateway to the Highlands, New Jersey                              27
                            Croton-on-Hudson, New York                                        30
                            East Hampton, New York                                            33
          Statewide Land Use Strategies                                                 37 - 41
          Land Use Strategies for Balanced Housing                                      41 - 48

II. Transportation Investment and Education Funding                                     49 - 70

          Transportation and Regional Housing                                           50 - 58
                            Critical Need for Modal Choice                                    52
                            Housing-Sensitive Transportation Policies                         53
                            Key Regional Initiatives                                          55
                            Financing Transportation Infrastructure                           57
          Housing and Local Government Finance                                          58 - 67
                            School Finance and Fiscal Zoning                                  60
                            School Finance in Connecticut                                     64
                            School Finance in New Jersey                                      65
                            School Finance in New York                                        66

          Transportation and Education Finance Strategies to Support Housing Balance    67 - 71

III. Housing Finance Challenges                                                         72 - 95

          Regional Housing and the Private Mortgage Market                              73 - 83
                            Selling the American Dream to All                                 75
                            Subsidizing Homeownership                                         79
                            State Homeownership Efforts                                       80
          Subsidized Rental Housing                                                     83 - 92
                            Tax-Exempt Multifamily Financing                                  86
                            LIHTCs and Local Priorities                                       87
                            State & Local Funds for Rental Housing                            90
          Housing Finance Strategies for Balanced Housing                               92 - 95
Sources                                                                                96 - 101
Tables and Maps                                                              Page

Five Year Change in Metropolitan Housing Prices, 2000-2005                      5

Population and Employment Changes in the Metropolitan Region, 1990-2003        10

New Residential Building Permits, 1990-2003 By Sub-Area and Type of
                                                                               11
Structure

Housing Permits in Low-Density Counties, 1990-2003                             12

Connecticut and New Jersey Changes in Land Cover, 1995-2002                    13

Map: Change in Share of Urbanized Land as Percentage of Acres, 1985 - 1995     14

Map: 5 Case Studies                                                            18

Bridgeport's Land Use Trends, 1996-2000                                        21

Montclair's Multifamily Building Permits, 1998-2004                            24

Housing Characteristics and Tenure in the Gateway, 1990-2000                   28

East Hampton's Land Use Trends, 1984-2004                                      33

Population Changes in Regional Cities, 1990-2000                               42

Map: 10 Largest Municipalities Outside New York City                           43

Ridership Change on Regional Commuter Rail Systems                             53

Transit Share of Journey to Work                                               54

Prices and Tax Burdens for a Modest Home in the Metropolitan Area, 2004        59

Average Number of Children by Housing Type and Tenure                          62

Regional Applications for Conventional Mortgages by Income Group, 1997-
                                                                               75
2003

Regional Homeownership Rate by Race, 1990-2000                                 76

Regional Mortgage Approval Rate, 1997-2003                                     76

National Fixed- and Adjustable-Rate Mortgages, 2001 - 2005                     79

HFA Financed Single-Family Mortgages, 1998-2003                                81

Map: Share of Rental Units that are Federally Assisted                         84

Federally-Assisted Rental Housing by County                                    85
Summary
                                                As the region has grown in population and
                                                geographic expanse, the range of choices
Housing costs in the New York                   available to many residents has, ironically,
metropolitan area are among the highest in      contracted. Households of modest means
the country. That is primarily due to the       have been virtually priced out of entire
unparalleled size and wealth of our region,     counties, and in many areas, there is an
not to a massive failure of the private or      acute shortage of suitable housing for
public institutions that influence the          young people, singles, and seniors. The
housing market. In and of themselves,           growing mismatch between housing need
relatively high housing costs do not pose an    and availability is revealed by an alarming
immanent danger to the prosperity of our        increase in commuting times throughout
region; in fact, they can even be interpreted   the region.
as a market valuation of its high quality of
life and promising future.                      Moreover, thousands of dwellings in our
                                                inner-city districts suffer from serious
Nevertheless,     there    are    significant   deterioration and neglect, and even much of
imbalances in the metropolitan housing          our stock of middle-income, suburban
market that can impede future economic          homes, built a half-century or more ago, is
growth, impose hardships on its residents,      modest and outdated when compared to its
and increase our vulnerability to resource      equivalent in Sunbelt growth cities. Even
disruptions.     Comparative measures of        more alarmingly, a growing portion of our
“median home prices” and “median                population is being forced into a
incomes” provide only a statistical             burgeoning illegal housing sector, putting
shorthand that mask millions of individual      at risk their own health and safety and
circumstances with respect to housing           overburdening both the structures and the
affordability, choice, and quality. In our      communities in which they are located.
region, too many of those circumstances are
precarious and inadequate and can only be       Our regional economy appears to be
rectified    through     purposeful      and    creating more well-paid, professional jobs
coordinated public policies.                    and more modestly-paid, service jobs than
                                                it has in the past, with a consequent decline
Rising home prices over the past several        in the number of middle-income, blue-collar
years have benefited millions of families       positions. At the same time, the relative
throughout      the    metropolitan     area,   number of elderly households, immigrant
increasing their net worth and enhancing        households, and single-person households
their economic security. At the same time,      is growing. For our region to prosper in
it has exacerbated the divide between the       coming decades and for its residents to
region’s “haves” and “have nots” and            enjoy the highest possible quality of life, our
raised the cost of entry for low-income         housing stock will have to be realigned with
families, immigrants, young people, and         such changing needs of the metropolitan
singles trying to establish a foothold on the   economy       and    with     the   changing
economic ladder. While a majority of the        demographics of its population. This study
population is comfortably housed, about         identifies three fundamental areas of public
thirty percent of the region’s households       policy that must be addressed so that both
pay more than one-third of their incomes        private and public agencies can effectively
for housing.                                    meet our 21st century housing needs.


                                                                                              i
1) Land Use Practices and Patterns. As our       •   Encourage and control accessory units.
region’s population grows beyond 20                  Informal or illegal accessory units in
million, reliance on the traditional suburban        private homes are proliferating
formula of low-density ownership housing             throughout the region because they
is no longer viable. The distances between           satisfy a huge unmet housing need.
the developable suburban fringe and the              The encouragement and proper
region’s major employment centers have               regulation of such units can
grown too great, the traffic has grown too           increase our affordable stock while
thick, and our reliance on petroleum-                better protecting resident safety and
powered cars has grown too perilous.                 neighborhood character.
Moreover,      the    increasingly     diverse
demographics and individual lifestyles of        •   Focus greater attention on the
our population demand a correspondingly              affordability of existing housing. With
diverse housing stock, the creation of which         many of our communities fully
the traditional suburban development                 developed,        the    emphasis    of
formula does not easily accommodate. Our             affordable housing efforts needs to
region needs to aggressively adopt a “smart          shift from new development
growth” approach to development, not only            towards existing housing.          That
for    environmental      and    preservation        means both preserving existing
reasons, but to satisfy its housing needs as         affordable housing assets and
well. Land use regulations and practices             designing new programs to increase
need to permit and encourage more                    access to the private market.
sustainable, varied, and affordable housing
development. Among the most important            •   Create programs that link open space
measures that are needed are:                        preservation and affordable housing. In
                                                     theory, communities can protect
     •   Focus on the region’s smaller cities.       their open space by allowing
         Smaller cities like Bridgeport,             greater density in designated
         Newark and Yonkers are among                development zones.          State and
         our region’s greatest potential             county programs are needed that
         assets. With land available for             explicitly link and incentivize these
         redevelopment        and       good         complimentary land use goals.
         transportation infrastructure, they
         can accommodate much of the             •   Adopt inclusionary zoning. There are
         region’s future housing needs               almost as many variations of
         without exacerbating low density            inclusionary zoning as there are
         sprawl.                                     jurisdictions that employ it. At its
                                                     core, inclusionary zoning requires
     •   Promote 2-family home construction.         or encourages developers to set
         Construction of owner-occupied,             aside a share of housing units for
         two-family homes can promote the            lower income households every
         creation of rental housing and              time they build. State and county
         dwelling diversity where it is              governments       must    encourage
         acutely needed, but they can still be       inclusionary     zoning    programs
         made highly compatible with                 consistent with local needs and
         suburban aesthetics.                        aspirations.


ii
                                                they buy. In addition, government’s choice
    •   Encourage the development of            of methods for financing its investments
        transit villages. Our region has over   and operations fundamentally affects the
        300 transit stations, many of which     cost of housing and the spatial patterns of
        could anchor attractive mixed use,      wealth and poverty.       For our region’s
        mixed income development.               housing problems to be solved, they must
                                                be analyzed and addressed within this
    •   Promote mixed-use main streets. A       broader public policy context.
        number of towns and villages in
        our area have recently begun to         Two aspects of this complex of government
        appreciate the advantages of mixed-     activities stand out from a housing
        use town centers. Aside from            viewpoint. The first is transportation. The
        creating new rental housing             association      between      transportation
        opportunities for young people,         investment and residential development
        singles, and the local workforce, the   patterns is intimate and obvious, with the
        approach adds life and activity to      development of railroads, subways, and
        main streets after hours, keeps         highways stimulating and channeling our
        purchasing power in the local retail    region’s development throughout the past
        districts, and enhances local tax       two centuries. In the coming years, we will
        bases.                                  be making important transportation
                                                decisions that will have a similarly
    •   Adopt meaningful statewide growth       profound effect on future residential
        plans.   While still a work in          patterns.
        progress, New Jersey’s statewide
        planning process is a national          The other area of critical importance is
        model. Connecticut’s plan is purely     public school finance. Elementary and
        advisory, and New York does not         secondary education dominates the budgets
        have one.        Establishment or       and politics of local governments. When
        improvement of statewide planning       land use decisions affecting residential
        processes would greatly facilitate      development and its character are made, or
        implementation of the previous          siting decisions involving affordable
        recommendations and the rational        housing are considered, the impact on local
        development     of    our   unique      schools is usually among the most
        metropolitan area.                      prominent and contentious issue that arises.
                                                Historically, a reliance on local property
                                                taxes to finance public education has
2) Public Infrastructure and Local Finance.     encouraged jurisdictions to exclude housing
Government’s influence on the housing           types and demographic groups that were
market goes far beyond the land use             perceived to generate more school
regulations it establishes and the housing      expenditures than local taxes. This practice
subsidies it provides. Its decisions about      of “fiscal zoning,” has for decades distorted
where and when to improve public                housing      development      patterns   and
infrastructure determine where housing is       heightened the segregation of economic and
built and what type is feasible. The quality    racial groups.     With the school finance
of public schools and other services it         systems of New York, New Jersey, and
provides influences consumers’ locational       Connecticut all under legal challenge and
preferences and the prices of the homes         financial pressure, it is an opportune time


                                                                                          iii
for planners and housing professionals to             •   Devise fiscally-neutral housing models.
become actively engaged on these issues.                  Different housing types have
                                                          different, but fairly predictable,
Among the most important necessary steps                  impacts on local school budgets and
are:                                                      tax collections. Housing developers,
                                                          especially     those     engaged    in
     •   Create intra-suburban and reverse                affordable housing creation, need to
         commute transit connections. After               exploit those differences to make
         several decades of suburban job                  projects more appealing to local
         growth, commutation patterns have                officials, planning boards, and
         become increasingly complex. To                  voters.
         increase transit usage in our region
         and simultaneously create new                •   Compensate communities for fiscal
         housing opportunities, suburban job              impacts. Many communities are
         centers must be connected to the                 reluctant to accept affordable
         regional transit grid.                           housing projects for fear of adverse
                                                          impact on local school budgets.
     •   Select transit with associated land use          State legislation should be enacted
         potential. Public transit investments            to compensate communities for
         in recent decades have more often                school costs incurred by districts
         been made to eliminate traffic                   that contribute to satisfying regional
         bottlenecks      rather     than     to          housing need.
         consciously guide development
         patterns.      Future transportation         •   Break the link between education
         improvements need to be evaluated                funding and local property taxes. The
         more explicitly on the basis of the              ultimate goal of housing and
         amount and type of housing                       planning professionals in the realm
         development they will stimulate.                 of local public finance should be to
                                                          develop    alternatives     to    local
     •   Finance     transit   adequately   and           revenues     sources,     particularly
         appropriately.    Several   important            property taxes, to fund education.
         regional transportation projects are             The traditional reliance on local
         contemplated          that       could           sources for funding schools is the
         significantly enhance opportunities              major incentive for fiscal zoning and
         for      transit-oriented      housing           a    root   cause     of    residential
         development. It is imperative that               segregation by income and race.
         these projects proceed with the
         necessary financial support. It is
         equally important that the region’s       3) Housing Finance. The housing finance
         major transit agencies have stable,       system is a sophisticated network of private
         sufficient operating and capital          businesses and public agencies that is
         subsidies, and that debt payments         continually innovating and adapting to new
         from financing capital projects do        market realities. A number of innovations
         not       unduly       burden      the    in recent decades, such as the creation of
         transportation system.                    mortgage-backed securities, have lowered
                                                   the cost of mortgage capital, facilitated
                                                   housing development, and broadened


iv
opportunities      for     homeownership.                 organizations to ensure permanent
Nevertheless, even a perfectly efficient                  affordability.
private housing finance system cannot
make new housing, and even much existing              •   Increase grant subsidy programs for
housing, affordable to moderate- and low-                 low-income housing. Equity raised
income households. Only government can                    through the sale of tax credits and
provide the below-market loans or grants                  low-interest financing provided by
that are needed to make homeownership a                   federal tax-exempt bonds are often
reality for moderate-income working                       not sufficient to reach low-income
families or any decent housing affordable to              households. Additional state and
the poor.                                                 local grants for low-income housing
                                                          development are essential.
The following should be the housing
finance priorities of state and local                 •   Provide additional support for low-and
governments in our region:                                moderate-income     homeowners.     As
                                                          federal and state programs increase
   •   Create dedicated state housing trust               the    number      of   lower-income
       funds. The creation of a dedicated                 homeowners, it is crucial that the
       source of revenue, independent of                  assistance not end when the home
       federal subsidies and limitations,                 mortgage loan is closed. Additional
       would allow state housing finance                  supports may be needed to sustain
       agencies and localities to create                  their ownership.
       sustainable mixed-income housing
       that blends public and private                 •   Coordinate state and local advocacy for
       investments and serves families at a               housing subsidies. Recognizing that
       broader range of incomes.                          the federal government provides the
                                                          majority of housing subsidies, the
   •   Provide tax credits for employer-assisted          region’s     government       officials,
       housing. All employers benefit from                business and real estate groups, and
       affordable     workforce       housing.            community        development       and
       Employer-assisted               housing            housing advocates, need to coalesce
       programs are particularly promising                around certain key issues: public
       because they allow firms to directly               housing; Section 8 rental assistance;
       benefit, through a more stable and                 and Community Development Block
       productive workforce, from housing                 Grants.
       they sponsor.
                                                   The New York metropolitan region,
   •   Create acquisition funds to preserve        comprised of four states, 32 counties, a
       existing low-rent housing.    Many          dozen significant cities, and numerous
       privately-owned assisted projects           towns and villages, functions as a single
       are reaching the end of their               economy and as one, integrated housing
       mandated affordability periods.             market. Firms and households make their
       Acquisition funds could allow for           locational decisions across political borders
       some of the expiring affordable             on the basis of price, transportation,
       developments to be purchased by             services, taxes and the like. In such an
       local housing agencies or nonprofit         integrated regional economy, the decisions
                                                   and policies of every jurisdiction have


                                                                                                v
reverberations on every other, even if the
effects are sometimes difficult to detect. No
single county, city, or town can “solve” its
housing problems without the cooperation
of its neighbors.

The recommendations listed above may
apply to one state more than another, to one
town more than the next. Nevertheless, one
common principle unites them all: only by
approaching their land use, infrastructure,
and financing challenges in a regional
context will individual jurisdictions make
headway in solving their housing problems
and preparing the ground for a prosperous
future.   The remainder of this report
outlines the logic of a coordinated and
cooperative approach to our region’s
housing challenges.




vi
Introduction: Housing for a                     is once against asserting itself as the
                                                economic engine of the region. Some of the
Smart Region                                    region’s smaller central cities are also
                                                showing signs of revival, suggesting that
                                                they are ready to recapture their once-
                                                strategic positions. The geographic limits of
Through the slow decades of metropolitan        auto-dependent development are quickly
evolution, new eras are ushered in and old      being reached, while gasoline price spikes
ones pass without much notice; there are        portend a new location-transportation
rarely single moments to mark the               calculus. While it is too early to say who
transition.   Only in hindsight do we           the visionary figures of the era will prove to
recognize that the economic basis of our        be, it is clear that new approaches to
community has shifted, and with it our          planning, real estate development, and
preferences, priorities, and challenges.        social welfare are required.

The decades following the Civil War were        It has been at least 20 years since a distinctly
one such period. New York City and its          knowledge-based         regional      economy
close cousins along the north shore of the      emerged from the remnants of the
Sound and the west bank of the Hudson           “industrial northeast.”      The undisputed
began their transition into industrial          leaders now are finance and business
urbanization, generating a huge demand for      services, culture and design, and education
immigrant         labor,      transportation    and health care. Those growth sectors are
infrastructure,    public    schools    and     centered in Manhattan, but they also thrive
sanitation,     and      new    government      in Stamford, White Plains, Melville,
institutions. Visionary planners such as        Princeton, and other important subcenters.
Andrew Haswell Green, builders like
Edward Clark, and reformers like Lawrence       The labor force needs and housing issues of
Veiller appeared on the scene and helped        this knowledge-based regional economy are
guide the development of the region onto a      also becoming increasingly clear. Our post-
modern and prosperous path.                     industrial economy rewards creative,
                                                educated workers, stimulating demand for
Another transitional period unfolded in the     high quality housing and neighborhoods in
1950s. The automobile opened up vast new        both city and suburb. It also generates a
areas for residential development, setting in   high demand for less-educated business
motion a rapid dispersion of population         and personal service workers—security
and industry and changing the ideal of          guards, cooks, gardeners, maintenance and
middle-class life. Planners such as Robert      home improvement workers, receptionists,
Moses and builders like William Levitt          and clerks. Those workers need affordable
facilitated the new era, while reformers        housing proximate to their jobs or feasible
such as Ira Robbins spoke up for those left     transportation to them; a shortage of both is
out.                                            becoming a major economic constraint and
                                                quality-of-life problem throughout the
It is becoming increasingly obvious that we     region.
are emerging from a similar period of
fundamental change. New York City               Another characteristic of the new regional
appears to have completed its painful           economy is that its demand for traditional
transition to a post-industrial economy, and    middle-income, middle-class workers is


                                                                                              1
dwindling, at least in relative terms. Many     housing projects that depend upon the
of them—teachers, drivers, mechanics, and       goodwill and support of the community.
municipal employees—are either leaving
the region for greener pastures or feeling      Just as tenement housing accommodated
squeezed by rising prices and declining         the labor force needs of industry in an
expectations.                                   earlier era, and streetcars and subways
                                                supported that tenement housing, the
Added to these labor force trends are           coming decades will require an alignment
demographic reverberations from the 20th        of our region’s economic base, its labor
century’s momentous events. The original        force    housing,      and    its    physical
post-war suburbanizers are now retired and      infrastructure. But it is important to realize
elderly, with greater service needs and         that in no era has the necessary public and
reduced mobility. Even the early waves of       private infrastructure been developed
the baby-boom generation are beginning to       spontaneously by an invisible hand; public
ponder how they can remain in their             water and sanitation, schools, subways and
suburban homes with property taxes rising       highways, and even housing was always
and social security and private pensions        the product of close cooperation between
under assault. In both city and suburb,         the private and public sectors (sometimes so
young people born in the 1970s and 1980s        close as to be corrupt).       To meet the
struggle to find the housing they need to       challenges of a new era, our region will
become independent and to begin families.       need deliberate and wise public policies to
                                                guide private motives into socially desirable
It may seem that the challenges of              pursuits, and will need reformers and
providing a housing infrastructure to fit       advocates to speak up for those who are
today’s workforce and demographic is            marginalized by progress.
much less daunting than the task earlier
generations faced. In a sense that is true—     Analyzing Regional Housing Needs
our region already has a marvelous housing
stock and the schools, roads, and               This is the second in a series of studies
infrastructure necessary to serve them. In      conducted by Regional Plan Association
relative terms, the magnitude of housing        and the Citizens Housing and Planning
expansion we must manage is modest by           Council aimed at analyzing regional
historical standards. But the difficulty of     housing needs and strategies.      The first
the task is magnified because our region is     report, Out of Balance, focused on
already substantially built. There are few      identifying the important trends and issues
orchards, farms, or forests left that offer     that    affect   our     region’s   housing
easy development opportunities, and for         infrastructure.1 This study builds upon the
those that remain, preservation is a high       former by surveying regional housing and
priority.     Most importantly, all new         land use policies at the state, county, and
development must now occur within a             local levels and by suggesting some of the
thicket of political interests: communities     most promising policies for solving regional
that want to preserve their traditional         housing problems.
character, motorists who fear more traffic,
and governments concerned about fiscal
balance. It is increasingly difficult for any
                                                1"Out of Balance: The Housing Crisis from a
                                                Regional Perspective." Regional Plan
proposed development to satisfy all
                                                Association and Citizens Housing and Planning
constituencies, least of all affordable
                                                Council. April 2004.


2
Our research in the first phase of the project   We find that our region scores very high in
led us to question the familiar “housing         terms of housing choice. We have an
crisis” paradigm for interpreting the            unparalleled range of housing types, from
region’s housing conditions.        First and    city lofts to suburban ranches to colonial
foremost, that picture obscures the fact that    farmhouses.         Our extensive public
the diversity of our housing and the             transportation network magnifies that
character of our neighborhoods is a regional     diversity, as it allows commuters to the
advantage that allows us to accommodate          urban core to choose from the full range of
migrants from all over the world in              residential environments. Economic and
hundreds of vibrant communities. While           demographic changes are, however,
our region may be at a cost disadvantage         eroding this advantage. An acute shortage
with respect to some growing cities in the       of rental housing in many suburban areas
Sunbelt, it has an enormous advantage in         and a worrying increase in commuting
the variety and quality of the residential       times throughout the region are signs that
environments it can offer.                       residential choices are becoming more
                                                 constrained.
Secondly, we concluded that the crisis
framework does not lend itself to a careful      While our housing is of a high quality
analysis of the strengths and weaknesses of      compared to that in many areas of the
a housing infrastructure valued in excess of     country, its age and inadequate rate of
$2.5 trillion. Within our region, there are      replacement are cause for concern. The
thousands of cases of acute and chronic          housing stock of many metropolitan areas is
housing need that demand immediate               significantly newer than ours, and while
attention, there are subtle inequities and       newer is not necessarily better, the
disadvantages that require persistent effort     amenities and conveniences our housing
to redress, and there are millions of            provides is falling behind national
satisfactory outcomes that should be             standards. A growing “bathroom gap”
appreciated and carefully built upon. Our        between our region’s housing and the
region faces significant housing challenges      national norm may be meaningful in itself,
but there is no prospect that they will be       but more importantly, it proxies for a host
solved easily or quickly, and a crisis           of modern design features and amenities
mentality can be a barrier to the formulation    that may be in short supply in our central-
of long-term policies that may provide           city and older suburban housing. The
structural and lasting solutions.                current boom in residential improvements
                                                 will help to mitigate some of those
In both phases of our research we have           shortcomings, but regional and local
preferred the analytical framework of a          policies aimed at modernizing, and
balanced housing market, and identified          sometimes replacing, the existing stock
three core components of such a market:          need to be considered.
choice, quality, and affordability. We find
that that approach allows us to evaluate         It is the cost of housing in our region that
housing issues in a more comprehensive           usually generates the most concern among
and integrated manner, and to more clearly       housing advocates, public officials, and the
identify policies that target immediate or       general public. Our cost problems are
structural problems as each case requires.       sometimes exaggerated; comparing housing
                                                 prices in our region to those in amorphous
                                                 Sunbelt suburbs or stagnant rustbelt towns


                                                                                           3
is not particularly meaningful. When our         social policies that generate and perpetuate
costs are compared to those of other             poverty. A balanced view suggests that we
populous,          high-income         coastal   need to augment our stock of low-income
metropolises, such as Boston, Washington,        housing, but cannot afford to be complacent
San Francisco, and Los Angeles, they             about the poverty that creates that need.
appear more reasonable.          Nevertheless,
housing affordability is a persistent            A larger, and in some ways more
problem for the region’s competitive             perplexing, affordability problem is that of
position. Even among high-income regions,        the low- to moderate-income families and
New York is among the most expensive.            individuals who are growing as a
Moreover,      all    of    these    high-cost   proportion of the region’s population. They
metropolitan areas are at an economic            are almost always working households
disadvantage to Sunbelt cities that have         (often with more than one earner), often
fewer topographical or environmental             recent immigrants, and are clearly crucial to
constraints on housing development. Those        the knowledge-based economy. It is this
geographic disadvantages are unlikely to         group, usually not eligible or given priority
abate regardless of the public policies that     for subsidized housing, that is increasingly
are adopted; cost-sensitive businesses and       being forced into over-crowded conditions
households will continue to migrate to           or into an informal and illegal housing
metropolitan areas where land is plentiful       market. Allowing that trend to continue is
and development costs are low. The task          neither fair nor smart. Much of the policy
for our region is to ensure that our premium     focus of this report is aimed at developing
housing costs are fully justified by income      solutions for the housing problems of this
differentials and the quality of our housing     economically important group.
and neighborhoods.
                                                 One affordability issue that must be taken
For the poor and disadvantaged, housing          into     account,     but     is   inherently
often consumes more than half of total           unpredictable, is the so-called “housing
income, and the recent escalation of housing     bubble.” In the popular press, the term is
costs is squeezing these households              often misused as a reference to any rapid
particularly hard. The problem would be          increase in housing prices. In a technical
even worse were it not for a stock of            sense, however, market bubbles exist only
subsidized, low-rent housing that is             when the price of an asset exceeds the price
significantly larger, in both absolute and       justified by its fundamental value—when
relative terms, than that found in other         the price increase is purely speculative. The
major metropolitan areas. In excess of 6         distinction is important.
percent of the region’s housing inventory is
public    housing     or   federally-assisted    We do not believe that the housing price
housing and is available to low-income           increases experienced throughout our
households.      That percentage is much         region during the past five years are
higher in the central cities of our region       primarily due to speculative factors. To a
than in the suburban counties, of course,        degree, it is a market correction after a
and distributing subsidized housing more         period of real home price declines that
evenly should be an objective of regional        lasted for much of the 1990s, and thus
housing policy. The overall adequacy of the      represents a favorable market judgment of
assisted stock, however, cannot be assessed      our region’s economic future. A bigger
entirely independent of the economic and         element, perhaps accounting for a majority


4
of the price increase, is the effect of                 which historically tend to be resistant to
historically low mortgage rates.       Low              current-dollar price declines. An alternative
mortgage rates allow buyers to bid up the               scenario is that housing prices do fall in an
price of homes as they compete for                      absolute sense, creating widespread
desirable properties.   If mortgage rates               financial     distress      among      recent
                                                        homebuyers,       especially   those     with
       Five-Year Change in Metropolitan                 adjustable rate or high loan-to-value
            House Prices, 2000-2005*                    mortgages.
                                              5-year
Metropolitan Area                            Change     At the very least, the recent surge in home
                                                        prices is further evidence of the price
Santa Barbara-Santa Maria, CA                  127.98   volatility to which our region, along with
San Diego-Carlsbad, CA                         118.27   other major metropolitan areas on the East
Los Angeles-Long Beach, CA                     115.09   and West coasts, is vulnerable. The sales
Miami-Kendall, FL                              107.94   price of existing single-family homes in
Washington-Arlington, VA                       101.22   many parts of the region has nearly doubled
Sarasota-Bradenton, FL                         100.77   in the past five years, trailing only a handful
Nassau-Suffolk, NY                              92.35   of metropolitan areas concentrated in
Edison, NJ                                      88.46   California and Florida. A similar run-up in
Poughkeepsie-Newburgh, NY                       87.05   home prices was experienced in the late
Baltimore-Towson, MD                            83.45   1980s, which was followed by a long period
NYC-Wayne-White Plains                          80.46   of eroding real home values. Such volatility
Trenton-Ewing, NJ                               77.54   complicates the housing decisions of
Boston-Quincy, MA                               74.67   millions of families and impedes the
Newark-Union, NJ                                74.38   implementation of a consistent set of
Philadelphia, PA                                68.10   affordable housing policies.
New Haven-Milford, CT                           68.04
Phoenix-Mesa, AZ                                67.31   Formulating Regional Housing Policies
Bridgeport-Stamford, CT                         67.03
San Francisco-San Mateo, CA                     62.08   In discussions between RPA and CHPC
Minneapolis-St. Paul, MN                        56.35   staff, with housing and land use experts on
Chicago-Joliet, IL                              47.20   our respective Boards and throughout the
Syracuse, NY                                    36.37   region, and in our statistical and policy
Kansas City, MO                                 29.62   research, three broad conclusions emerged
Denver-Aurora, CO                               29.01   that served to frame and guide our more
Atlanta-Marietta, GA                            28.12   specific policy recommendations. They are:
Houston-Sugar Land, TX                          24.66
Durham, NC                                      23.84   The metropolitan area’s housing problems can
Rochester, NY                                   21.79   only be solved on a regional basis. This is a
                                                        rather obvious conclusion given the theme
*Percentage change in repeat sales price index, from
2Q 2000 to 2Q 2005.
                                                        of the project, but it bears explicit
Source: OFHEO                                           articulation.    Our region is a single,
                                                        functional economic unit in which each
increase significantly in the coming years, it          jurisdiction complements, and influences,
could cause an even bigger affordability                the others. For example, the persistently
crunch, as more costly mortgage money is                higher rate of housing price increase on
not fully offset by falling home prices,                Long Island has and will continues to affect


                                                                                                     5
housing prices in other parts of the region,    Our region has grown too large and
as households arbitrage price differences       intensively developed for the majority of
across county and state lines. Similarly,       our projected housing needs to be satisfied
decisions made by New Jersey officials          primarily with additional single-family,
regarding commuter transit will inevitably      low-density housing development on the
increase or decrease demand pressures in        suburban fringe. Higher-density housing in
New York City’s housing market. Those           revitalized central cities and transit-oriented
intra-regional spillovers exist in housing,     villages is the only way we can meet future
land use, transportation, income support,       housing demand while mitigating the
public finance, and a host of other policy      adverse impacts of a growing population.
areas, and no single jurisdiction can “solve”   Our region now faces a fundamental choice:
its problems in any of those areas in           Smart Growth or no growth.
isolation from the actions of the others.
                                                Solutions arise from common interests. There
It has been a central argument of both RPA      have been some important court mandates
and CHPC for many years that our                that    affect     the    region’s  housing
metropolitan area needs more and stronger       environment, notably New Jersey’s Mount
institutions for regional governance. That      Laurel rulings and New Jersey’s and
remains a core principle of both                Connecticut’s Supreme Court rulings on
organizations but this study does not           school finance. While we believe that on
explicitly address the creation of such         balance the effects of those rulings have
institutions.    Rather, it takes existing      been positive, the implementation of
governmental structures as given, and seeks     progressive housing policies cannot wait for
to identify potentially useful policies that    distant and unpredictable court decisions.
can be implemented by the individual            Regional policies that can be implemented
states, counties or localities within the       voluntarily by villages, towns, and cities
existing governing framework.        To the     because they are perceived to be in their
degree that policies are implemented in a       own interests promise the most effective
coordinated     and     consistent  fashion,    strategy    for     meeting    our  housing
however, they will be more effective.           challenges.      However, the entrenched
                                                attitudes generated by our system of local
Smart Growth is crucial to balanced housing.    government finance are formidable barriers.
The priorities associated with the term         These challenges will be difficult to
“smart growth,” including open space            overcome without new approaches to
preservation, redevelopment of urban            regional dialogue and statewide reforms of
centers and greater density around              land use and fiscal incentives.
improved transit networks, have become
central tenets of mainstream urban              Many of the imbalances we find in our
planning and environmental advocacy. For        present housing environment arose from
housing advocates and professionals, Smart      political rivalries and divergent interests
Growth is more often viewed as a benign         between and among cities and suburbs. For
embellishment of their core mission. It is      example, the shortages of affordable rental
more than that. We are convinced that our       housing, or of multi-family housing of any
region cannot address its current and future    kind in many suburban areas, is a result of
housing challenges without embracing and        zoning practices motivated by local fiscal
implementing Smart Growth principles.           considerations. But there are opportunities
                                                to reduce those obstacles, as the courts


6
intervene in school finance decisions and
changing demographics alter the logic of
local finance. In the coming years multi-
family housing can be made a much more
appealing proposition for localities worried
about public school budgets and rising
property taxes. Similarly, higher-density
housing, especially when it is supported by
an effective transit infrastructure, can be
made preferable to low-density sprawl for
communities concerned about growing
traffic congestion and dwindling open
space. Housing policies that restructure
incentives to appeal to a new definition of
local interests may be as effective, or more
so, than those that are mandated by court
orders or legislative fiat.




                                               7
I. Housing and Land Use                          With 37 percent of the metropolitan area’s
                                                 population concentrated in the five
in the Metropolitan Region                       boroughs of New York City and a land
                                                 mass of over 13,000 square miles, it is easy
                                                 to underestimate the challenges continued
                                                 population growth will pose. It is not only
The New York metropolitan region faces a         the city, however, that has already attained
formidable land use challenge in the years       unusually high population densities by
ahead.      Already the largest and most         national standards. In addition to the five
densely populated region in the country,         boroughs, Hudson, Essex, Union, Bergen
the metropolitan area will need to house         and Nassau counties are developed at
over 2 million additional residents within       densities above those usually associated
the next 15 years. This challenge will have      with central cities.1 Furthermore, Passaic,
to be met while protecting environmentally       Middlesex, Westchester, Mercer, Fairfield,
sensitive watersheds and other open spaces,      New Haven, Rockland, Suffolk, and
while maintaining and expanding an               Monmouth are developed at densities
efficient and resilient transportation system,   commonly associated with mature suburbs.
and while maintaining a high quality of life     In those counties, encompassing a land area
for its residents. To accomplish these goals,    of over 5,000 square miles, developable land
and at the same time ameliorate an already       is scarce and most future residential
acute housing shortage, the land use             construction will face high land costs and
policies of hundreds of jurisdictions will       will come at the expense of other pressing
need to adapt and adjust to new conditions       land use needs.
and challenges.
                                                 Only in the outer ring of metropolitan
Although the metropolitan area is a              counties, arcing through Connecticut, New
relatively mature, slow-growing region, the      York and New Jersey’s highland areas and
absolute quantity of its population growth       into central New Jersey, are there still large
remains enormous and will continue to            tracts of land available for conventional
affect the character of its cities, towns and    subdivision development.         While those
counties. During the 1980s, the 32-county        counties will undoubtedly absorb a good
region added about 700,000 residents,            portion of future metropolitan growth,
representing about 3 percent of the nation’s     there are environmental, financial and
population increase. During the 1990s, due       logistical difficulties with allowing growth
both to a larger national increase and its       to focus there.
greater share of the national growth, the
region added over 1.6 million residents,         Although our region’s ecology is not
more than any other metropolitan area save       unusually fragile, there are regional, as well
Los Angeles. Even with a projected slowing       as global, environmental constraints on
of national population growth, our area is
expected to add about 1.4 million new            1The incorporated cities of Albuquerque,
residents during this decade and a similar       Atlanta, Charlotte, Denver, Dallas, Houston,
number during the next. In the next fifteen      Kansas City, Las Vegas, Los Angeles,
years, we will have to accommodate               Minneapolis, Orlando, Phoenix, Portland, Salt
population growth equal to the entire            Lake City, San Antonio, San Diego and Seattle
population of Houston, Texas.                    have a combined population density of 3,609
                                                 persons per square mile. The five counties listed
                                                 have a density of 5,204 per square mile.


8
further development.          In particular,   Mountain and shore areas are easily
watershed protection has become a major        reachable for second home getaways or
consideration in the New Jersey Highlands,     weekend recreation.       Few regions can
the lower Catskills, in the Croton watershed   compare with ours in the diversity of
and Litchfield County east of the Hudson,      residential choice, and that gives it an
and in Eastern Suffolk County. These           inherent advantage over metropolitan areas
concerns have prompted a number of land        where suburban homogeneity appeals to a
conservation measures, most recently and       narrower range of lifestyle preferences. As
dramatically New Jersey’s Highlands            our region struggles to accommodate the
Protection Act. Coastal zone management,       population pressures of coming years, land
wetlands      protection       and     other   use policies that preserve the rich history
environmental considerations also place        and diversity of the region, and at the same
constraints on the type and extent of          time satisfy housing demand and
development in our region. Beyond those        transportation necessity, will have to be
local or regional concerns are global          devised.
environmental challenges, such as energy
conservation and global warming, that our      Of course, not all lifestyle preferences
metropolitan area should want to be an         should be tolerated or accommodated. Our
international model in addressing, both as a   region still exhibits unacceptably high levels
matter of environmental ethics and as a        of racial and economic segregation,1 and no
means of reducing economic risk.               regional housing agenda should fail to place
                                               fair housing and equal opportunity
Most of the recent population growth has       foremost among its priorities. Fortunately,
come at the region’s perimeter in the form     many of the same land use policies that can
of low-density suburban development.           help to ameliorate environmental, economic
Such urban sprawl forfeits our region’s        and other quality of life problems can also
relative    energy     and    transportation   promote integration and equal opportunity.
advantages.     As the world’s petroleum
reserves dwindle in coming decades and         Although the continuous suburbanization
private automotive transportation becomes      following World War II created many
relatively more expensive than public          appealing communities that nurtured a
transit, our extensive public transportation   generation and a culture, it also created a
infrastructure can enhance our competitive     deep rivalry between city and suburb. Not
advantage compared to more auto-               all of that rivalry has yet dissipated, but it is
dependent metropolitan areas.            But   increasingly obvious that the continued
transportation efficiency is a function of     health of the city and the suburb are
both investments in transit infrastructure     mutually dependent.              The shared
and promotion of development patterns          experience       of    growing      congestion,
that encourage its use.                        environmental necessity, and housing
                                               scarcity now opens up new opportunities
Another of our region’s competitive            for mutually beneficial approaches to
advantages is its broad diversity of           solving regional problems. Just as some
residential environments. It offers urban      European nations gradually realized that
neighborhoods      with   rich    cultural
influences, suburban communities with
                                               1Iceland, Weinberg and Steinmetz, Racial and
good housing and schools, and historic
                                               Ethnic Segregation in the United States: 1980-2000.
towns that evoke an idyllic Americana.
                                               US Census Bureau, Series CENSR-3, 2002.


                                                                                                 9
cooperation offered greater gains to all than      reported and celebrated in the press.
continued rivalry, so may the states,              Although it is remarkable that the city’s
counties and municipalities of our region          population has grown while many other
come to realize that coordinated policies are
the best means of preserving their identities       Population and Employment Changes in
and achieving their goals.                            the Metropolitan Region, 1990-2003

                                                                             (thousands)    Net
                                                   Area                        1990   2003 Change
Trends in Land Use                         and
                                                   Population:
Housing Development                                New York City             7,322.6   8,085.7    763.1
                                                   Long Island               2,609.2   2,807.5    198.3
Between 1990 and 2003 the metropolitan
                                                   E Hudson & CT             3,024.3   3,259.8    235.5
area added about 2.1 million residents.2
                                                   West Hudson                 847.8     964.4    116.6
That population growth brought with it
                                                   North Jersey              3,765.1   4,072.6    307.5
changes obvious to all residents of the
region, many of which were beneficial. In          Central Jersey            2,332.0   2,761.3    429.3
particular, once forbidding expanses of
New York and other regional cities have            Region                   19,901.0 21,951.3 2,050.3
been revitalized and are today much safer
and more attractive places than they were a        Employment:
decade or two ago. In addition, population         New York City             3,549.5   3,518.9    -30.6
growth facilitated the region’s recovery           Long Island               1,123.0   1,222.2     99.2
from the deep recession of the early 1990s         E Hudson & CT             1,359.6   1,363.3      3.7
and the economically sluggish decades that         West Hudson                 247.2     278.2     31.0
preceded it.                                       North Jersey              1,858.3   1,907.1     48.8
                                                   Central Jersey              886.5   1,056.6    170.1
At the same time, the population increase
has had many adverse impacts. Traffic               Region                   9,024.1 9,346.3      322.2
congestion has increased significantly and
with it, there has been a dramatic                 Sources: Census Bureau; Bureau of Labor Statistics;
lengthening of commuting times to work.            compiled by CHPC & RPA
Open space has dwindled, causing a
diminishment of the charm and ambiance of          mature American cities continue to
many of our neighborhoods, towns and               depopulate, the city’s growth was not faster
villages. Furthermore, housing prices have         than the metropolitan area’s as a whole. In
risen    substantially,  benefiting   many         1990, New York City had about 37 percent
homeowners but limiting choice for many            of the region’s population, and it captured
young families and the less well off.              37 percent of the population growth in the
                                                   subsequent 13 years. Growing more slowly
Patterns of Housing Development                    were Long Island and the areas north of the
                                                   city and east of the Hudson, including
The growth of New York City’s population           Westchester, Putnam and Dutchess and
to over 8 million persons has been widely          southwestern Connecticut.      Those areas
                                                   contained 28 percent of the region’s
2At the time of this writing, US Census Bureau     population in 1990, but registered only 21
estimates of population at the county level were   percent of the subsequent regional increase.
available through July 1, 2003.                    Moreover, Suffolk County alone accounted


10
for over one-third of that population           were for one-family homes, and in the low-
growth. Northern New Jersey also grew
relatively slowly and lost share of the          New Residential Building Permits, 1990-2003
regional population.                                By Sub-Area and Type of Structure

The outstanding growth areas of the region      SubArea                 Total         Percent
since 1990 have been the suburban and           All Permits:
rural counties north of the city and west of    Total Region           631,521          100.0
the Hudson, and the counties of central         New York City          141,838          22.5
New Jersey. The New York counties west          New Jersey-PA          272,833          43.2
of the Hudson, plus Pike County,                Long Island             70,036          11.1
Pennsylvania, increased their population by     Hudson Valley-CT       146,814          23.2
about 117,000 residents, or 14 percent,
between 1990 and 2003.           Even more      Single-family:
impressive was the growth of central New        Total Region:          421,852          100.0
Jersey, which gained as many residents as       New York City          37,347            8.9
did the entire suburban area east of the        New Jersey-PA          212,305          50.3
Hudson and grew by nearly a fifth in            Long Island             58,095          13.8
thirteen years.                                 Hudson Valley-CT       114,105          27.0

While the development of the areas to the       2-family:
northwest and southwest of New York City        Total Region:          54,017           100.0
may have brought prosperity to many             New York City          35,006           64.8
businesses there and home ownership             New Jersey-PA          12,493           23.1
opportunities to thousands of families, such    Long Island             1,774            3.3
sprawling     development       also   poses    Hudson Valley-CT        4,744            8.8
environmental challenges, alters the rural
character of those areas, increases our         3- and 4-family:
region’s dependence on automobiles, and         Total Region           25,012           100.0
reinforces a homogenous form of housing         New York City          17,692           70.7
development on the exurban fringe. From         New Jersey-PA           3,884           15.5
1990 to 2003 building permits were issued       Long Island              698             2.8
for 631,500 new residential units throughout    Hudson Valley-CT        2,738           10.9
the region. Counties with a population
density of less than 2,000 people per square    Multi-family:          139,130          100.0
mile had only 36 percent of the initial         New York City           59,818          43.0
population but accounted for 62 percent of      New Jersey-PA           44,046          31.7
the new housing permits. In those counties,     Long Island             10,049           7.2
single-family homes accounted for 84            Hudson Valley-CT       25,217           18.1
percent of the unit permits issued.
                                                Source: HUD Permits Database; calculations by
                                                CHPC & RPA
There are important differences in the type
of residential construction taking place even   density counties of New York, about 81
among low-density counties in the four          percent. In low-density New Jersey, despite
states. In the Connecticut portions of our      its Mount Laurel rules and the state’s efforts
region, only 80 percent of the new permits      to implement smart growth planning, 88
                                                percent of the residential permits were for


                                                                                                11
single-family homes. In the counties of            certain demographic group and does not
Hunterdon, Mercer, Monmouth, Ocean,                begin to meet the housing needs of our
Warren and Sussex, 92 percent of the new           diverse society. Over 70 percent of buyers
housing units were single-family homes.            of new homes in the areas of our region
                                                   outside of New York City are married
                                                   couples with children, a family type that, in
 Housing Permits in Low-Density Counties,
                1990-2003                          recent years, has accounted for little if any
                                                   of the region’s net increase in household
                                                   formations.     Moreover, they have an
Area            1-fam 2-fam 3-fam+        Total
                                                   average income more than 50 percent
New York:
                                                   higher that the suburban household
Suffolk        49,056    1,052   7,503 57,611
                                                   average.     Young people, the elderly,
Rockland        6,055     154    2,282   8,491     families of low or moderate income, and
Putnam          3,967      8       730   4,705     those with small families who desire less
Orange         15,992     446    4,785 21,223      space, are left behind when local land use
Dutchess        1,053      80     1,627  2,760     policies encourage only single-family home
Ulster          6,279     184      810   7,273     development.
Sullivan        4,392     460      166   5,018
NY Total       86,794    2,384   17,903 107,081    There are two primary factors behind the
Percent          81.1     2.2     16.7    100.0    continued predominance of single-family
Connecticut:                                       home production, even as the demographic
Fairfield      20,995     890    6,998    28,883   composition of the region is changing in
NewHaven       22,477     634     4,494   27,605   favor of other housing types. Because new
Litchfield      9,095     36       381     9,512   homebuyers are often two-earner couples in
CT Total       52,567    1,560   11,873   66,000
                                                   their prime earning years, it is one of the
                                                   few     market      segments    in    which
Percent          79.6     2.4     18.0    100.0
                                                   unsubsidized housing can be profitably
New Jersey:                                        built and sold. Municipal land use policies
Hunterdon        9,052     2       208   9,262     amplify that market bias, encouraging the
Mercer          12,689   90       2,507 15,286     building of single-family homes on large
Monmouth        31,815    76      3,236 35,127     lots while restricting the opportunities for
Ocean           42,733   208      2,472 45,413     multi-family     or    garden     apartment
Morris          20,535   108      4,662 25,305     development.
Somerset        20,154   104      5,449 25,707
Warren           7,541   38        340   7,919     If the fringe areas where new construction is
Sussex          6,837     8        443   7,288     almost exclusively single-family homes
NJ Total       151,356   634     19,317 171,307    served only as “bedroom communities” for
Percent          88.4     0.4     11.3    100.0    a labor force that commutes to work in
                                                   urbanized places, the resulting housing
Source: HUD Permits Database; calculations by      imbalances would not be so severe.
CHPC & RPA                                         However, between 1990 and 2003 over 85
                                                   percent of the new jobs created in the region
                                                   were located in low-density suburban
Obviously, construction of new single-             communities, including 170,000 new jobs in
family homes does not occur unless there is        central New Jersey alone. Many of those
demand for them. However, it is a housing          jobs are in the retail and service sectors and
type that is economically practical for only a     are filled by a labor force reverse


12
commuting from areas with a larger rental               The disappearance of the natural land
housing stock. The resulting pressure on                cover, as well as of agriculture, also has an
housing markets in the denser jurisdictions             aesthetic and spiritual cost, which many
inflates housing prices and contributes to              communities around the region are
road congestion.                                        increasingly resisting.

Trends in Land Consumption                              The USDA’s Census of Agriculture
                                                        indicates that our region has lost about
    Connecticut and New Jersey Changes in               100,000 acres of farmland, nearly all of them
            Land Cover, 1995-2002                       due to development, since 1987. Nearly
                                                        three-quarters of the decline occurred in
                                                        New Jersey. Dutchess, Suffolk and Orange
            (thousand acres)                 Net
                                                        counties in New York have also lost
Connecticut       1995        2002         Change
                                                        substantial amounts of farmland. Overall,
Developed         572.8       595.2         22.4
                                                        the region’s farmland continues to decline
Turf & Farm       518.4       523.5          5.1
                                                        by about 6,000 acres per year.
Forest           1,808.0     1,774.7        -33.3
Wetlands          140.2       141.4          1.2
                                                        Data compiled by the New Jersey
Barren             33.9       39.0           5.1        Department of Environmental Protection
Utility            10.0       10.0           0.0        and the Walton Center for Remote Sensing
Water             101.8       96.6           -5.2       and Spatial Analysis at Rutgers University
                                                        indicates that the developed “land cover” of
                                             Net        New Jersey increased by about 278,000
New Jersey          1995          2002     Change       acres between 1984 and 2001.4           That
Developed          1,427.3       1,483.2    55.9        development came at the expense of 157,000
Turf & Farm         883.6         850.0     -33.6       acres of cultivated land and grassland,
Forest             1,421.1       1,388.9    -32.2       77,000 acres of forest and scrubland, and
Wetlands            984.5         981.0      -3.5       63,000 acres of wetlands. Between 1995 and
Barren               45.5         59.0      13.5        2000 New Jersey land used for residential
Water               515.0         514.9      -0.1       purposes increased by about 57,000 acres
                                                        and for commercial, service and industrial
                                                        purposes by about 12,000 acres. On a more
Sources: Walton Center for Remote Sensing and           encouraging note, however, the loss of
Spatial Analysis, Rutgers University; Center for Land
                                                        wetlands has slowed in recent years,
Use Education and Research, University of
Connecticut                                             although it has not yet reached the “no net


The need for a more balanced flow of new
housing production is also urgent from an
                                                        acres. This is because the methodology most
environmental prospective. Single-family                often used to determine land cover does not
home construction is highly consumptive of              capture land uses. Using the current
important natural land areas such as forests,           methodology, for example, a house surrounded
scrublands, and wetlands.3                              by trees in the summer is categorized as
                                                        forested, while its use is clearly not the same as
                                                        forest. The trends in these numbers are still
3
  It should be noted that all the numbers used in       somewhat revelatory, however.
this section tend to underestimate the amount of        4 NJ Department of Environmental Protection,

land that is urban while overestimating forested        New Jersey land Use/land Cover Update: 2000-2001.


                                                                                                       13
14
loss” standard        embodied   in   Federal   The increase in commuting times is due to a
wetlands policy.                                complex interaction of factors that is not
                                                fully understood; it cannot be directly
Data based on similar methodology for           attributed    to    continued     low-density
Connecticut watersheds are available from       development on the region’s fringes.2 In
the Center for Land Use Education and           general, workers in the outer ring of the
Research of the University of Connecticut.1     metropolitan area—in counties such as
Their figures indicate that, in the             Suffolk,    Orange,     and     Morris—have
watersheds roughly comprising New               commutes that are no longer than those of
Haven, Fairfield and Litchfield counties,       workers in the more centrally-located
developed acreage increased by about 5,700      counties. That reflects, in large part, the
between 1995 and 2002.                          decentralization of jobs throughout the
                                                region, which allows the holders of those
Although      there are no up-to-date           jobs to seek less expensive housing even
tabulations on the change in land use and       further into the countryside, maintaining a
land cover in New York State, imputations       fairly constant commuting time among
can be made using the New Jersey and            residents of the diverse parts of our region.
Connecticut data in conjunction with an
analysis of the location of building permits.   About 30 percent of the workers in our
In New Jersey, each single-family home          metropolitan area either walk or take public
built outside of already urbanized areas is     transportation to work, a proportion far
associated with about .5 acre loss of           higher than in any other metro area in the
agricultural, forest, scrub or wetland, while   country. That proportion has held steady
in Connecticut the loss appears to be about     over the past ten to fifteen years, as the
one-third of an acre. For the region as a       surge in New York City’s population, as
whole, new residential development              well as important improvements made by
outside of urbanized areas is consuming         New Jersey Transit, have increased the
about 10,700 acres per year of vegetated        share    of    workers      using     public
land annually.                                  transportation in the most densely
                                                populated counties.      Nevertheless, the
Commuting and Transportation                    development patterns detailed above are
                                                moving us away from public transportation
Residents of the New York Metropolitan          toward private automobiles, at a time when
area already have, on average, the longest      economic, environmental, and national
commuting times to work in the country.         security considerations would seem to
With a mean travel time of 34 minutes, their    signal movement in the other direction.
commutes are rivaled only by those of
workers in Washington D.C. (31.7 minutes),      The means of commuting to work changes
Atlanta (31.2 minutes) and Chicago (31.0        dramatically as the housing stock and
minutes). The first phase of this project,      population decentralizes. In particular, the
published by RPA and CHPC as “Out of            proportion of workers driving to work
Balance,” documented in detail the
alarming increase in commuting times for        2
                                                  A recent study finds that both dispersion of people
workers in our region between 1990 and          and jobs, as well as a declining sensitivity of workers
2000.                                           to commuting distance, have contributed to the trend.
                                                Jason Bram and Alisdair McKay, Current Issues in
                                                Economics and Finance, Vol. 11, No. 10, October
1   http://clear.uconn.edu                      2005. Federal Reserve Bank of New York.


                                                                                                    15
alone increases, and the proportion using        Under almost any plausible scenario,
public transportation decreases, the further     however, the real costs of private
the area is from the urbanized core. Moving      automotive transportation will rise in the
east from Manhattan, for example, 34             future. At current rates of vehicle efficiency
percent of workers living in Queens, 69          and use, a $1.00 per gallon increase in the
percent of workers living in Nassau, and 78      price of gasoline costs consumers in New
percent of workers living in Suffolk drive to    York, New Jersey and Connecticut
work alone. The percentages using public         approximately       $15    billion   annually.
transportation fall accordingly.       Similar   Because of those staggering costs and
patterns are evident in the Hudson Valley,       profound uncertainties, it seems a matter of
Connecticut, and in New Jersey’s                 prudent regional planning that as much
population corridors.      As our region’s       resiliency and flexibility should be built into
population growth continues to occur             our transportation system, and the land use
disproportionately in the more distant           patterns it serves, as is economically and
counties, in large part because that is where    politically feasible.
less expensive housing can be produced,
our region will become more auto-                In a system in which housing decisions are
dependent and economically vulnerable to         made by individual consumers, and land
petroleum shortages and gasoline price           use decisions by numerous and relatively
increases.                                       small jurisdictions, reversing population
                                                 sprawl is a daunting challenge. However,
It is exceedingly perilous to predict the        individual housing choices are influenced
future of private automotive transportation.     by the relative costs of different options,
We know that the world’s petroleum               and those costs are in turn influenced by
reserves are dwindling, and that its demand      land use policies. It is a basic premise of
is increasing. Responsible estimates suggest     this study that the interests of individual
that at projected rates of world demand,         jurisdictions largely coincide with the
proven supplies will last several more           broader regional interests, and that
decades.3 We do not know whether the             significant progress in providing affordable
transition to alternative fuels and              housing and economic sustainability can be
automotive       technologies   will   occur     made without degrading the character and
gradually and seamlessly, or will be             distinctiveness of our diverse communities.
accompanied by political strife and supply       In the following section, we look at the
interruptions. Furthermore, we do not            problems faced by several representative
know whether global warming will occur           jurisdictions and the solutions they have
incrementally, allowing ample time for           devised to address them.
gradual     political    and   technological
measures      to     be   implemented,    or
catastrophically, requiring dramatic and
sudden changes in our economy and
                                                 Local Land Use Strategies
lifestyles.
                                                 Land use decisions affecting our region’s
                                                 housing, transportation, environment, and
                                                 economy are made by over 1,000
                                                 autonomous jurisdictions whose policies are
3Energy Information Administration, US           set primarily according to the desires of
Department of Energy, International Energy       their local electorates. The 32 counties and
Outlook—2004.


16
four state governments, as well as the           The five case studies that follow
federal government, establish the legal and      demonstrate how the intersection of three
financial parameters within which local          state regulatory environments with several
decisions are made, but ultimately most          distinct types of place result in a range of
land use decisions are made on a highly          land use decisions and housing outcomes:
decentralized basis. As the region and its
challenges become more complex, the              Bridgeport, CT represents one of the several
problem of coordination among those              small cities in the region that has not
jurisdictions grows more urgent.                 experienced a downtown revival to the
                                                 same degree as New York City. It also
The decentralized system of land use             functions in a state with an advisory state
authority also makes it difficult to catalogue   land use plan but no procedure for local
and analyze the region’s land use policies.      compliance and no county governments
To what extent are trends discussed in the       that can act as a quasi-regional authority.
previous section the product of freely
exercised consumer choice, and how much          Montclair, NJ is an affluent, transit-oriented
are those choices shaped by local policies?      municipality that typifies many of the older
To what extent are local policies helping to     inner ring suburbs in northern NJ, Nassau,
ameliorate,    or   exacerbate,       regional   Westchester and Fairfield.        Unlike its
problems? Because of the complexity and          counterparts in New York and Connecticut,
variety of local conditions, and the             its land use decisions operate in the context
numerous jurisdictions which address             of a state with a detailed land use plan and
them, an accurate characterization of            local cross-acceptance process (although
regional land use policy is virtually            one with limited enforcement provisions),
impossible.                                      and housing mandates derived from the
                                                 Mount Laurel court decisions.
One approach is to observe the collective
results, as was done above, and to impute a      Gateway to the Highlands, NJ is a regional
policy context from them. Although that          center made up of three municipalities at
approach offers some insight, its focus is too   the edge of a sparsely populated highlands
wide to understand the nuances of local          region with state-protected open space. It
policies and the considerations that shape       demonstrates the potential and limitations
them. In the following section, we attempt       of a regional approach that is driven by
to illuminate strategies to promote              environmental necessity, encouraged by the
economic sustainability and balanced             state plan and administered by county
housing by discussing the policies of four       government.
representative    communities.           Each
community was selected because we believe        Croton-on-Hudson, NY is one of the region’s
that its concerns capture important aspects      many small villages that have nearly built
of regional land use decisions, and to some      out all the land available under their low-
degree, are representative of many               density zoning provisions. It functions in a
counterpart communities throughout the           state with home rule provisions that are
region. They were chosen because their           arguably as strong as those in New Jersey
land use challenges reveal the complexity of     and      Connecticut,    but    with     no
our regional problems, not because they          comprehensive state land use plan.
have been notably successful or ineffective
in meeting them.


                                                                                            17
18
East Hampton, NY typifies the challenges of      continued following the end of the Cold
places at the rural edge of the region that      War, as some of the city’s largest employers
are transforming from agricultural to            such as Sikorsky Aircraft, Remington
recreational uses.    While there are no         Products, and Bryant Electric eliminated
statewide land use incentives to guide its       thousands of jobs.        Nevertheless, the
development, it is influenced by county          manufacturing sector still employs 20
open space and housing policies and state        percent of the city’s workers. In addition to
environmental regulations.                       causing high unemployment among city
                                                 residents,     deindustrialization   marred
Bridgeport, Connecticut                          Bridgeport’s landscape with abandoned
                                                 industrial sites, including 350 brownfields,
Like many small cities in the Northeast,         many of which are located in residential
Bridgeport has experienced job loss,             areas. Heated debates over cleanup and use
demographic change, and inner-city decline       of brownfield sites continues to this day,
associated with the transition from a            most recently concerning the Steel Point
manufacturing to a service-based economy.        plan and United Illuminating Company.
Bridgeport’s experience, however, was
more dire than most and its budget crisis        At the same time that the city’s economic
led to the creation of a state authority to      outlook     was    worsening,   Bridgeport
oversee its finances from the late 1980s         experienced a population decline from its
through the mid 1990s.            Although       peak in 1950 as affluent families began to
Bridgeport remains severely distressed—its       move to suburban towns like Fairfield,
median household income is 65 percent of         Trumbull, and Monroe.         The relative
the state’s while its unemployment rate is       stability of the population in the last 20
40 percent higher—it is actively pursuing a      years at a round 140,000, however, does not
slum clearance and jobs-based community          convey the dramatic racial change that has
development strategy in the hopes of             occurred in the city. Between 1990 and
reversing its trajectory.                        2000, the non-Hispanic white population
                                                 declined by 34 percent. Moreover, city
Bridgeport is the largest city in Connecticut.   residents are younger, have completed less
At a mere 16 square miles, it is also the most   schooling, and have a higher poverty rate
densely populated with almost 9,000              than residents of the greater Bridgeport
persons per square mile. Approximately 25        region and the state.
percent of the city’s land area is high-
density residential (30 or more units per        The economic distress of the city and its
acre), another 22 percent is medium-density      residents has had a disastrous impact on the
residential (5 to 30 units per acre), and 6      physical condition of the housing stock as
percent of the city’s area is low-density        well as its affordability. According to the
housing (4 units or less per acre). Industrial   2000 Census, two-thirds of Bridgeport’s
uses occupy approximately 12 percent             54,367 housing units were built before 1960
while commercial land consumes another           and 31 percent before 1940. During the
10 percent of the city.                          1990s, the city built only 2,200 new
                                                 residential units for a net loss of 5 percent.
Since the mid-nineteenth century, the city’s     Since 2000, demolitions have continued to
fate has been tied to industry. Bridgeport
lost over 30,000 manufacturing jobs
between the 1960s and the 1980s. This trend



                                                                                            19
outpace the issuance of building permits at    state can influence local land use decisions
a rate of roughly five to two.1                by state infrastructure investments.

Many of the residential buildings are          In 1971, Connecticut’s General Assembly
historic, which raises the rehabilitation      passed a resolution calling for the
costs. In addition, the older stock often      development of a State Plan of
contains environmental hazards such as         Conservation and Development. A Plan
lead paint that require specialized            was drafted as executive policy in 1974 and
remediation. The high rehabilitation costs     implemented through Executive Order.
make these properties difficult to reuse as    Two years later, new legislation created a
affordable housing.      The obstacles to      process by which the Office of Policy and
increasing the affordable housing supply       Management (OPM) would revise the State
exacerbate an already grave situation given    Plan every five years with input from
that many city residents have high housing     legislative committees and public hearings
costs. In 2000, 43 percent of renters and 37   before being presented to the General
percent of homeowners paid more than 30        Assembly for approval. State Plans were
percent of their incomes on housing. Even      developed and adopted in 1979, 1983, 1987,
more alarming, the proportion that paid        1992, and 1998.
more than 50 percent of their monthly
income on housing was 23 and 13 percent,       The State Plan provides a policy and
respectively.                                  planning framework for state actions.
                                               Specifically, the State Plan serves as a
In response to the changing economic base,     guideline     for   evaluating    proposals
the environmental repercussions of former      submitted to OPM for review. In addition,
industrial uses, and the high poverty rate     state agencies must conform to the Plan for
among its residents, Bridgeport devised a      projects over $100,000. However, the extent
comeback plan in the mid-1990s built           to which the State Plan is implemented at
around the elimination of blight, an           the local level remains in the category of
aggressive redevelopment of the downtown       suggestion: “municipalities must consider
district and the waterfront, as well as a      the Plan and note any inconsistencies when
diversification of its housing supply with a   they update their own plans, but they are
focus on homeownership.                        not required to reconcile any differences.”2
                                               The revision of the State Plan was delayed
Under Connecticut’s system of home rule,       during the past two years in the General
the 169 municipalities have the autonomy to    Assembly by a controversy involving a
regulate their local land use through          separate bill that would have required
subdivision control, zoning regulations,       municipal plans to be consistent with both
transfer of development rights, and the        regional and State plans.
establishment of village and local historic
districts. However, state law does not         The State Plan for 2005-2010, finally
generally allow municipalities to impose       adopted in June 2005, was heavily
development impact fees. In addition, the      influenced by three substantive studies—
                                               the    Connecticut  Strategic   Economic


1 City of Bridgeport Comprehensive Economic    2Conservation and Development Policies Plan for
Development Strategy (Annual Update, June      Connecticut, 2005-2010, Connecticut Office of
2005), Urban Land Institute, page 36.          Policy and Management, page 2.


20
Framework (Gallis Report), Connecticut           Plan must undergo a minor revision every
Metropatterns (Orfield report), and Blue         five years and a major revision every ten.
Ribbon Commission Report on Property             Bridgeport’s current Master Plan was last
Tax Burdens and Smart Growth—which               revised in 1996. The city did not allocate
concluded that the state’s development           the necessary funds for the 2001 revision.
patterns were not sustainable. Over the          OPED is in the process of securing funding
past three decades, the amount of
developed land in Connecticut increased at
                                                     Bridgeport's Land Use Trends, 1996-2000
more than eight times the rate of population
increase. The continuous expansion of low-       Total Land Area: 10,240 acres

density housing development toward                                                   1996      2000
distant areas not only harms the                 Residential                         5,455     5,393
environment but also requires new                   high density                      n/a      2,556
infrastructure and an expansion of                  medium density                    n/a      2,250
municipal services.     This development            low density                       n/a       587
pattern strains municipal coffers while          Commercial                           930       982
leaving the poor concentrated and isolated       Industrial                           744      1,214
in the inner city.                               Institutional                        965       903
                                                 Utility/Transportation               429       460
Influenced by these reports and in response      Open Space                           890       850
to criticisms that the State Plan has not been   Vacant                               950       423
sufficiently prescriptive to municipalities
and regional planning organizations, the
                                                 Source: 2003 Regional Profile, Greater Bridgeport
2005-2010 revision promotes growth               Regional Planning Agency
management principles. Those include the
revitalization of regional centers, an           to undertake a major revision of the Master
expansion of housing choices, concentration      Plan as well as to revise the zoning
of development around transportation             regulations to accommodate higher density
nodes, conservation of natural resources,        residential    development     along     the
and integrated planning across all levels of     waterfront and in formerly industrial areas.
government.                                      The city expects to have this done by late
                                                 2007 or early 2008.
In addition to the State Plan, Connecticut
law requires municipalities to prepare,          Given           Bridgeport’s         declining
adopt, and amend a plan of development           manufacturing base, high unemployment
every ten years. Although the law does not       and poverty, combined with a large number
require municipalities to implement their        of abandoned buildings and brownfield
own plans, they can do so through their          sites, it is hardly surprising that its Master
zoning regulations, capital improvement          Plan set out a job-growth and aggressive
projects as well as through their use of         redevelopment land use plan. The Plan
community and economic development               focused on revitalizing the city’s economic
programs.                                        outlook by reinvesting in the central
Since the 1950s, Bridgeport law has              business district and other commercial
required the city’s Office of Planning and       corridors. It also outlined transportation
Economic Development (OPED) to draft a           improvements meant to facilitate the
Master Plan of Development. This Master          intermodal transfer of goods in order to
                                                 establish the Port of Bridgeport as the state’s


                                                                                                     21
hub for international trade. In anticipation    neighborhoods. Through 1998, the city had
of increased service and office-related         dedicated $13.5 million for acquisition,
employment, the Plan set out various            demolition, and clean-up costs. In 1997,
infrastructure improvements. It proposed        Bridgeport’s program was selected by the
waterfront redevelopment for industrial use     U.S. Conference of Mayors as a Best Practice
as well as for entertainment and tourism        award recipient.
purposes.
                                                Between 1992 and 2000, Bridgeport
The     1996    Master     Plan   designated    demolished approximately 2,000 housing
redevelopment as the primary land use           units, accounting for the majority of the 5
objective through 2016: “the city must focus    percent housing loss recorded in the 2000
its attention on effectively infilling these    Census. Most of the units eliminated were
vacant lots and buildings with new              in public housing developments.           The
development, such as innovative industrial      largest was the demolition of the Father
uses for the West End and new and               Panik Village, a 1,100-unit complex built in
improved housing for the East Side.”3 The       1939 that had become notorious for drugs,
rationale was to assist the economic            crime, and other social ills. As a result of a
recovery of the city following the decline of   lawsuit, the city’s Housing Authority
the manufacturing base that left vast           agreed to replace almost three-fourths of the
sections of the city vacant and abandoned.      units by 1997. However, as of November
                                                2005, only 500 replacement units have been
In addition to the industrial redevelopment     built and the Authority continues to look
goals, the Master Plan set out to improve       for funding for the remainder.
the housing stock of the city. The strategy
included demolishing blighted structures,       The demolition of public housing has
rehabilitating the older stock, and providing   continued. In 2004, the city spent $1.5
a balanced housing stock with single- and       million of its own funds to raze the
multi-family as well as townhouse options.      Pequonnock Apartments, a 256-unit public
The Plan emphasized homeownership as a          housing complex. The site currently has 800
means of stabilizing neighborhoods. It          parking spaces that serve the nearby Harbor
proposed marketing the city as a desirable      Yard Stadium and Arena. Although the city
place for homeownership, targeting not          agreed to create at least 100 replacement
only city residents but also people from        units, none have been built so far. In the
surrounding communities and as far as           meantime, two-thirds of the former
Westchester County, New York.                   residents have received Section 8 vouchers.
                                                Since 1990, the Bridgeport Housing
The housing goals of the 1996 Master Plan       Authority has lost 25 percent of its public
built upon efforts began earlier in the         housing stock.
decade. Established in 1992, Bridgeport’s
Anti-Blight Committee identified over 450       While the city’s demolition efforts have
industrial and residential structures for       succeeded in removing blight, another
demolition to make room for open space,         result has been the creation of vacant lots.
new       housing,     and      revitalized     The city is making an effort to rationalize its
                                                disposition strategies. It created a task force
                                                to sell appropriate lots to investors for
3Bridgeport Master Plan of Development—1996,
                                                development, to sell others to business
prepared by the Greater Bridgeport Regional
                                                owners for expansion, or to donate the land
Planning Agency, page 54.


22
to nonprofit organizations like Habitat for      risk losing them through city foreclosure
Humanity. However, it remains to be seen         actions and subsequent Requests for
whether        Bridgeport’s     community        Developers. Instead of simply demolishing
development corporations have the capacity       the blighted buildings, resulting in empty
to absorb large numbers of cleared lots for      lots, the city hopes to maintain vibrant
housing and economic development                 neighborhoods.
opportunities.
                                                 Despite     some     progress,    Bridgeport
One     notable   example      of    housing     continues to struggle for the resources and
preservation efforts is rehabilitation of 10     political coordination required for the large-
vacant Victorian homes in 2000. The 19th         scale redevelopment projects. While the
century homes were converted into 35 units       commercial and industrial projects have
of affordable housing in the historic district   been more successful at securing private
of Washington Park. The project used             investment, the plans for housing
approximately $800,000 in Low Income             redevelopment           and        increasing
Housing Tax Credits and $500,000 in CDBG         homeownership have faltered.
funds as equity and secured $5 million in
permanent financing. The National Trust          Montclair, New Jersey
for Historic Preservation highlighted the
project as a model for historic preservation     Relatively diverse and sometimes described
and affordable housing.                          as ‘the Upper West Side of New Jersey,’
                                                 Montclair township is situated 12 miles
In addition to blight removal and housing        west of Manhattan and is home to just
preservation, Bridgeport’s other main            under 39,000 residents. It is a family-
housing     goal   is   to   increase   the      oriented community; more than 80 percent
homeownership rate from its current 43           of the population lives in households with a
percent. However, this goal is made more         spouse and/or children. Approximately 57
difficult by declining income and home           percent of the population is non-Hispanic
values.      In inflation-adjusted terms,        white, and 31 percent is African American.
Bridgeport experienced a 10 percent decline      Montclair is a bedroom community where
in median household income and 40 percent        most residents work in New York City and
decline in median home value between the         Newark. There is no industrial activity left
1990 and 2000 Census. This made the              in Montclair.
possibility of homeownership among lower
income families more difficult to achieve        The town has a variety of neighborhoods
and strained some existing owners who            and housing types. Upper Montclair is
found themselves owing more than their           home to wealthier residents and higher
homes were worth.                                priced, newer homes. The south side of the
                                                 town is divided between an African
The current city administration has              American neighborhood with a mix of
committed to building or rehabilitating 500      single- and multi-family housing, some of
units of affordable housing and 1,000 new        historical significance. Just outside of this
market rate housing units over the next two      area is an older part of town with large
years. In 2005, the city launched another        estates set back on huge tracts of land. The
anti-blight    campaign,    focusing     on      town has several traditional main streets
enforcement and fines. Owners will be            with apartments above the stores. There is
compelled to invest in their properties or       only one strip mall with a grocery store


                                                                                            23
anchor and large parking lot in front, and       Montclair will be reassessed. Residents fear
no homogenous big box stores and office          this will lead to a steep hike in taxes and
parks.                                           will expedite Montclair’s shift to a
                                                 homogenous, wealthy town. The town is in
Montclair understands and appreciates the        the process of building a new 550-student
value of a transit village, main street          elementary school. There is some concern
environment: when construction began in          that the town will not be able to cope with
2005 on a 10-unit, loft-style apartment          the cost of adding capacity for more
building within walking distance of the          families to move into town.5
Walnut Street train station, local business
owners, concerned about maintaining an           Montclair's Multifamily Building Permits,
active street life, complained that the                         1998-2004
building will have no commercial space on        Montclair                1998      2000      2004
its ground floor.
                                                 Multi-Family Permits       0         5        21
                                                 Total Permits             12        13        33
In 1996, Montclair added Midtown Direct
                                                 MF as Share of Total      0%       38%       64%
service to Manhattan. A one-seat ride is
                                                 Public School
now possible between Montclair and Penn          Students (thousands)      5.9       6.1       6.6
Station. It takes about half an hour and
costs less than $5 each way.            When
                                                 New Jersey            1998         2000      2004
Midtown Direct service was added,
                                                 Multi-Family Permits 5,886        9,325     13,507
property values and rents increased and
                                                 Total Permits        31,345       34,585    35,936
interest in development was revived. The
                                                 MF as Share of Total  19%          27%       38%
median price of a home rose from $425,000
                                                 Public School
in 2000 to $725,000 in the first six months of
                                                 Students (thousands) 1,264.3      1,313.4   1,391.2
2005, and only 10 homes sold below
$300,000 in 2005. Conversely, the number         Sources: US Department of Housing & Urban
of homes that sold for more than $1 million      Development; Montclair Township
nearly quadrupled over the same time
period.4 The median household income was
about $75,000 in 2000 and grew quickly to        Residents of the historic Pine Street district
$84,000 in 2003.                                 are facing higher rents and there is a well-
                                                 documented need for affordable housing
Montclair faces the same housing and             throughout the town. Two hundred ninety
planning issues as those faced by similarly      families receive Section 8 rent vouchers and
prosperous communities in the inner              like many places, Montclair has not
suburbs. Gentrification and loss of              received new Section 8 vouchers for years.
community character is a main concern. As        The waiting list has over 200 eligible people
property taxes rise, more upper income           and has been closed since 2000. While
households are moving in, and retirees and       many of the town residents are politically
lower income households are moving out.          progressive and pro-affordable housing, a
In 2006-2007, all taxable properties in          sizable contingent, most of who live in
                                                 Upper Montclair, are against spending any

4 Paul Brubaker, “Inclusionary zoning
ordinance previewed: New Housing                 5 Paul Brubaker, “Officials affirm commitment
Commission positioned to maintain diversity.”    to school; public split over costs.” The Montclair
The Montclair Times, July 13, 2005.              Times, March 09, 2005.


24
tax dollars on affordable       housing   or    the construction of new affordable housing
promoting diversity.                            or renovation of affordable housing in
                                                Redevelopment Areas.
Montclair’s       three-person     planning
department, like many inner suburban            Essex County provides some programs that
towns in New Jersey, finds itself               benefit lower income households in
understaffed, overburdened, and unable to       Montclair, including deferred payment
keep up with state, county, and resident        loans of up to $15,000 to homebuyers, loans
demands as it struggles to address these        for home improvements that are paid off
issues. For example, to comply with the last    upon sale of the property, rental property
round of regulations of the Council on          rehabilitation loans, and low interest loans
Affordable Housing (COAH), the planning         for affordable housing development. The
department was required to forecast             United Way also makes funds available to
commercial and residential growth by            lower income homeowners for repairs.
examining 10 years of past permits and
certificates of occupancy. This process,        In 2004, the Montclair Affordable Housing
necessitated for all of New Jersey’s 566        Strategy was drafted, and shortly afterward
municipalities,     was    extremely   time     its recommended Housing Commission was
consuming.      In the end the planning         formed. The Commission meets monthly.
department forecasted a need for 123            Its main task has been to produce an
affordable housing units. In June 2004,         inclusionary zoning rule for the town: 20
Montclair developed an affordable housing       percent of all residential developments of 6
strategy that recommended hiring a              or more units are to be affordable to lower
Housing Specialist (along with forming a        income households, or the developer must
Montclair Housing Commission, and               make a large payment in lieu of developing
implementing inclusionary zoning, along         the affordable units. If the development is
with 5 other key strategies). The Housing       comprised of less than 6 units, the
Specialist position was funded at only          developer must make a lower payment to
$15,000; that money is being used for           support affordable housing. There is some
discrete consulting projects.                   provision for alternative agreements such as
                                                donation of land and offsite development.
Working toward its affordable housing           Affordability is described in terms of
goals, Montclair has in place a variety of      workforce housing and is defined as 80
regulatory requirements and funding             percent of median income. There is some
programs.      The Township requires a          movement toward making the income
developer’s fee, which was increased in         targets toward 100 or 120 percent of area
February 2005. The residential developer’s      median income.
fee is now 1 percent and the nonresidential
fee is 2 percent. These are the maximum         The inclusionary regulation did not work
fees allowed by COAH. The fees feed the         very well. In one case, a developer changed
town’s Housing Trust Fund. In 2004, it was      his plans specifically to avoid the
estimated that these fees would generate        requirement. He had planned to build 9
$150,000 to $200,000 by 2010. Montclair also    units of moderate to high-end housing, but
has four designated Redevelopment Area.         after learning that 20 percent of his
An inclusionary housing requirement of 10       development would need to be affordable,
percent applies to these areas, and             he changed his plans and is building 5 units
Montclair offers five year tax abatements for   of luxury housing; he will make a payment


                                                                                         25
in lieu of building the affordable units. In    town consortium in Essex County that
fall 2005, the town is undertaking a revision   receives HUD money, much of which goes
of the Master Plan and will address ways to     to fund social service programs.
better implement inclusionary zoning.
                                                As the Master Planning process begins in
In addition to making strides through           fall 2005, Montclair has numerous
planning, Montclair has directly addressed      affordable housing challenges to face. The
the increase in housing values caused by        housing agenda is much the same as it was
Midtown Direct service. The town worked         when the Affordable Housing Strategy was
with the local transit agency to ensure         drafted in 2004 with some important
affordable housing would be part of the         differences: there has been a marked
new development that resulted from              increase in residents with physical
improved transit accessibility. When the        disabilities and there is a call for more
tracks were laid down for Midtown Direct        accessible housing; there is a proposal for
through an older part of Montclair, NJ          the town to enter a regional contribution
Transit took the land around the tracks on      agreement6 and receive funds for fulfilling
Pine Street by eminent domain. The town         another      town’s   affordable     housing
began negotiations with NJ Transit real         obligation; and the agenda now includes
estate representatives. Transit intended to     consideration of legalizing accessory
sell the land it acquired at market prices.     dwelling units, again pursuant to COAH
The properties on the land were                 guidelines.    Preservation is also a key
traditionally lower cost, and the town          concern as there are 120 units in Montclair
stepped in to preserve these affordable         that may lose their affordability restrictions
units. The town was successful in two           by 2010.
cases. In one, Transit sold the property at
the below-market rate of $430,000 to the        The 2004 report recommended that
town, which flipped it to a nonprofit           Montclair create a community land trust,
developer who rehabilitated the property        where the township would acquire and
and put up affordable units. In the second      manage land as a nonprofit, sell the
case, Transit sold the property at a reduced    residential structures to lower income
rate of $180,000 and the town flipped it to a   households (or sell rental structures to
first time homebuyer in the private market      nonprofits), and put profit restrictions on
who rented the upper floor to a lower           the resale prices. The township’s main role
income household.          The homebuyer        would be to provide financial contributions
received a property tax abatement from          to the CLT. Developers could donate land
Montclair.                                      to the CLT as part of meeting their
                                                inclusionary zoning requirements, and
Montclair’s small planning department has       private land owners could donate property.
also been successful at obtaining state and     This was not pursued and does not appear
federal grant money. The town has been          on the present Master Planning agenda.
the recipient of grants from the Department
of Community Affairs, Balanced Housing          According to its affordable housing
money,      Neighborhood       Rehabilitation   strategy, Montclair measures success by
money, and federal funds including HOME,
Community Development Block Grant, and
                                                6 Regional contribution agreements allow one
the coveted, flexible Section 202 subsidy for
                                                municipality to pay another $25,000 per unit to
senior housing. Montclair is part of an 18-
                                                take part of its fair share obligation


26
diversity of age, race and income over time,      the highlands region, the State of New
share of units with price restrictions, extent    Jersey passed the Highlands Act of 2004.
of households overpaying for housing, and         The Act covers an area approximately 1250
distribution of affordable units by               square miles (800,000 acres of land). The
geographic area. Its attempts to succeed by       area was divided into two parts, the
these measures have been hampered by lack         Highlands Preservation Area where the
of resources in the past. As property values      strictest land use controls are in place, and
increase and higher income residents move         the Highlands Planning Area where home
to town, it is possible that meeting these        rule still governs land use decisions.
goals will lose their political appeal just as
the need for lower income and workforce           The Highlands Regional Gateway covers 6
housing grows.                                    square miles of the most densely developed
                                                  areas in each borough. While the center lies
Gateway to the Highlands, New Jersey              within the Planning Area, other portions of
                                                  the three boroughs lie within the
The Gateway to the Highlands is a                 preservation areas. The center is within 25
proposed regional center made up of the           miles of Midtown Manhattan and other
boroughs of Pompton Lakes, Wanaque, and           large employment centers. A major
Bloomingdale. This trio of northern New           interstate highway, I-287, and a state
Jersey municipalities is uniquely positioned      highway, Route 23, bisect the boroughs and
at the nexus between the densely populated        make the regional center highly accessible
suburban portions of Passaic County to the        to vehicular traffic. NJ Transit has also
southeast       and     sparsely    populated     proposed extending commuter service
Highlands region to the northwest. The            along a currently unused rail corridor and
regional      center     concept,    originally   creating a regional transit village in
conceived of by Passaic County planners in        Pompton Lakes.
accordance with State Plan guidelines, has
won wide support from some quarters, and          Because of this connectivity, proximity to
criticism from others. Though still in a          the numerous recreational opportunities in
nascent stage of planning, understanding          the highlands, and rapid regional economic
the     political   struggles,    development     growth, there has been a strong demand for
processes, and regulatory framework               housing. From 1990 to 2000 the Borough of
involved in this smart growth project can         Pompton Lakes authorized less than 50 new
yield valuable clues about the future of the      residential building permits, while from
region and how smart housing policy can           2001 to 2005 the number was over 300. This
complement such efforts.                          demand has led to a rapid increase in
                                                  housing prices over the past few years. In
The three boroughs are home to about              Pompton       Lakes,     Wanaque,      and
30,000 people spread over 24.5 square miles       Bloomingdale average home prices grew
of land area. The Wanaque Reservoir,              more than 60 percent from 2000 to 2004 and
Pompton Lake, and a series of smaller lakes       the median home value now tops $175,000.
and tributaries dominate the landscape of
the area. Together these water features           The Highland Regional Gateway is within
constitute a major portion of the Highlands       the Highland Planning Area and the
watershed, which supplies water to much of        boroughs are still largely responsible for
northern and central New Jersey. Because          land use decisions that have the greatest
of the critical environmental sensitivity of      impact on housing production. A seven-


                                                                                            27
member borough council is responsible for           groups regarding the need for continuing
zoning regulations and infrastructure               expansion of the economic base. Local
decisions. The mayor serves as the seventh          planners are quick to note that channeling
member and only votes in a tie-breaking             growth into the borough town centers
role.   The mayor appoints municipal                reduces development pressures in more
administrators with the advice and consent          environmentally sensitive outlying areas.
of the borough council who in turn                  The dialogue between those who seek limits
implement policy within the boroughs.               on new development and those who seek
                                                    greater development channeled into the
In all three gateway towns, a strong                town centers is ongoing and most recently
environmental constituency exists. Non-             has been co-opted into the state mandated
profit interest groups such as Skyclean and         cross-acceptance process.
the Highlands Coalition are made up of
local environmentalists and property                The      1992    State   Development       and
owners seeking to promote environmentally           Redevelopment Plan originally laid out the
sound land use decisions. The borough of            cross-acceptance process. It is a two-year
Bloomingdale is the least developed of the          process undertaken every three years in
three and has been the most receptive               accordance with state law. The key players
regarding the need to curtail development           in the cross-acceptance process are the
not only in the Highlands Protection Area,          towns        themselves,       the      county
but within the Highlands Planning Area as           administrators, the state, and in some cases
well.                                               county freeholders who represent the
                                                    interests of constituents outside individual
                                                    municipalities.        The two-year cross-
 Housing Characteristics and Tenure in              acceptance process involves three stages.
            the Gateway                             First, county administrators formulate a
Total Housing Units                9,819   10,464   plan in conjunction with local officials. This
                                    1990    2000    initial stage relies heavily on mapping and
Units in Structure as % of Total                    is focused on deviations from previous
1 unit                              77.4     75.8   plans. Once the first stage is complete, a
2-4 units                           12.6     10.7   cross acceptance report is submitted to the
5 + units                            9.9     13.4   State Office of Smart Growth, which then
Tenure as % of Total                                deliberates on the report.         After state
Own                                 75.6     75.7   assurance that the plan fits within the
Rent                                24.3     24.2   overall state plan, the report is then
                                                    submitted to local officials for adoption.
Source: U.S. Census Bureau; CHPC & RPA
calculations                                        Once adopted, local officials then use the
                                                    plan to guide land use decisions.
                                                    Adherence to the plan makes both the
At the same time, borough officials, most           county and the municipalities eligible for
notably in Wanaque, have pressed for                state funding on critical infrastructure and
continuing economic development and an              transportation projects. In February 2005,
expansion of municipal ratables, which will         Passaic County completed the first stage of
allow for the continual upgrading of                the cross-acceptance process and identified
municipal services. The local chamber of            two regional centers, the Preakness Center
commerce has been one of the most vocal             in Paterson and the Highlands Regional


28
Gateway.       The State Office of Smart         identified redevelopment corridors, none of
Growth is currently negotiating with each        the three boroughs have plans that seek to
of the three boroughs.                           expand the range of residential options in
                                                 the borough.
One of the primary smart growth aims of a
regional center is to channel development        There are still a few remaining parcels of
into concentrated areas. According to the        land for green-field development in the
State Plan, such regional centers generally      three boroughs, but much of this lies
share common economic, social, and               outside of the regional center. The cross-
cultural activities.   In the case of the        acceptance      report     envisions     such
Gateway to the Highlands, the shared             development as occurring incrementally
economic activity is service to the resort and   and with densities no greater than 5 units
recreational communities within the              per acre. This represents a substantial
highlands. Currently, the regional center is     increase in density as the three boroughs as
home to about 9,000 jobs. The State Plan         a whole currently have only slightly more
generally identifies regional centers as         than one unit per acre. Local environmental
having jobs to housing ratios of                 groups argue that many of the largest
approximately 3:1. The Highlands Regional        parcels of land slated for development lie in
Gateway currently has a 1:1 jobs to housing      flood plains and that development will be
ratio.    Job growth in the Gateway is           harmful to the existing water resources.
expected to grow faster than housing
growth over the next 15 years. As the            Another      factor    that    has     limited
employment base continues to expand, it is       development in Wanaque is the ability to
critical that housing opportunities match        treat the amounts of water required for
the needs of the service-oriented workforce.     commercial and residential use. As of early
                                                 2006, the borough has been relying on an
One of the problems that County officials        inflow of treated water from Ringwood, an
foresee is a mismatch of jobs and housing.       adjacent borough. Despite being rich in
Because of the rapid rise in housing prices,     water resources, both surface and
many of the people employed in the local         underground, the borough has not had the
service industries will not be able to find      ability to keep up with water demand from
housing within the area. In addition, nearly     its own citizens over the past decade.
80 percent of the housing stock is owner
occupied and recent building permits             Another factor that will potentially limit the
indicate that this trend not likely to change    supply of new housing in the near future is
in the near future. To combat this problem,      the need for open space preservation. The
the most recent cross acceptance report          New Jersey Department of Environmental
plans for the redevelopment of several           Protection administers the Green Acres
arterials in the three boroughs.            It   Program. Green Acres, created in 1994,
recommends that main street retail               allows the state, in conjunction with local
establishments be constructed with second        municipalities, to purchase land for
floor rental units and that surface parking      preservation purposes.       Generally the
lots be developed into small two to four         purchase is made by the localities with
family residential buildings. In many cases      matching funds from the state and the land
this limited scale development will be           is then deeded to local non-profit
possible without overburdening existing          organizations who maintain the land. The
infrastructure.       Beyond these three         borough of Wanaque recently held a


                                                                                            29
referendum on funding a local open space        family home in January 2003 was $350,000,
program. The referendum called for a $.01       well below the average price for
tax on every $100 of assessed property          Westchester County at $525,000, but from
value. The referendum passed with over 75       2000 to 2003 housing prices in Croton
percent of the vote in favor highlighting a     increased by 25 percent.
strong will among residents to protect
surrounding areas from development. The         As stated in its 1977 Master Plan, and
money will be used in conjunction with the      supported in the Comprehensive Plan of
Green Acres Program.                            2003, “the essential character of Croton-on-
                                                Hudson is a community of individual
As the region continues to expand the           house-owners, residing in single-family
Highlands Regional Gateway will be a            dwellings on separate lots.” With only 110
critical test case for the regional center      acres of vacant, undeveloped land, the
concept. The boroughs of Pompton Lakes,         village is close to reaching its build-out.
Wanaque, and Bloomingdale, like many            The undeveloped land consists of select
other regional municipalities on the            areas along the Hudson River zoned for
suburban fringe, have taken the first steps     commercial or recreational use and
that, if done correctly, will allow for a       scattered one-acre parcels throughout the
continued expansion of the local housing        Village.      Given these development
market while protecting environmentally         constraints, Croton is challenged with
critical outlying areas. According to the       addressing the regional needs of housing
regional master plan for the Highlands          demand and affordability while preserving
Planning Area, one of the essential             its waterfront open space, environmental
components of the Highlands Act is to           resources, historic commercial corridors,
“protect and maintain the essential             and         single-family         residential
character of the Highlands environment.”        neighborhoods.
With a strong emphasis on regional
planning and smart growth the prospects         In the last 25 years, the planning process in
for success in the Gateway to the Highlands     Croton-on-Hudson has been characterized
hinges upon balancing both environmental        by the revitalization of the Hudson
protection and economic development.            riverfront. The entire village was designated
                                                as a New York State Coastal Zone in 1982,
Croton-on-Hudson, New York                      and in 1992, the village adopted its Local
                                                Waterfront Revitalization Plan (LWRP), a
Croton-on-Hudson, is a 4.9 square-mile          water and land use plan developed locally
Village of 7,606 residents located in the       in partnership with NYS Division of Coastal
Cortlandt Township of Westchester County,       Resources. The plan serves as a strategy
30 miles north of New York City along the       that brings together state waterfront policies
east bank of the Hudson River. It is            with the needs of the local community.
characterized by open space along the           Some of the planning issues include
riverfront, historic amenities, single-family   waterfront development, historic resources,
housing, and a small town bucolic setting.      scenic resources, public access, and
After experiencing a decline in population      preservation of environmental resources.
from 7,523 in 1970 to 6,889 in 1980, Croton-
on-Hudson once again has a burgeoning           Croton is one of 242 communities within
residential population reaching 7,606 in        thirteen counties of New York State that are
2000. The median sales price for a single-      included in the Hudson River Valley


30
Greenway Act of 1991. The Greenway Act            town character, the Hudson and Croton
was officially incorporated in Croton’s           riverfronts, and open spaces.        The
Master Plan in 1997.         The Greenway         weaknesses included sidewalk conditions,
Communities Council offers financial and          rate of new development, appearance of
technical assistance for communities that         commercial districts, lack of housing
voluntarily adopt a local plan that includes      opportunities, and rising housing costs.
the greenway “criteria” of natural and            Thus, Croton is faced with a dilemma:
cultural resources protection, regional           maintain the character of the village by
planning, economic development, public            limiting or even excluding future
access, and heritage and environmental            development, while at the same time,
education.      As part of the regional           address the workforce and senior housing
component       of   the   Greenway      Act,     needs in a region with rapidly increasing
Westchester County has developed an               housing costs.
economic      development      strategy   by
promoting the “Historic River Towns of            Since 2003, the Village has taken an active
Westchester”, a consortium of thirteen            role to “update of Village Zoning Code and
towns and villages committed to open-             Map,”      which     was      one     of    the
space, historic preservation, and main street     Comprehensive Plans recommendations for
revitalization.                                   preserving local character. The village has
                                                  already implemented two of three phases.
In accordance to the Greenway Act and             Phase 1 was to establish Gateway Districts
LWRP, the Comprehensive Plan of 2003 sets         to the three main commercial corridors.
a framework for “preserving Croton-on-            These Gateway Districts establish use, area,
Hudson’s          traditional        qualities,   bulk, and design regulations in the main
strengthening its assets, and protecting its      entry points to the Village in order to give
resources.” The Plan focuses on ways of           the visitor or resident a sense of “arrival” or
preserving the village character by               “community.” Phase 2 was to create FAR
protecting open-spaces and environmental          and site plan review regulations for
resources, revitalizing the four commercial       residential zones. The FAR limits the size
districts, creating architectural design          and bulk of single-family housing and the
standards, and establishing FAR regulations       site plan review establishes architectural
for residential districts. In order to protect    and design guidelines set by the Planning
the Village’s character from development          Board. Phase 3 is a “general clean-up” of
pressure, the Plan “strongly recommends”          definitions and building codes. This phase
“discourag[ing] any further large-scale           is currently underway.
residential developments and that, in the
future, no rezoning should occur which            Though Croton has nearly reached its build-
would permit commercial development               out, it is still under development pressure
outside of those areas currently zoned for        from regional population growth and
commercial development.” At the same              market demand. There is a portion of
time, in order to preserve the diversity of its   undeveloped “double-lots” throughout the
residents, the Village must also “maintain        Village, which are two adjacent lots with a
economic diversity” and find ways to              sole owner with only one developed lot.
prevent residents from being “priced-out.”        Many of these vacant lots that were
                                                  previously deemed undevelopable due to
From a residential survey included in The         high construction costs because of
Plan, the strengths of Croton included small      topographical limitations such as steep-


                                                                                              31
slopes are now economically viable due to         programs and offers municipalities funding,
rising housing demand. The new site plan          planning, and technical assistance for
review for residential districts and FAR          housing and community development. In
regulations should help maintain the              the mid-1980s, it created the Housing
character of these neighborhoods.                 Implementation Fund, which provides
                                                  infrastructure improvements for affordable
There are two 2-family home districts in the      housing development. It has also created
Village, and grandfathered from the pre-          the New Homes Construction Fund and
1977 Master Plan zoning code, there are           New Homes Land Acquisition Fund. The
some 3-family homes. Therefore, there are         County also administers the federal
some multi-family rental housing options,         Community Development Block Grant
but still only 24.2 percent of the total          program.
occupied units are rentals, way below the
Westchester average of 40 percent. Half           Croton’s Comprehensive Plan does not give
Moon Bay is the Village’s largest multi-          a specific framework for addressing
family development. Construction began in         affordable housing development, but the
the late-1980s, and after the five phase          Village is involved with the county-wide
project is completed in the mid-2000s, the        affordable housing program and locally
subdivision will total 276 units; only a small    based Croton Housing Network. In 1995, a
portion of these units are affordable. This       development by the Croton Housing
development will undoubtedly be the last          Network included 12 affordable units in
large-scale subdivision development in the        which all of the development costs were
Village.                                          covered     by    County    sponsored     or
                                                  administered grants. The development did
Despite the Village’s active approach             come under some controversy as the land
towards preservation, it is still committed to    was originally granted to the village as an
the development of affordable housing. In         open-space requirement for the approval
the mid-1980s the Village formed the              for nearby housing subdivision of 32 single-
Croton Housing Task Force to address              family homes.         Given the limited
housing affordability issues prompting a          availability of land, the village has made
more     active    approach       from    local   some concessions for affordable housing
government. In 1990, members of this task         development.
force formed The Croton Housing Network,
a    not-for-profit   affordable       housing    The Croton Housing Network’s most recent
developer that has since completed a total        proposal is for 11 units of affordable
of “17 rental units and 7 individually            housing for seniors on the adjacent
owned homes.” The organization uses               property. The Village purchased the land a
funds from federal, state, and county             few years ago, it then sold the land to
sources.                                          Westchester County, and the Croton
                                                  Housing Network will then buy the land for
In response to the growing housing                $1. Some opponents to the development
affordability crisis across the county, the       argue that the affordable housing should be
Westchester     County     Department     of      better distributed throughout the Village.
Planning has taken an active role in              This a reasonable concern since the
affordable housing development. Outlined          neighborhood had to forfeit its open-space
in the County Plan, Patterns for Westchester,     for the previous affordable housing project,
the county administers federal and state          but in general, the residents of Croton are


32
sympathetic      to    affordable   housing     The planning process in Croton-on-Hudson
development, especially for seniors. Since      is a culmination of community action and
the development requires a height variance      regional participation.     Croton sets an
to build three-stories (the zoning allows       example of a municipality that reaps its
2.5), some say the development does not fit     own benefits by voluntarily participating in
into the character of the neighborhood. In      regional planning initiatives. Croton has
accordance to the preservationist nature of     emerged as a vibrant waterfront community
the Village, the Planning Board says the        since its implementation of the Hudson
aesthetic quality of the building will be the   Valley Greenway Plan and Local Waterfront
deciding factor for approval.                   Revitalization Program. After endorsing
                                                the Westchester County Plan, Croton has
In order to address some of the housing         used the County’s help to provide much
needs for seniors, the Village permits          needed affordable housing. It expects a
accessory units. The Planning Board must        revitalization of its commercial areas from
first grant a special permit prior to           its participation in the County sponsored
construction, and the owner of the              “Historic River Towns of Westchester”
accessory unit must renew the permit every      economic      development     and      historic
three years. The owner or lessee must be 55     preservation program.           Finally, by
years of age or older. Though the use of        considering TOD options, it is addressing
accessory units is not widespread, and only     its     regional      responsibilities      for
a few are approved, the Comprehensive           accommodating population growth and
Plan does list “regulation of accessory         transportation needs.
units” as one of the main housing issues for
the Village.                                    East Hampton, New York

The Croton-Harmon Metro-North station           The Town of East Hampton comprises 74.3
lies on the Southern border of the Village.     square miles on the easternmost end of
On average, 2,860 commuters board trains        Long Island’s South Fork. With more than
on the way to New York City during peak         half of its 20,000 housing units used by
AM hours and close to 7,100 people use the      seasonal or weekend residents, the town
station daily. The Village provides a 2,000-
space parking lot with 1,600 monthly permit
spaces. The Village has recently hired a        East Hampton's Land Use Trends
consultant to investigate transit oriented
development (TOD) opportunities for the         Total Land Area: 43,753 acres
area around the station. Since over 1,000 of                                     1984    2004
the monthly spaces are used by commuters        Land Uses as % of Total:
who live outside of Croton, this station        Residential                       23.5   37.7
serves as an important commuter hub for         Commercial                         1.1    1.5
other nearby towns and villages, therefore      Industrial                         0.6    0.8
any future development could not have a         Institutional                      1.3    1.1
net decrease in parking. Some development       Agricultural                       3.6    3.3
possibilities include condominiums, mixed-      Trnspt & Utility                   8.8   10.0
use developments, a small commercial strip,
                                                Open Space                        16.6   34.7
or nothing at all.
                                                Vacant                            45.5   11.0


                                                Source: 2004 Draft Comprehensive Plan


                                                                                            33
epitomizes the housing and land use              there     were     numerous      subsequent
dilemmas characteristic of vacation or           amendments. A new Plan, which was
recreational areas around the region. Many       adopted by the Town Board in May 2005, is
towns in Litchfield County, the Hudson           the product of the town’s Planning
Valley, the Catskills and along the Jersey       Department, its other administrative
shore share East Hampton’s problems of           agencies, three paid planning consultant
workforce housing and scenic preservation,       studies, and an extensive process of
but perhaps nowhere are those issues more        community        outreach     and     public
severe or urgent.                                participation. Several other conservation
With approximately 3,000 hotel/motel             and revitalization plans, including a water
rooms in addition to its seasonal homes,         resource management plan and an
condominiums and co-ops, the town’s year-        affordable housing plan, were incorporated
round population of 20,000 can swell to as       into the Comprehensive Plan.
many as 90,000 on summer weekends.
Beyond the famous traffic congestion that        The Plan lists eleven goals of the planning
causes, the summer population surge brings       process; the first three relate to maintaining
with it enormous housing demand from a           or restoring the town’s “rural and semi-
seasonal workforce on which the local            rural character,” the fourth goal relates to
economy depends. Exacerbating the local          affordable housing. Other goals include
and seasonal demand for housing, recent          retention of traditional industries, historic
years have witnessed skyrocketing home           preservation, development of water and
prices, as more affluent professionals from      wastewater infrastructure, and reducing
the city seek summer getaways and real           reliance on private automobiles.
estate investment opportunities.          The
median home price has soared beyond              Development pressure was the principal
$500,000, making it increasingly difficult for   impetus to the planning process. Between
the local labor force to buy homes or find       1990 and 2000 the year-round population of
housing of any sort.                             the town increased by an estimated 22
                                                 percent and the number of dwelling units
Despite the shortage, most residents             rose from 17,068 to 19,640. It is believed
recognize that the town’s housing problems       that about 70 percent of the new units were
cannot be solved simply by encouraging           built for seasonal or weekend use. That
more development.         The town’s scenic      proportion is expected to rise even further
coastline and wooded back roads are              in the future, although some seasonal
valuable natural assets that, if degraded by     residents will transition to year-round
over-development, will undermine the local       residence upon retirement.
economy. Moreover, the town is lacking a
sewer and wastewater treatment system, so        Residential uses currently account for about
the potential for “smart” town-centered          38 percent of the Town’s land area,
growth is strictly limited. Caught between       compared to 24 percent in 1984. About 65
an urgent preservation need and a                percent of the residential land is categorized
workforce housing crisis, the town has           as low density, at one or less dwelling unit
sought to strike a balance with a new            per acre. About 2 percent is categorized as
Comprehensive Plan.                              high density, at 5 or more dwellings per
                                                 acre. The residential area includes a 3,300-
The town’s Comprehensive Plan was                acre island, largely undeveloped, that has
previously overhauled in 1984, although          been in possession of the same family since


34
1639. Whereas 45 percent of the Town’s          lots reduced the build-out from about 3,200
land area was categorized as vacant in 1984,    units to about 900 units.
that proportion is only 11 percent today, as
the proportion used for housing or              In 2004 the Town Board proposed a
preserved open space has expanded.              moratorium on building in Urban Renewal
                                                Areas, but retracted it after an outcry from
An explicit goal of the new plan is to reduce   local businesses. The Comprehensive Plan,
the total build-out of the Town. Under          however,       makes      several     further
present zoning, the number of dwellings         recommendations to reduce density in the
existing in 2004 can increase by about 33       areas. One is to require them to comply
percent. The Plan proposes to reduce the        with the Suffolk County Sanitary Code,
total build-out from 6,000 additional           which would limit buildable lot sizes to one
housing units to about 4,500. This is to be     or     one-half   acre,     depending      on
achieved primarily through rezoning and         groundwater      conditions.         Another
land acquisition.      Nearly 100 separate      recommendation is to develop a tax
proposed remapping actions would reduce         incentive or similar program to encourage
the build-out by approximately 1,450 units.     homeowners to acquire and permanently
                                                merge adjacent vacant lots.
The Town’s zoning ordinance strictly limits
building height to 25 feet and does not         While the Urban Renewal Areas have been
permit multi-family housing other than          a focal point of contention regarding the
attached housing.       One of the most         Town’s density and character, they have
controversial aspects of the Town’s land use    also been the focal point of its affordable
policies, however, relates to subdivision       housing efforts. Because the sites tend to be
maps filed with the Suffolk County Clerk’s      less expensive than other vacant parcels and
Office prior to the adoption of a Town          because many are located near commercial
zoning code. Some of these subdivision          strips, the Town has acquired a number of
maps created 20’ by 100’ foot lots which        them for affordable housing projects since
would allow residential development             1980. One site was divided into 14 half-acre
incompatible with the Town’s character, in      parcels that were sold at reduced prices to
the view of the Planning Board and most         eligible buyers. The buyers were required
residents,    and    that    would     create   to build their own houses, and the Town
environmental and infrastructure problems.      retained a 78 percent interest in the land.
In 1976, pursuant to Article 15 of New          On another acquired site 32 single-family
York’s General Municipal Law, the Town          homes were built and sold to eligible buyers
designated 38 Urban Renewal Areas               for prices ranging from $47,600 to $73,700,
covering the pre-zoning subdivisions.           with the Town retaining an interest in the
Rules were adopted requiring that non-          land.
conforming parcels be assembled into larger
building lots and that certain infrastructure   Although the Town has facilitated or built
improvements be completed or bonded for         several rental projects, including two
before building permits are issued.             owned and managed by its housing
Although there have been differing              authority, its affordable housing strategy
estimates of the build-out potential in these   has emphasized homeownership. To date,
areas, the Comprehensive Plan indicates         166 single-family homes, or the land to
that the rules regarding non-conforming         build them, have been made available to
                                                low- and moderate-income households.


                                                                                          35
Given the extraordinary prices for                apartment per house is permitted. The Plan
residentially-zoned land (one 13.7-acre site      proposes to liberalize rules regarding the
reported sold for over $30 million), the          creation of accessory apartments, in
Town’s strategy has focused on land               particular by making post-1985 homes
subsidies, with the Town retaining an             eligible.
interest in the land to facilitate recapture of
the subsidy upon resale. Another unique           Another proposal in the Comprehensive
aspect of its approach has been to require        Plan is to create a Seasonal Employees
affordable land buyers to build their own         Housing Overlay District in the Montauk
homes, thus reducing administrative costs         hamlet, which already has resort zoning.
and utilizing the Town’s network of small,        Restaurant and resort owners have been
custom home builders.                             seeking to purchase dilapidated motels in
                                                  order to refurbish or rebuild them as
Another element of the town’s housing             seasonal employee housing. The existing
strategy is its Affordable Housing Overlay        unit densities of those motels, however,
District zoning. In such districts apartment      exceed the current permitted densities of
density is allowed to rise to eight units per     County health regulations and Town
acre and to two per acre for single-family        zoning. The proposed district would allow
homes.       The town also encourages             those units to be refurbished or rebuilt at
apartments over stores through a special          the existing density provided that the units
permit process. With the approval of the          have common bath and cooking facilities,
Fire Prevention Inspector, up to three            small bedrooms, and are closed for a
apartments, with a minimum size of 450            portion of the year.
square feet and maximum of 1,000 square
feet, are permitted on second stories of          The new Plan also includes a new focus on
commercial buildings. A separate entrance         the affordability of the existing housing
for residential tenants must be provided as       stock. The proposal would allow eligible
well as one on-site parking spot per              home buyers to find an existing home on
apartment. The Plan proposes to liberalize        the open market, and the Town would have
those rules by giving the Planning Board          the sales price verified as a fair market
discretion over parking requirements and          value by an independent appraiser. The
by removing the 3-apartment limit. It also        buyer would pay no more than three times
proposes to facilitate the creation of            their annual income, and the Town would
apartments over stores by allowing the            make up the difference, retaining an equity
development rights from environmentally           interest in the property. The Plan also
sensitive land the Town purchases to be           proposes to take a similar equity interest in
transferred to such sites.                        certain new residential construction, and
                                                  recommends exploring inclusionary zoning
The town’s zoning code encourages the             and impact fees.
creation of accessory apartments in private
homes       under      strictly   regulated       While affordable housing is a priority of
circumstances. They are only permitted in         East Hampton’s planning, land preservation
houses built before 1985 and must be              is the centerpiece. The Town’s aggressive
between 450 and 1,000 square feet, with no        land preservation program has increased its
more than two bedrooms. The house must            area devoted to preserved open space from
have at least 1,600 square feet of livable        11 percent to 36 percent since 1984. The
floor area and no more than one accessory         16,000 acres of open space include several


36
state parks, two county parks, over 500          neither of those claims are convincing on
acres of preserves owned by the Nature           economic or environmental grounds.
Conservancy, town parks and almost 900
acres of preserved farmland.        Land
preservation has been accomplished
through a variety of state and county
                                                 Statewide Land Use Strategies
programs, including Suffolk County’s
Farmland Development Rights Program,             State governments play a critical role in
the country’s first program designed to          establishing an environment within which
preserve farmland through the purchase of        localities are encouraged to cooperate or to
development rights.                              compete.       In our region, the state
                                                 governments vary in their ability to foster
In 1998, state legislation authorized the five   cooperation among localities or guide local
Suffolk towns surrounding Peconic Bay to         land use decision making. New Jersey’s
impose a real estate transfer tax for the        state government has the greatest impact on
purpose of creating a dedicated fund for         local decisions, including a statewide, active
land purchase and preservation.           The    policy on affordable housing provision.
legislation authorized them to levy a 2          However, both have been criticized as
percent tax on real property transfers above     ineffective.       New      York     has    an
$500, subject to voter referendum, with all      environmental review process that can
proceeds to be deposited into a Community        mitigate adverse land use patterns but lacks
Preservation Fund. Proceeds of the Fund          a state plan or coherent set of land use
are to be expended only for the                  principles      to    promote      sustainable
“preservation of community character,”           development. Connecticut has a state plan
including the acquisition of properties for      but no real means to implement it.
environmental and scenic conservation,           Improvements are needed in all three states
open space, recreation and historic              to realize the potential of state level policy
preservation. The Town of East Hampton           for smart growth, yet it’s in planning-rich
proposed a 2 percent tax on the value of real    New Jersey that most aggressive suburban
property transfers above $250,000, which         sprawl development patterns are found.
voters overwhelmingly approved in 1998
and again in 2004.                               New Jersey

Between 1999 and 2003 the tax raised $43         Of all three states, New Jersey has perhaps
million for the Community Preservation           the greatest challenges to implementing
Fund and 821 acres of open space were            smart growth land use policies.         It is
permanently preserved. Some supporters           extremely       fragmented     with       566
of the program disingenuously claim that         municipalities, and has the highest reliance
the tax, which by law is paid by the buyer,      on local property taxes of any state.
has no effect on existing homeowners,            However New Jersey has also made the
although economic theory suggests that it is     most ambitious attempts at state-level
at least partially capitalized into property     planning and affordable housing policy.
values. At the same time, opponents argue
that by adding to closing costs and              New Jersey is one of the few states in the
withdrawing land from the market the             nation with a statewide land use plan.
program is adverse to affordable housing;        Compliance with the plan by local
                                                 governments is voluntary, although the



                                                                                            37
state provides some incentives. The plan is      Raritan Canal Comprehensive Plan and the
intended to act as a policy guide for            Highlands       Regional    Master      Plan.7
localities, and to promote growth in urban       Similarly, some state agencies make full use
areas and compact centers while protecting       of the plan while others disregard it. A
open space. Critics have noted that New          coordinating council was formed in 2002 to
Jersey’s intensive state planning efforts        resolve these issues, but has not been active.
have not resulted in smart growth: state         New Jersey’s statewide affordable housing
land consumed per incremental resident           policy is also supposed to be coordinated
compares unfavorably with that in New            with the State Plan; making this linkage has
York and Pennsylvania, two neighboring           actually created a negative perception of the
states with no state land use plan. New          State Plan in some municipalities. In the
Jersey is also the only state in the region      view of some, there have been affordable
with an affordable housing policy that is        housing decisions made at the state level
governed from the state level and affects        that have directly contradicted the State
every municipality.                              Plan, despite the fact that since 1992 the
                                                 Council on Affordable Housing (COAH)
New Jersey’s statewide planning process          has been required to act consistently with
has gone through a number of incarnations,       the State Plan.
starting with the 1934 map of Future Land
Utilization, importantly marked by the 1976      Perhaps even more so than the State Plan
Municipal      Land      Use    Law     firmly   itself, COAH and the affordable housing
establishing home rule, and culminating in       policy that resulted from the 1980s Mount
the 1985 State Planning Act that created         Laurel judgments have had an impact on
what is now called the Office of Smart           local land use decisions. COAH sets out
Growth. The current plan was first adopted       “fair share obligations,” or numbers of
in 1992 through a much celebrated cross          income-targeted units that must be built in
acceptance process, wherein county, state        each municipality. Municipalities enter the
and local levels of government are all           process voluntarily and can be certified by
involved. It has since been revised using        COAH by filing a fair share plan that shows
that process. The Plan’s impact on local         the town has a realistic opportunity for
land use is difficult to measure. While New      affordable housing provision. COAH-
Jersey may fall short of smart growth goals,     certified municipalities are protected from
it may have been even worse off without          lawsuits from developers, and COAH
the plan. Court cases have tended to             certification can be considered an
support the state plan, and private litigation   “administrative shield” from developers’
has given towns pause before enacting            lawsuits. About half of all municipalities
more restrictive zoning.        Gubernatorial    are certified. Certification lasts for six years.
promotion of the plan has been the most          COAH now uses a ‘growth share’ approach
important factor in localities’ compliance at    to develop its fair share obligations. It asks
any given time.                                  municipalities to determine what future
                                                 residential and commercial growth will be,
Coordination with other plans can be             and then determines how many affordable
problematic. Other plans often come out of       units the municipality must provide based
regional coalitions and are for targeted         on fractions of those numbers.
purposes.      Some examples are the
Meadowlands Master Plan, the Pinelands           7The Highlands Regional Master Plan is
Comprehensive Plan, the Delaware and
                                                 expected to be released in summer 2006.


38
                                                  ten years by over 80,000 households.9 The
Municipalities meet their fair share              Coalition on Affordable Housing and the
obligations through a variety of means.           Environment projects the need for
One, which is promoted by COAH, is to             affordable housing between 1999 and 2014
require developers to make 20 percent of          at 650,000.10 Yet overall statewide fair share
new residential units affordable to lower         obligation is projected at 75,681 units from
income households. Municipalities can also        1999 to 2014. Another criticism is that
meet a portion of their obligations through       although the issue comes under the rubric
rehabilitation of existing units, creation of     of the State Plan and COAH, New Jersey’s
accessory dwelling units, and through             development patterns are leading to an
regional contribution agreements. These           increasing jobs-housing mismatch. Finally,
agreements allow one municipality to pay          there is considerable criticism around
another $25,000 per unit to take its fair share   regional contribution agreements. Critics
requirement. COAH also determines rules           say that allowing municipalities to buy their
around impact fees.                               way out of up to half their fair share
                                                  obligation is a better deal for wealthier
Since COAH was initiated, over 30,000 units       municipalities than it is for poorer,
of affordable housing have been created           receiving     municipalities.       It    also
statewide. Some observers say those units         concentrates poverty, and exacerbates an
would have been produced regardless of            unfair distribution of affordable housing
COAH, while others argue that those units         throughout the state. Many of the same
weren’t produced in the places where they         groups argue that too large a share of the
are most needed or where sustainable              fair housing obligation can be met with age-
growth policies indicate growth should go.        restricted housing, limiting affordable
Still others claim that COAH has made New         housing development for families and the
Jersey a leader in provision of affordable        working poor.
housing and prevented home rule from
translating directly into exclusion and           New York
homogeneity. Regardless of the COAH
debate, the need for affordable housing is        New York does not have a state plan or
still evident8 and COAH represents a              coordinated land use policy. Land use
unique model for meeting statewide                planning powers are held by more than
affordable housing needs.                         1,600 municipalities, but municipalities are
                                                  not required to write plans. The State,
There are some aspects of COAH that draw          however, provides a number of resources to
particular criticism. One is that COAH’s          help   build     planning    capacity     in
needs numbers seem exceptionally low              municipalities and to encourage smart
compared with those from other sources.           growth (but not using that terminology).
According the US Census, affordable
housing need in the Garden State has, by          9 In 1990, 46% of households earning under
conservative estimates, grown over the last       $35,000 paid more than 35% of income for
                                                  housing in NJ; in 2000, 47% of households
                                                  earning under $50,000 paid more than 35%, an
                                                  increase of about 83,000 households.
                                                  10 Council on Affordable Housing and the
8The National Low Income Housing Coalition        Environment. How Much Affordable Housing Do
“Out of Reach” report (2004) ranked New Jersey    We Need? COAH vs. Reality, A Preliminary
the third least affordable state in the nation.   Assessment. December 2003.


                                                                                             39
Most of these resources are provided by the        Connecticut
Department of State.
                                                   Connecticut has a State Plan of
The one way in which New York State has a          Conservation and Development. The plan
direct, state-level impact on local land use is    was drafted in the 1970s and implemented
the through the 1978 State Environmental           through executive order. The Office of
Quality Review Act (SEQR).            The Act      Policy and Management was then created to
expands on federal legislation from the            draft and revise the plan every five years.
1960s such as the National Historic                There is public input to the plan, although
Preservation Act and the National                  nothing as complex as the cross acceptance
Environmental Policy Act that require an           process in New Jersey. The most recent
examination of a proposed development’s            revision was in 2005.
impact with various interests in mind.
SEQR requires all state, county and local          Compliance with the Plan is considered
agencies, including local planning and             voluntary. The one mandatory component
zoning boards, to consider environmental           requires State agencies to conform to the
impacts equally with social and economic           Plan for projects over $100,000. The extent
factors. While SEQR is ‘enforced’ by each          to which the State Plan is implemented at
agency that must conform to it,                    the local level remains in the category of
independent entities can use noncompliance         suggestion: “municipalities must consider
with SEQR to legally stop a development.           the Plan and note any inconsistencies when
New York State's court system has                  they update their own plans, but they are
consistently ruled in favor of strong              not required to reconcile any differences.”11
compliance with the provisions of SEQR.
The SEQR process is intended to determine          In the years preceding the 2005 revision of
whether a proposed project would have a            the State Plan, three substantive studies—
significant environmental impact. If it will,      the    Connecticut    Strategic    Economic
then an Environmental Impact Statement             Framework (Gallis Report), Connecticut
must be prepared as a next step toward             Metropatterns (Orfield report), and Blue
development.                                       Ribbon Commission Report on Property
                                                   Tax Burdens and Smart Growth—all
New York also has a statewide affordable           concluded that the state’s development
housing trust fund. Currently the trust            patterns were not sustainable. Over the
fund is funded by annual appropriations            past three decades, the amount of
from the state legislature unlike most             developed land in Connecticut increased at
housing trust funds that are funded by a           more than eight times the rate of population
dedicated revenue stream. Its primary              increase. The continuous expansion of low-
function is to manage various HUD-funded           density housing development toward
programs and to disburse federal funds.            distant areas not only harms the
Although New York’s HTF does not impact            environment but also requires new
land use directly, it is still notable for being   infrastructure and an expansion of
a statewide effort. As such, it has the            municipal services.      This development
potential to be used as a starting point by        pattern strains municipal coffers while
political leaders who want to develop and
promote a smart growth land use agenda
                                                   11Conservation and Development Policies Plan for
for the state.
                                                   Connecticut, 2005-2010, Connecticut Office of
                                                   Policy and Management, page 2.


40
leaving the poor concentrated and isolated       its state funded programs. While the state
in the inner city.                               plan may echo the wisdom of smart growth,
                                                 the actual decision making that could
Influenced by the findings of these reports      implement a smart growth agenda is in the
and in response to criticisms that the State     hands of 169 independent municipalities
Plan has not been sufficiently prescriptive      Connecticut       has no    county   level
to municipalities and regional planning          government, however there are 15 planning
organizations, the 2005-2010 revision            sub-regions, mostly formed in the 1950s,
promotes growth management principles.           that assist planning and development
These generally follow a smart growth            efforts through their state-sanctioned
agenda: revitalization of regional centers, an   regional councils of government, regional
expansion of housing choices, concentration      planning agencies, and regional councils of
of development around transportation             elected officials.
nodes, conservation of natural resources,
and integrated planning across all levels of
government.
                                                 Land Use Strategies for Balanced
One of the explicit principles of                Housing
Connecticut’s state plan is centered on
housing, specifically “to expand housing         If planners could devise and implement
opportunities and design choices to              their policies with impunity, facilitating a
accommodate a variety of household types         balanced housing market while meeting
and needs.”       The plan notes the gap         other important land use challenges would
between the cost of construction and the         be an easy task. Some infrastructure here, a
market value of new housing in cities, as        little upzoning there, perhaps a tax and
well as the gap between market value and         subsidy or two, and the region could be
affordability. The plan points to programs       reorganized on much more efficient lines.
of the Department of Economic and
Community        Development      and     the    In the real world of American democracy,
Connecticut Housing Finance Agency as the        where the electorates of towns and villages
means of reaching the plan’s objectives. It      determine land use policies, where owners
discusses the merits of regional planning for    have the right to seek the highest return for
housing and inclusionary zoning, and the         their property’s use, and where households
importance of the municipality in creating       can freely “vote with their feet,” resolving
housing opportunities.        The strongest      housing and land use priorities is far more
statement in the housing section of the plan     difficult.   Unless they are justified by
says that the state should consider requiring    constitutional rulings or unambiguous
municipalities to adopt inclusionary zoning      environmental exigency, and often not even
regulations.                                     then, policies are not traditionally imposed
                                                 on self-ruled jurisdictions. Rather, they
In addition to the State Plan, Connecticut       must be accepted on their own merits, and
law requires municipalities to prepare,          diffused throughout the region through a
adopt, and amend a plan of development           painstaking process of advocacy, education
every ten years. However, the law does not       and consensus-building.
require municipalities to implement their
own plans. Connecticut’s state-level impact      In our metropolitan area the task is
on local land use is essentially confined to     complicated further by the fragmentation of



                                                                                           41
fiscal and legislative power among three        tax revenues, brownfield contamination,
state governments (or four, as the              and racial isolation.
commuter shed reaches into eastern
Pennsylvania). With the competition for           Population Changes in Regional Cities,
jobs and tax revenues never far below the                      1990-2000
surface of cordial interstate relations, the
respective states cannot easily serve as         City                1990    2000 % Change
regional planning authorities, establishing                           (thousands)
common rules and balancing out winners
                                                 New York City      7,320.2 8,008.3     9.4
and losers.
                                                 Newark              275.2 273.5        -0.6
In the following pages CHPC and RPA offer
                                                 Jersey City         228.4 240.1         5.1
a number of suggestions for reconciling the
                                                 Yonkers             188.2 196.1         4.2
region’s housing needs and other land use
priorities. Some of them are long-standing       Paterson            158.1 149.2        -5.6
positions of one or the other organization,      Bridgeport          141.5 139.5        -1.4
some emerged from the analysis presented         New Haven           130.1 123.6        -5.0
above, and still others arose from a lengthy     Elizabeth           110.1 120.6         9.5
process of out-reach and discussion with         Waterbury           108.2 107.3        -0.9
practitioners throughout the metropolitan        Stamford            108.1 117.1         8.3
area.    The key screening criterion for         Trenton              88.6    85.4      -3.6
inclusion, however, was that each                Norwalk              78.3    83.0       5.9
recommended strategy is justifiable on the       East Orange         73.7    69.8       -5.2
basis of a community’s best interests.           Clifton              72.0    78.7       9.3
Strategies that would need to be imposed         New Rochelle         67.4    72.2       7.1
on communities from state governments or         Mt. Vernon           67.0    68.4       2.0
state courts, though sometimes necessary,
                                                                    1,895.0 1,924.4      1.6
were left for another day and another study.
                                                 Suburban Areas    10,645.6 11,559.2    8.6
1. Focus Resources on Regional Cities.
One of our region’s most undervalued
                                                 Source: US Census Bureau; CHPC & RPA
resources is its system of mid-sized,
regional cities. Although the list of them is
somewhat arbitrary, the largest is Newark       One regional advantage to focusing on
and the 15th most populous is Mount             these centers is that they would benefit
Vernon.                                         from, and generally would welcome,
                                                greater population density.             Their
These cities all play, or once played, an       residential land is typically zoned at urban
important part in the regional economy,         densities and much of it is vacant; a number
often    specializing  in    a    particular    of them, including Newark, Jersey City,
manufacturing or trade sector that supplied,    New Haven and Bridgeport, now have
or drew upon, components made elsewhere         populations significantly lower than their
in the region. While several of them have       1950 counts. Even during the 1990’s, when
prospered in recent years, as a group they      New York City’s population increased by
have languished with the familiar urban         9.4 percent and that of our region’s
burdens of deindustrialization, declining       suburban areas by 8.6 percent, these 15
                                                regional cities saw population growth of


42
43
                                                   suburban areas of New Jersey—indicative
only 1.6 percent. As a group, they could           of a zoning bias against them.
absorb a significant amount of high-density
residential development, and would benefit         Two-family homes have been a popular
from repopulation as did the Bronx and             urban housing form for many years, and the
Brooklyn during the 1990s.                         recent production trends in parts of the
                                                   region indicate that they remain favored by
Another important advantage of regional            buyers.    Since the secondary units are
growth focused on mid-sized cities is that         usually rented, construction of two-family
they are all connected by rail and other           homes can add significantly to the rental
public transit, either with New York City or       stock in urban and suburban areas alike,
with each other. Those connections can             providing a critical housing resource for
facilitate fast and convenient day-to-day          populations for whom ownership is not a
commerce and would provide an immense              sensible option—young people and singles,
strategic advantage during times of future         in particular. In their classic “mother-
petroleum supply interruptions.                    daughter” configuration, 2-family homes
                                                   also create more opportunities for housing
Being that New York City is four times             the elderly, often in situations where family
more populous than the next 15 largest             members can provide care and familial
regional cities combined, this strategy will       companionship without entirely sacrificing
require an enlightened view of its self-           their privacy.
interest from New York’s government.
Rather than seeing these centers as potential      3. Encourage and Control Accessory Units
competitors for jobs and taxpayers, joint          in Private Homes.
economic development programs that                 Although little hard data is available, all
exploit hub-and-spoke efficiencies could be        anecdotal evidence suggests that accessory
pursued, for example.                              units, and often illegal unit subdivisions,
                                                   are proliferating throughout the region. In
2. Encourage 2-Family Home Construction            New York City and Long Island,
and Conversion.                                    unacceptably crowded and dangerous
During the recent real estate cycle,               conditions      have     been    discovered,
construction of 2-family homes has boomed          sometimes only after tragic fires have
wherever they are permitted by zoning. In          occurred. While local housing safety and
New York City, building permits for new 2-         health regulations should be rigorously
family homes increased by 112 percent              enforced, it is also important to recognize
between 1998 and 2004.1         They also          that the profusion of informal housing units
increased as a share of all new residential        is a market response to a shortage of lawful
permits throughout the Hudson Valley and           housing supply. Encouragement of legal
southern Connecticut.                              accessory apartment creation can be an
                                                   important source of inexpensive housing
In contrast, construction of 2-family homes        supply and a complement to more vigorous
has been flat on Long Island and in most           housing code enforcement.

1 Department of Housing and Urban
                                                   Unlike many other forms of rental housing,
Development, State of the Cities Data System       accessory units in private homes need not
Building Permit Database. 112% is the increase     change the built character of a community.
in number of units in 2-unit structure for which
                                                   Depending on the design standards that are
building permits were issued.


44
adopted, they can be made visually              Community Land Trust model also has
indistinguishable from single-family houses     potential for this region.
and from a community’s existing housing
stock.                                          The major constraint on such programs is
                                                initial capitalization.      Whether created
With nearly 4,500,000 existing single-family    through state funding or through local
homes in the metropolitan area, there is also   transfer or other real estate taxes, initial
a huge retrofit potential in the existing       capitalization requirements would be
stock. If even one in ten single-family         significant. However, depending on the
homes were retrofitted with an accessory        market conditions prevailing in particular
apartment, a good portion of the region’s       communities and the parameters they set
rental housing shortage would be met.           for eligibility, the per-unit capital costs need
Properly regulated, a substantial supply of     not be greater than for conventional
accessory apartments could be created with      homeownership programs. Furthermore,
very little architectural or social impact on   recapture of the public subsidy is automatic,
the communities in which they are located.      and on average a positive real rate of return
East Hampton’s accessory apartment rules,       can be expected on the public funds.
discussed above, provide a good example of
how this can be done.                           5. Link Open Space Preservation and
                                                Affordable Housing Production.
4. Focus on the Affordability of Existing       In theory, communities can conserve their
Housing.                                        open space by allowing greater density in
Many of our region’s suburban areas are         designated development zones; the higher
nearly built out and there is little land       densities also facilitate rental and affordable
available for new affordable housing            housing development. In practice however,
development.         By   targeting  their      there is no direct link between open space
affordability efforts toward the existing       preservation and high-density or affordable
housing stock, communities can protect          housing creation.
their remaining open space and their            Open space and other land preservation
existing built character while addressing       programs have proven to be highly popular
pressing workforce and lifecycle housing        with voters, even when new taxes are
needs.                                          proposed to pay for them. New Jersey’s
                                                Green Acres program and Long Island’s
East Hampton’s novel proposal to create a       Peconic Bay Community Preservation Fund
homeownership program with shared               program are evidence of that. While such
public/private equity in the homes is an        programs are valuable in their own right
idea of great promise. The program would        and should be expanded, they do not
utilize the existing housing stock to create    directly reward communities that zone for
affordable homeownership opportunities,         or accept higher-density housing, thereby
preserve economic incentives characteristic     easing development pressures on the entire
of private housing markets, and avoid the       region’s store of open land. Statewide or
siting issues that often thwart affordable      regional preservation funds, along the lines
housing programs.       It would also be        of the New Jersey and Long Island
extremely flexible, allowing different          programs, could be adapted to encourage
communities       to   adjust    parameters     communities to directly balance their
according to their preferences and needs or     willingness to accept higher-density
with changing market conditions.        The


                                                                                             45
housing with their desire to preserve open     incentives are provided       to   encourage
space.                                         developers to do so.

In 1987, Vermont created a statewide           Within the New York metropolitan area,
program intended to link the dual goals of     villages such as Port Chester and Hastings-
land preservation and affordable housing.      on-Hudson, towns including Bedford,
Funded through its state property transfer     Greenburgh, North Salem, Somers and
tax, the Vermont Housing and Conservation      Southold, and cities including White Plains
Trust Fund awards grants to public and         Yonkers, and Stamford have adopted
private projects that create affordable        inclusionary housing. New York City has
housing or conserve the state’s historical,    expanded its inclusionary housing program
agricultural and natural resources. Projects   in Manhattan and extended it to parts of
that achieve more than one of these goals      Brooklyn, and of course, the entire state of
are given priority status. Statewide or        New Jersey has implemented a form of
regional programs based on the Vermont         inclusionary zoning through its Mt. Laurel
model, but which make the link between         requirements. State legislators from Nassau
affordable or higher-density housing and       and Suffolk counties have been trying to
preservation even more direct, would be        pass a mandatory inclusionary program
relatively easy to design.                     since 2003. The Long Island Workforce
                                               Housing Incentive Program would require
Since it would be difficult from a political   10 percent of all future residential
viewpoint, and possibly undesirable from       developments with more than five units to
an environmental viewpoint, to attach          be sold at a price affordable to households
affordable housing requirements onto           earning 80 percent of the median income or
existing open space preservation programs,     less.
new programs and funding sources would
probably be required to implement this         There are as many variations of
approach. Given the region’s escalating        inclusionary     zoning    as     there   are
property values, new transfer taxes or         communities that have adopted it. The
impact fees on new development might be        critical variable is whether the program is
viable funding sources. To compensate          mandatory or voluntary. There is probably
jurisdictions that would generate large        no one best answer to that choice. Because
revenues but have relatively little open       of the region’s need to satisfy its aggregate
space left to preserve, other uses of the      housing demand and to create more
funds, such as transit improvements or         compact, transit-oriented nodes of housing
historic preservation, could be also be        development, inclusionary programs that
permitted.                                     offer density incentives are probably
                                               preferable to mandatory programs that do
5. Adopt Inclusionary Zoning.                  not. However, local land use and political
Throughout the country and region, there       conditions differ widely, and a mandatory
has been a movement toward the adoption        approach may be more feasible in some
of inclusionary zoning.    Typically, the      jurisdictions.
approach involves either a mandatory
requirement that some of the units in new      6. Encourage Transit Village Development.
residential subdivisions or multi-family       Transit-oriented development has been a
developments be set aside as affordable        popular term within planning circles for the
housing, or density bonuses and other          past decade but only recently has the transit


46
village concept engaged the public                “vacant land and/or underutilized or
imagination. A transit village is an area of      deteriorated buildings within walking
moderate- to high-density, mixed-income,          distance of transit where redevelopment
mixed-use development or redevelopment            can take place.”
centered upon a node in an existing or
planned transit network.                          An obvious prerequisite for transit village
                                                  development is a transit system, preferably
This connection between land use and
                                                  commuter rail. Our region is fortunate to
transportation is not a new concept, but in
                                                  already have an extensive, comparatively
the past fifty years most land use decisions
                                                  efficient       public        transportation
have been linked to highways, interstates,
                                                  infrastructure.   Some jurisdictions have
and     other     automotive      forms     of
                                                  already begun to capitalize on that
transportation. For a variety of reasons, it is
                                                  infrastructure while others remain wary.
only recently that there has been a renewed
                                                  State financial incentives can help to
interest in centering development around
                                                  convince communities that transit village
transit. Public agencies have realized the
                                                  development is advantageous; in the longer
potential to reduce congestion and limit air
                                                  run, the ability to attract a high tax, low-
pollution by encouraging transit use, to
                                                  service taxpayer base may be even more
curtail inefficient sprawl by concentrating
                                                  convincing.
development, and to strengthen local
coffers by diversifying the housing stock.
                                                  7. Promote Mixed-Use Main Streets.
                                                  A number of towns and villages in our area
It is this final reason that has the most
                                                  have recently begun to appreciate the
potential to affect positive change in the
                                                  advantages of mixed-use town centers,
regional housing market.         In suburban
                                                  particularly in the form of apartments over
places, transit villages have the potential to
                                                  stores. Pompton Lakes, New Jersey and
attract young professionals interested in a
                                                  Mount Kisco, New York are among the
more communitarian lifestyle. For regional
                                                  communities encouraging this low-rise,
cities, transit villages have the potential to
                                                  mixed-use building type. In other areas of
reinvigorate dormant local economies by
                                                  the country, even new subdivision
spurring new retail investment and creating
                                                  developers are adopting the style for village
new entertainment venues supported by an
                                                  centers and shopping districts.
expanded local population.
                                                  Aside from creating new rental housing
New Jersey has been at the forefront of
                                                  opportunities for young people, singles, and
transit-oriented development in our region.
                                                  the local workforce, the approach has a
Looking at just a few of the 13 key criteria
                                                  number of advantages. The residential
that New Jersey uses to identify potential
                                                  density adds life and activity to main streets
transit villages gives a sense of how such
                                                  after hours, keeps purchasing power in the
places will eventually contribute to the
                                                  local retail districts, and can help to stabilize
creation of a balanced housing market in the
                                                  the finances of small retail businesses.
region. For instance, one of the criteria
                                                  Furthermore, the second or third stories
states that transit villages will have a
                                                  often enhance streetscapes and, because
“strong residential component [which] can
                                                  they are by definition in commercial
include mid-rise buildings, townhouses, or
                                                  districts, arouse little opposition from local
apartments over first floor businesses.”
                                                  homeowners.
Another notes that such villages have



                                                                                                47
8. Adopt Meaningful Statewide Growth
Plans.
While New York has not yet begun the
process of articulating statewide growth
objectives, all three states need to create
stronger incentives and disincentives to
ensure local and state agency compliance
and coordination. Gubernatorial leadership
is critical and each of the region’s governors
can play a galvinizing role in promoting
smart growth. Creation of true housing
trust funds with dedicated revenue streams
could be important tools for realizing
affordable      housing      components     of
statewide growth plans.

In New Jersey, the state with the most
elaborate statewide planning apparatus,
several specific steps need to be taken. For
example, COAH should either significantly
increase the amount of money per unit for
Regional Contribution Agreements or
terminate the provision entirely. COAH’s
“Growth Share” should be changed to an
explicit inclusionary zoning requirement
and the state should adopt a “smart growth
shield” to protect towns compliant with the
State Plan from lawsuits and other
challenges.




48
II. Transportation Investment                  development patterns in parts of the region
                                               are constrained by the lack of such public
and Education Funding                          infrastructure.

                                               Although initially developed by private
                                               interests, our transportation infrastructure
Government’s influence on the housing          has had an equally profound effect on
market goes far beyond the land use            housing patterns.        The dense urban
regulations it establishes or the housing      character of Brooklyn and the Bronx was
subsidies it provides. Its decisions about     facilitated by private trolley systems and
where to expand highways, how to improve       later by subways, while many of the
public transportation, or whether to extend    villages that characterize Long Island and
sewer systems determine where housing is       Westchester congealed around 19th century
built and what type is feasible. The quality   commuter rail lines. Eventually the public
of public schools and other services it        sector assumed responsibility for that
provides influences consumers’ locational      transit infrastructure, while playing an even
preferences and the prices of the homes        larger role in developing the roadways that
they buy. And government’s choice of           paved the way for low-density suburban
methods for financing its investments and      housing       development.            Today’s
operations fundamentally affects the cost of   transportation investments may be less
housing and the spatial patterns of wealth     revolutionary, but they continue to
and poverty.                                   influence where housing can be feasibly
                                               built and marketed.
Much of the discussion of housing policy at
the state or local level ignores such          Government’s role in creating a healthy
foundations of governmental housing            housing environment does not end with the
policy and focuses instead on finance and      development of physical infrastructure.
subsidy programs that affect relatively few    Modern urban densities would be
households. But in a region where over 90      impossible without public provision of
percent of all housing is privately            police, fire and sanitation services. While
developed and financed, government             those services are now taken for granted,
decisions on infrastructure investments and    the quality and cost of public education
public services may actually have a far        continues to be a central concern of housing
greater impact on housing outcomes than        developers and consumers. The perceived
its direct housing programs.                   shortcomings of public school systems in
                                               many of our region’s central cities impede
Since the earliest settlement of our region,   market-rate housing development in them,
government decisions regarding public          and correspondingly heighten housing
infrastructure and services have shaped the    demand in high-quality suburban school
housing landscape and altered the choices      districts. Further, a decentralized system of
available to consumers. The high density       financing public services, especially schools,
core of our region could never have            exacerbates fiscal disparities and distorts
developed were it not for the far-sighted      housing choice.
decision to build a water supply aqueduct
150 years ago and the subsequent public        For our region to meet its future housing
development of a sewage collection and         challenges, more attention must be paid to
treatment     system.        Even     today,   the    housing   implications   of   these


                                                                                          49
fundamental government policies and               carefully integrated into regional housing
practices. That political sensitivity will only   policy. There are presently a number of
arise, however, if housing experts and            major    transportation   projects   under
planners      inject     their     professional   consideration throughout our region; the
perspectives more assertively into the            decisions we make in allocating our
debates on broad public policy issues. In         transportation dollars among them will
recent decades, both the fields of urban          help to determine the character of
planning      and      affordable      housing    residential development for decades to
development        have        grown      more    come.
sophisticated and professional, with an
inevitable narrowing of focus to matters of       The second, public school finance, is not
technique      and     financing.          That   part of the usual Smart Growth agenda but
professionalization has led to better local       is a critical issue in regional housing policy.
planning practices and to more sustainable        Political resistance to higher-density and
affordable housing developments, but also         income targeted housing may have many
to the neglect of the public policy context in    sources, including a preference for
which residential development takes place.        traditional suburban forms, concerns about
The sweeping social vision of the early           congestion, and racial prejudice. But the
housing reformers and city planners has           logic of Smart Growth may offset some of
been replaced by the more immediate               that resistance while there is abundant
technical focus of the practitioner.              evidence that racial prejudice is suffering a
                                                  slow but certain demise. Nevertheless, by
The Smart Growth movement arose, in part,         financing public schools primarily through
from a recognition that isolated housing          local property taxes, government has
and planning initiatives cannot adequately        created a huge incentive for communities to
challenge a development logic that                engage in “fiscal zoning,” a practice that
simultaneously degrades the environment           works against rational regional housing
and restricts housing opportunities. Smart        solutions. In New York, New Jersey and
Growth has been critical in uniting housing,      Connecticut that system of public finance is
transportation and environmental concerns         increasingly unpopular with voters and is
into a policy framework that stresses their       under attack on legal grounds, yet the
interdependence,    and     it   has   been       perspective of housing and planning
enormously successful in shaping policy           professionals has been largely absent from
debates about land use and development            the debate.
trends.   It has been less successful in
actually changing those trends, in good
measure because the fiscal structures that
support sprawl and housing segregation
remain intact.                                    Transportation and Regional
                                                  Housing
In this section we discuss two public policy
issues that fundamentally affect our
                                                  In the late 1970s, the waterfront district of
region’s housing environment, although
                                                  Norwalk, CT was in steep decline and new
neither addresses housing opportunity
                                                  investment was minimal. The nineteenth-
directly.       The first, transportation
                                                  century housing stock was dilapidated and
infrastructure, is a central concern of Smart
                                                  vacancy rates in some areas were as high as
Growth planning that needs to be more


50
76 percent. Despite calls by some for urban     Transit District bus service; to New York
renewal, William Collins, then mayor of         and New Haven via the Metro-North
Norwalk, suggested that the historic            Railroad; and to upper Fairfield County on
housing stock could be preserved and            the Danbury Branch line, mean that
revitalized through a program of adaptive       residents have easy access to several of the
reuse made possible by enhancement of the       largest employment centers in the region.
city’s excellent transportation linkages. The
combination of renewed housing and top-         For potential housing consumers in South
quality accessibility could then be used to     Norwalk, calculations about accessibility
encourage new residential, commercial, and      are second nature. Before choosing to
retail developments in the area.                purchase or rent a particular unit of
                                                housing, consumers instinctively assess
The primary transportation improvements         their ability to access employment, schools,
were centered on the aging Metro-North          daily      necessities,   recreation,    and
station, which lies close to the midway         entertainment in that location. They also
point on the New York/New Haven main            size up the ease with which they will be
line. In the early 1990s poor physical          able to travel from one location to another,
conditions and safety concerns deterred         what planners call mobility.        Together,
investment around the station. By the mid-      accessibility and mobility form the nexus
1990s, however, the city had secured funds      between housing and transportation at the
to construct a new station and adjoining        ground level of analysis.
parking garage and today the station is
consistently recognized as one of the line’s    Both for-profit and non-profit housing
best. In 2004, a $24 million, 58,000 square     developers must respond to the intuitive
foot police headquarters was completed          decision-making of individual consumers.
directly across from the station to provide     Thus within the housing development
enhanced security. More recently the city       industry, knowledge of accessibility and
secured $250,000 in the 2005 federal            mobility is critical to creating successful
Transportation Equity Act to study the          developments that meet market demands.
possibility of developing transit-oriented      Even      transportation   planners,   often
uses around the station itself. Though in a     criticized for their failure to provide
nascent stage of planning, the study will       consumers with multi-modal choices, now
look to the possibility of expanding the        continually stress the relationship between
station into a multimodal transit hub for the   their endeavors and land uses which
region with a significant number of             ultimately affect the housing market.
residential units.
                                                As second nature as the connection between
Today, as urban redevelopment efforts have      housing and transportation may be for
produced over 1,500 new units of housing        consumers, housing developers, and
and reached their final stages, planners in     transportation planners, it is startlingly
Norwalk are quick to credit the successful      absent from higher-level policy dialogues
redevelopment to one critical factor—           among housing experts and advocates. As
accessibility. While not a major regional       argued in Out Of Balance, for the
center on the scale of Stamford or White        metropolitan region to increase its economic
Plains, its transportation linkages to the      competitiveness in relation to other
Southwestern Connecticut region via             metropolitan regions, the existence of a
Interstate 95, Route 7, and the Norwalk         balanced housing market defined by


                                                                                          51
affordability, choice, and quality, is vitally   The core of this dependence is rooted in a
important.        Thoughtful transportation      complex web of federal, state, and local
planning can and must play a key role in         public policies, private sector decision-
the constitution of such a housing market.       making, and consumer preferences defined
For this to become a reality, housing experts    over the previous half-century. At the same
must embrace transportation as an issue of       time, post-war suburbanization ushered in
great importance—a means not only for            an unprecedented period of housing
increasing accessibility and mobility that       improvement for working families. From
will facilitate housing opportunity, but also    1950 to 1980, homeownership rates in the
for ameliorating urban poverty and               United States increased from 55 percent to
increasing social mobility.                      64 percent.         Low-density suburban
                                                 development gave millions of working
Although transportation and housing              families access to more space, healthier
priorities sometimes conflict, it is equally     living conditions, and good schools.
true that they are dependent upon one
another. The policies of one will affect the     What was crucially missing from the
policies of the other.        Transportation     calculus of many post-war subdivisions,
policies are often carried out by states or      however, was transportation choice. Older
large regional entities such as the Port         communities were often connected to the
Authority       or     the      Metropolitan     region’s extensive rail network, geared to
Transportation Authority (MTA), whereas          moving commuters into and out of
local governments often craft housing            Manhattan. Newer communities, however,
policy. Resolving the disparate nature of        provided automobile access primarily to the
the relationship is particularly vexing. For     suburban office parks and retail complexes
the purposes of this section, the goal is to     that grew up around major highway
articulate the ways in which transportation      interchanges. For a time those development
affects housing through land use decision-       patterns served the region well, making
making and to identify regional projects         suburban housing more available to
that have significant potential to contribute    working     families    while    facilitating
to a balanced housing market.                    economic growth and job creation in
                                                 suburban counties.
The Critical Need for Modal Choice
                                                 Today, owning a personal automobile is a
When it comes to transportation policy in        necessity for a great majority of the region’s
our region, policy-makers and the general        22 million inhabitants. In fact, of the nearly
public alike are often predisposed to            70 million trips that are made on an average
exceptionalism. The metropolitan area is         weekday in our region, approximately 85
home to one of the busiest transit systems in    percent are made by car.1 The number
the world and the proportion of those            varies greatly with location. In Manhattan,
commuting to and from work via public            only 10 percent of trips are made by
transportation is greater than any other         automobile, while in Hunterdon County,
North American region. However, there            New Jersey, 90 percent of all trips are made
are many more similarities than differences
between this and other metropolitan
regions. One of the most critical is a
                                                 11997/98 Region Travel – Household Interview
dependence on the personal automobile.           Survey, New York Metropolitan Transportation
                                                 Council and North Jersey Transportation
                                                 Planning Authority.


52
by auto. This latter number reflects the lack    a more balanced approach            to       new
of transportation choices in one of the          transportation infrastructure.
fastest growing counties in the region.
                                                 Housing-Sensitive Transportation Policies
Unimodal       overdependence      negatively
affects the region’s housing market. Traffic     The metropolitan region is fortunate to have
congestion, security concerns, and pollution     an extensive transit infrastructure in place.
are the byproducts that receive most of the      Within the City of New York itself, the
attention. In terms of the regional housing      MTA’s New York City Transit operates 468
market, though, other consequences, such         subway stations that connect 26 subway
as the spatial mismatch between people           lines. MTA subways carry 4.5 million riders
and jobs and resulting lengthened                per day and are supplemented by an
commutes, the loss of open space,                extensive network of local and regional
environmental inefficiencies, increased costs    buses. In addition, the MTA operates the
of living, higher labor costs, and public        Staten Island Railroad, a 14-mile heavy rail
health concerns are also important. Such         line that connects to the Staten Island Ferry
costs are directly related to housing and        at the north end of the island.
land use decision-making.
                                                 The Port Authority also operates a regional
Even if many of these costs could be             heavy rail subway line, the PATH, which
mitigated or contained, there is another         connects Manhattan to the cities of
major problem with continuing to do things       Hoboken, Jersey City, and Newark, New
the way we have for the past half-century: it    Jersey. Manhattan is further connected to
is simply no longer possible.          Many      the region by three major commuter rail
remaining greenfield sites suited for            systems—the Long Island Railroad, the
suburban development are too far from the        Metro-North Railroad, and New Jersey
core—and even from suburban job                  Transit—which feed into one of two main
centers—to make daily commuting a viable         terminals, Grand Central and Penn Station.
option. Further in, developers often meet
with strong political opposition to proposed
developments that might impact local traffic     Ridership Change on Regional Commuter
flow.                                                         Rail Systems

There is no doubt that suburban
                                                 Average Weekday Ridership (000's)
development will continue to occur in our
region, but we can no longer rely on auto-                            2000 2005 % change
dependent, low-density development to            Long Island RR       336.6 336.8         0
satisfy our region’s growing housing needs.
                                                 Metro North RR       242.1 247.5         2.2
While there are places in the current
infrastructure of roads, highways, bridges,      NJ Transit            207   222.6        7.5
and tunnels where expansion may be
possible, it is important that housing           Source: APTA, CHPC
experts look to transit alternatives that will
help satisfy the increasing diversity of         In addition to the transit network that
housing needs that the region’s changing         connects Manhattan with the region, there
demographics and lifestyles demand. A            are also developed transit networks in some
balanced regional housing market requires        of the region’s other centers. For instance,



                                                                                                53
New Jersey Transit operates a light rail          more geographically distant centers such as
subway line in the city of Newark and an          Newburgh, Trenton, and Waterbury,
at-grade light rail line that connects Hudson     Connecticut have the ability to play an
River shore communities. Extensive bus            important role in the creation of a balanced
systems serve other regional centers              housing market if regionally integrated
throughout the area. 2                            transportation policies are undertaken over
                                                  the coming decades. Doing so not only
While transportation policy discussions           increases transportation options, but also
often revolve around connecting the core to       serves as a tool of community development
the periphery, it is important from a             and helps meet regional housing demand.
housing perspective that the need to
connect these regional centers not be             Many regional and sub-regional centers,
neglected. Only 37 percent of the region’s        like South Norwalk, have already
jobs are within the five boroughs and 60          successfully used transit to encourage a
percent of the regional population lives          broad range of development. Others, such
outside of the five boroughs. The sheer           as Montclair, New Jersey, have specifically
geographic size of our region dictates that       used transit nodes to construct new, higher
residents on the fringe are unlikely to be        density,       mixed-use,    mixed-income
commuting into the core. Viable transit           development, also known as Transit
options that can deliver commuters to             Oriented Development (TOD). Growing
regional job centers must continue to be          transit ridership in the region suggests
created.                                          potential for even more TOD.

A continued expansion of reliable, properly            Transit Share of Journey to Work
maintained service would allow developed
                                                                               Totals (000's)
regional centers such as Stamford and
                                                                             1980    1990    2000
White Plains to capitalize on their strong
office and retail markets. In addition, such      Regional Employment       7,914   8,555   9,319
regional centers have the potential to            Transit to Work           2,287   2,272   2,320
facilitate even greater housing development       Market Share              28.8%   26.5%   24.8%
at greater densities in surrounding
localities. The Nassau Hub, for example, is       Source: US Census
being developed with a significant housing
                                                  Planners in the San Francisco metropolitan
component, but county officials expect the
                                                  region have estimated that 50 percent of the
largest portion of new residential
                                                  next one million inhabitants in their region
construction to occur in the nearby area.
                                                  can be accommodated in transit hubs and
                                                  corridors.3 Similar goals are not out of the
Older regional centers such as Paterson and
                                                  question for this region. TODs are in part
Newark, New Jersey, and Bridgeport,
                                                  defined by pedestrian accessible amenities
Connecticut need further investment. Even
                                                  that reduce the amount of vehicular trips.
2 The regional transit network extends more

broadly than presented here. For a more
comprehensive analysis of commuter flow in the
region and trends over time, see Out of Balance   3According to the Association of Bay Area
and visit the websites of the New York            Governments (2002), doing so would preserve
Metropolitan Transportation Council and NJ        79,000 acres of open space and allow 163,000
TRANSIT.                                          households to avoid auto ownership.


54
Increasing the number and success of TODs        Key Regional Initiatives
may not always            require massive
investments in reshaping the built               The housing community does not have a
environment. Little improvements can tip         way to empirically judge transportation
the balance of commuting choice and, in          initiatives based on their contribution (or
turn, make different types of housing            lack thereof) to a balanced regional housing
development viable.         Fast, frequent,      market. There are certain mega-projects,
comfortable service can make public transit      however, that are so compelling in terms of
more appealing.          Seemingly small         creating a balanced regional housing
conveniences can also go a long way. For         market that housing experts can scarcely
example, the introduction of the MTA’s           afford to be unaware of them.
MetroCard fare allowed bulk fares for
unlimited rides and free transfers between       Two of the transportation mega-projects
bus and subway trips for the first time and      currently vying for funding in our region
ridership surged. As a follow up to the          address growth west of the Hudson. This
successful introduction of the MetroCard,        half of the region—which includes New
the MTA and other regional transportation        Jersey, Rockland, Orange, Ulster, and
agencies have begun exploring the use of         Sullivan counties in New York, and Pike
Smart Card technology that would allow all       County in Pennsylvania—is the fastest
transit trips in the region to be accessed       growing part of the region. In fact, 89
with a single card.                              percent of the increase in suburban
                                                 commuters to Manhattan in the 1980s and
Another crucial component to improving           1990s came from west of the Hudson. In
the overall vehicular transportation system      total, 300,000 people commute each
in favor of housing is devising ways to          weekday into Manhattan from New Jersey
manage      demand,      thereby     reducing    and Rockland and Orange counties.
congestion. The Transportation Equity Act
of 2005 seeks to control demand on urban         Managing the supply and demand of
highways through the use of High                 regional highways and transit west of the
Occupancy Toll (HOT) lanes. Such lanes           Hudson River (particularly where there is
are a combination of High Occupancy              not a one-seat ride option to Midtown
Vehicle (HOV) lanes and value pricing.           Manhattan) is crucial to ensuring both the
Using       sophisticated       transportation   health of New York City’s economy and the
technologies such lanes allow non-HOV            continued feasibility of commuting suburbs
vehicles to use HOV lanes for a variable         in Bergen, Rockland, and Orange counties.
price that ensures traffic will continue to      The shape of the housing market—density
flow freely in the lane. Implementing            and affordability—in these suburbs will be
pricing strategies for limited access            directly     tied      to    transportation
highways also has the potential to ease          improvements made there.
congestion and generate revenue for
enhanced transit service.          Congestion    The first project considered here is a new
pricing, similar to what is done in London       passenger rail tunnel under the Hudson.
and Stockholm, could also be considered to       Nearly 250,000, or 83 percent, of those
manage demand for road space in our              commuting from New Jersey use some form
region’s central business districts.




                                                                                          55
of public transportation.4 By 2010, however,   New Jersey and Rockland and Orange
NJ TRANSIT has estimated that its service      Counties.
to Penn Station will be operating at 110
percent capacity.      With the proposed       The second transportation project of note is
development of 26 million square feet of       the Tappan Zee Bridge/I-287 corridor. The
office space in the Hudson Yards, demand       current bridge is an aging structure that
for trans-Hudson crossings will be even        opened for its first crossing in 1955. It
greater.                                       carried 18,000 vehicles during its first year
                                               of operation.      The seven-lane bridge,
Currently, a maximum of 23 trains per hour     originally designed with a 50-year
can travel from New Jersey into Penn           maximum lifespan, today carries 140,000
Station.    NJ TRANSIT and the Port            vehicles a day. At peak hours, it operates at
Authority are proceeding with plans for a      capacity.    Approximately two thousand
trans-Hudson commuter tunnel into              vehicles per hour can use each of four lanes,
Midtown Manhattan. The project, dubbed         and additional demand regularly causes
Trans Hudson Express Tunnel or Access to       backups.
the Region’s Core (ARC), involves not only
the construction of a new commuter tunnel,     Sixty four percent of automobile commuters
but also seeks to increase commuter            using the Tappan Zee bridge come from
capacity throughout Northern New Jersey.       Rockland and Orange country. As the
                                               fringes of Rockland and Orange counties
In addition to alleviating the current         have increasingly been developed with
bottleneck of trains that occurs during peak   auto-friendly land uses, the bridge has
periods between Secaucus and Penn              become a major bottleneck on the regional
Station, and creating more one-seat ride       transportation grid.
options, ARC would construct a new eight-
track passenger station underneath 34th        The Tappan Zee/I-287 corridor project was
Street to absorb the additional rail service   initiated in 2001 and is currently
into Midtown. The new station, which has       undergoing           a         comprehensive
won the support of several prominent New       Environmental Impact Statement.           The
York state elected officials, would have       study is assessing transit options that could
pedestrian connections to Penn Station and     be built in addition to a replacement bridge.
the new Moynihan Station.                      These include bus rapid transit (BRT), light
                                               rail, and commuter rail. Specifically, one
The construction of a second trans-Hudson      option would built bus rapid transit across
rail tunnel feeding into an expanded Penn      the bridge to a Metro-North station on the
Station would more than double existing        New Haven line; two options include
rail capacity from West of the Hudson. In      building commuter rail across the bridge to
addition,    ARC     would    create    new    the Hudson line; and the fourth would
connections at the Secaucus transfer station   build commuter rail the whole way,
that would allow a one-seat ride into Penn     connecting at the Hudson and the New
Station for riders on the Main, Bergen, and    Haven lines.
Pascack Valley lines that serve Northern
                                               It is safe to assume that the final version of
                                               the corridor will include 8 lanes for
                                               vehicular traffic, whether via a span or a
4New Jersey Transit, Access to the Region’s
                                               tunnel, and some form of public
Core, www. Accesstheregionscore.com


56
transportation accommodation, such as            communities in Queens, Nassau, and
commuter rail, light rail, or BRT.               Suffolk counties will have greater options
                                                 when assessing the desirability of zoning
The final outcome will have a major impact       for greater densities around transit stations
on the regional housing environment.             in a new context.
Many of the proposed stops on a commuter
rail line would be ideal for park-and-ride       Financing Transportation Infrastructure
commuters. Such a connection has the
potential to encourage smart growth in the       These and other transportation mega-
area by providing multi-modal choice to          projects will require investments of billions
potential housing consumers. While both          of dollars. Determining how we, as a region,
ARC and the Tappan Zee bridge capacity           are going to pay for future transportation
expansion could spur additional housing,         mega-projects is vital.
both will need to be justified on the basis of
ridership and cost. For either to be feasible,   The interdependence between housing and
there needs to be coordinated land use-          transportation is implicitly recognized by
transportation strategy to insure that cost-     some existing financing mechanisms. For
effective     transportation     investments     example, a portion of New York’s mortgage
support housing and development.                 recording tax surcharge goes to funding the
                                                 MTA and other regional transit authorities.
A third mega-project that has the potential      Originally, the surcharge was assessed to
to greatly enhance the regional housing          fund SONYMA’s mortgage insurance
market and relieve congestion at Penn            operations, but in 1987 the state amended
Station is East Side Access for the Long         the law to divert revenues from 13
Island Railroad (LIRR.) The LIRR is the          downstate counties to the MTA.
largest commuter railroad in the country,
serving approximately 270,000 riders on a        Most regional transportation infrastructure
typical weekday. Currently, about 240,000        is financed through federal and state taxes.
of those riders utilize Penn Station. The        The federal gas tax of $0.184 per gallon goes
East Side Access project would relieve some      into the Federal Highway Trust Fund that
of that burden by utilizing the existing 63rd    was established with the passage of the
Street tunnel to provide a link into Grand       Highway       Revenue      Act    of    1956.
Central Terminal.                                Nationwide, about $0.1544 of that sum is
                                                 used to fund highways and other road
The project would increase tunnel capacity       infrastructure, $0.0286 is used to fund
from the east into Manhattan by 67 percent.      public transportation infrastructure, and the
Current forecasts suggest that nearly            final $0.010 of it is used to assist with the
165,000 riders will utilize the service by       clean up of underground storage tanks.
2020. In addition, access to the East Side of
Manhattan will reduce commuting time for         State gas taxes range considerably from a
a significant portion of commuters by            high of $0.35 in Hawaii to a low of $0.08 in
obviating their crosstown trip.          This    Alaska.5 Even gas taxes within our region
combination of additional capacity and           vary considerably. Connecticut effectively
reduced commuting times will significantly
increase both accessibility and mobility via     5
                                                  State gas taxes noted here include excise, wholesale
the LIRR. Once the LIRR is able to make a        and other state taxes, many of which vary by market
                                                 conditions. They are expressed here in per gallon
stop in Grand Central Station, many
                                                 equivalents. Source: American Petroleum Institute


                                                                                                   57
taxes consumers $0.297 per gallon, New           Housing and Local Government
York $0.303 (although it varies by locality),    Finance
and New Jersey $0.145 per gallon. New
Jersey, because of its low gas tax, finances a
                                                 In 1956, Charles Tiebot published his
greater portion of its transportation
                                                 seminal article on the allocation of public
infrastructure from general revenue and has
                                                 goods, which laid the foundation for the
recently seen its Transportation Trust Fund
                                                 modern theory of local public finance. One
nearly exhausted. In Connecticut, unlike in
                                                 of Tiebot’s central insights was that in the
New York and New Jersey, the state
                                                 American federal system, the purchase or
constitution mandates that gas tax revenues
                                                 rental of a home is much more than a real
be used for highway infrastructure only.
                                                 estate transaction.     It also reflects the
                                                 consumer’s preference for a certain mix of
Another form of transportation finance that
                                                 public services and reveals their reciprocal
seeks to address the negative externalities of
                                                 willingness to pay for those services. In that
elevated peak-period demand is congestion
                                                 regard local taxes serve as the public-sector
charging. Just as airlines manage seasonal
                                                 analog of the market price system, allowing
demand through pricing, or electrical
                                                 consumers to “vote with their feet” for the
utilities set wholesale prices according to
                                                 public services they desire.
demand, localities can do the same to
improve surface transportation flows. After
                                                 That localities, both nationally and in our
London         successfully     implemented
                                                 region, finance most public services through
congestion charging in its core business
                                                 property tax levies is more an accident of
district in 2003, business and transportation
                                                 history than a necessity of public finance.
groups in our own region have called for
                                                 Americans’ familiar property tax descends
similar measures which, by some estimates,
                                                 from medieval England, where most wealth
could capitalize $19 billion for other
                                                 was in the form of land or its produce.7
transportation improvements.6 At the same
                                                 Taxing      property    was      particularly
time, smaller scale programs, such as the
                                                 convenient because property wealth could
addition of High Occupancy Toll (HOT)
                                                 be easily assessed without the cooperation
lanes could help to create flow efficiencies
                                                 of its holder.     For at least a century,
on heavily congested highways throughout
                                                 economists have argued that the property
the region.
                                                 tax is antiquated, as wealth is now held in
                                                 many intangible forms and there are
With the recent rise in fuel prices, many
                                                 reliable ways of monitoring and taxing
politicians and motor vehicle lobby groups
                                                 monetary income and wealth.
have called for reductions or moratoriums
on state and federal gas taxes. That is
                                                 Nevertheless, property taxes remain a
precisely the wrong approach, and
                                                 mainstay of local government finance.
symptomatic of why our nation is
                                                 Nationally, property taxes generate over 70
dangerously dependent on imported oil. It
                                                 percent of local tax revenues. In New Jersey
is important that transportation finance
                                                 and Connecticut nearly all local tax
mechanisms are sustainable and preferably
                                                 revenues come from the property tax.
immune to short-term political pressures.
                                                 7Dennis Hale, “Evolution of the Property Tax: A
6Regional Plan Association, An Exploration of    Study of the Relation Between Public Finance
Motor Vehicle Congestion Pricing in New York,    and Political Theory,” Journal of Politics, Vol. 47,
November 2003.                                   1985.


58
Because of New York City’s diversified tax       considered property taxes the “most
base, New York State’s average is about 56       important voting issue” in New Jersey’s
percent, but it is much higher in suburban       gubernatorial election.9 In a poll conducted
jurisdictions and small municipalities.          by the Center for Survey Research of SUNY
Further, county governments in New Jersey        Stony Brook for the Rauch Foundation,
raise virtually all of their own-source          “taxes” or “property taxes” were cited as
revenues from property taxes, while              the “most serious” problem by respondents
property taxes account for about 42 percent      in the metropolitan area’s suburbs. On
of New York counties’ tax revenues               Long Island, 41 percent cited it as the most
(Connecticut     has   no   county     level     serious problem, as did 26 percent in
government). All told, state, county, and        northern New Jersey and 18 percent in the
local governments in the three states raised     city’s northern suburbs.10
$48.5 billion from property taxes in fiscal
year 2001-02.8                                        Prices and Tax Burdens For A Modest
                                                      Home in the Metropolitan Area, 2004*
Property taxes, whether billed directly to
                                                                       Purchase Monthly Annual
the homeowner or disguised in the tenant’s
                                                 Area                    Price      Taxes Tax Rate
monthly rent bill, are a major component of
housing costs. For example, we estimate                                 (dollars) (dollars) (percent)
that a family buying a modest home in a
typical suburban area of our region would        New York City          625,730      275       0.53
pay, on average, about $600 in property          Long Island            549,282      666       1.45
taxes per month, or about 20 to 25 percent       West-Rock-Orng         405,998      672       1.99
of their monthly carrying costs (mortgage,       New Jersey             424,252      594       1.68
insurance, and taxes).                           Connecticut            381,119      421       1.32

High and escalating property taxes have          *Estimated price and property tax bill for a 30-year
naturally caused anxiety and consternation       old, 3-bedroom, 2-bath house on a 7,260 square foot
                                                 lot, in a typical neighborhood. Figures estimated from
among homeowners throughout the region.
                                                 a sample of 273 published home sales.
Unlike in Maine, Indiana, or most famously,
in California, there is not yet a “taxpayer      Property tax payments finance necessary
revolt” that could lead to precipitous           public services and, in theory, if a number
limitations on taxes and local government        of efficiency conditions are met, they should
budgets. However, in New Jersey there is         not distort housing prices from area to area.
increasing voter and legislative pressure for    However, because those taxes are levied on
a constitutional convention or special           housing, as opposed to other items (auto or
legislative session to address the issue. In     general sales taxes) or general income, they
2004 the legislature mandated the creation       raise the cost of housing relative to other
of a special task force to develop               consumer expenditures. If homes are taxed
recommendations       regarding      such    a   and autos are not, for example, consumers
convention and Governor Corzine is               will purchase relatively less housing and
expected to call a special session in 2006. In   relatively more autos, compared to a
August 2005, a Rasmussen Reports poll
found that 34 percent of likely voters
                                                 9http://www.rasmussenreports.com.
                                                 10Long Island Index. Where Do We Grow From
8US Census Bureau, 2002 Census of                Here? Land Use On Long Island. December, 2004.
Governments. http://www.census.gov.              http://www.longislandindex.org.


                                                                                                    59
situation in which there is no or                professionals will continue to be frustrated
proportional taxation. From that viewpoint       in their efforts to create a balanced housing
alone, property taxes are an issue that          market      and      to   increase    housing
should concern housing advocates.                opportunities.

The effect of property taxes on housing          School Finance and Fiscal Zoning
outcomes goes much deeper, however.
Because most local public services are           While a number of important public
funded with property taxes, jurisdictions        services are provided and funded at the
have a strong incentive to exclude housing       local level, elementary and secondary
types which are anticipated to place a           education dominates the budgets and
greater demand on public services than           politics of local governments. When land
they will pay in taxes. Thus, communities        use     decisions    affecting  residential
adopt large-lot zoning or other techniques       development and its character are made, or
intended to discourage the creation of           siting decisions involving affordable
modestly-priced homes; limit the areas           housing are considered, the impact on local
zoned      for    multi-family     residential   schools is usually among the most
development, and neglect or oppose the           prominent and contentious issues that arise.
creation of subsidized housing.         These
practices are generally referred to as “fiscal   In New York, New Jersey, and Connecticut
zoning,” and over the decades have               collectively, about 37 percent of all local
contributed     to    monolithic     housing     government spending is on public schools;
development, low-density sprawl, and             in New Jersey and Connecticut it is over
economic and racial segregation.                 half. Those budget shares are enough to
                                                 make education the principal concern of
There are many reasons why communities           local government, but other aspects of
may discriminate against multi-family or         public school economics heighten its
affordable housing: an authentic preference      prominence.      Unlike many other local
for low-density environments; an aesthetic       public services, the marginal cost of
preference for attractive, fashionable, and      providing education is fairly constant; each
well-landscaped homes; fear of increased         additional student entails a large and fairly
congestion and a decrease of property            predictable annual expenditure. Moreover,
values; the desire to maintain economically      each time enrollment reaches a threshold
or racially homogenous communities.              that necessitates construction of a new
Some of those reasons are understandable         school,    local   spending      can   jump
while others are offensive. Nevertheless,        dramatically. 11 Local schools also play a
fiscal zoning is the economic foundation of      key role in community life and in the
residential exclusion. Even if communities       aspirations parents hold for their children;
gain an appreciation for the benefits and        voters are more aware of and emotionally
conveniences of denser town centers, learn       involved with their local schools than with
that affordable housing can be attractive        any other public service.
and well-designed, and rise above historic
economic and racial prejudices, the
economic logic of fiscal zoning will remain      11Marginal costs may in fact decline with small
an obstacle to rational development. Unless      increases in enrollment, if there are
                                                 underutilized classrooms or teachers. However,
that economic basis of exclusion is
                                                 as a general rule, marginal costs in public
addressed,      planners     and    housing
                                                 education are relatively constant.


60
                                                  proportion of school expenditures, the
Total spending per pupil in the public            incentive for jurisdictions in our region to
schools of New Jersey, New York, and              engage in fiscal zoning is particularly great.
Connecticut reached $11,948 in the 2002-03        This is surely a contributing factor to the
academic year. The three states rank first,       persistently high levels of segregation in
second and third, respectively, in per-pupil      our region and a source of the notable
spending among the fifty states.12 Real per-      resistance of many communities to multi-
pupil spending in the region increased            family housing, which is perceived to
rapidly during the 1980s but slowed relative      generate more school enrollments per tax
to the national trend during the 1990s;           dollar than single-family homes.
nevertheless, by 2002-03 it was about 5
percent greater in real terms than it was ten     Although the figure differs widely from
years earlier. Combined with increasing           jurisdiction to jurisdiction, each additional
enrollments, total public school spending         school-age child in the three states imposes
had increased by about 17 percent, adjusted       a school funding obligation on the locality
for inflation. The increase in real spending      of about $6,000 per year. When the cost of
has been fastest in New Jersey and slowest        other public services are also considered, it
in New York.                                      is easy to see that most new housing
                                                  development does not pay for itself in fiscal
When public school systems were first             terms if even one new enrollment is
established in the late 19th century, they        generated per unit.           If new housing
were funded almost entirely by municipal          generates more than one new enrollment,
governments. The local funding share then         the fiscal trade-off is significantly negative.
declined through most of the 20th century,
with the federal and state governments            Census data indicate that there are about
picking up ever greater shares. The federal       0.93 children per single-family home in our
government’s share peaked in 1979-80,             region, excluding New York City.
however, and has since declined. Over the         However, new home buyers are likely to
past 25 years state government’s share of         have more school-age children than the
public school funding has inched upwards          general population of homeowners, which
while the local share has been essentially        includes many “empty-nester” families.
stable.   In all three states in our region       Recent homebuyer families in suburban
(four, if Pennsylvania is included), local        areas have an average of 1.09 children and
governments pay a significantly higher            many of them are still in their child-bearing
share of public school costs than they do         years. Among all homeowner families in
nationally, although in New York, state           which the household head is between 30
funding has grown much faster than local          and 40 years old, the average number of
funding over the past ten years.                  children is 1.51.13

With New Jersey, New York, and
Connecticut the national leaders in per-
pupil education spending and all requiring
local governments to fund a high


122002 Census of Governments, Vol. 4,
Government Finances. Public Education Finances,   13CHPC and RPA calculations from Census
2002.                                             2000 microdata.


                                                                                              61
                                                Overall, however, the perception that new
Average Number of Children by Housing
                                                housing development creates fiscal strains
Type and Tenure, New York Metropolitan
                                                on a community that can necessitate higher
                 Area
                                                property taxes for all residents is not
                                                mistaken. There are then, two approaches
Suburban Housing Type Number of Children
                                                that can mitigate the fiscal bias against new
                                                housing development.            One is to
All Owners                     0.933
                                                compensate communities for the fiscal costs
Head Age 31-40                 1.508
                                                new housing imposes. The second is to
Recent Owners                  1.094            break the link entirely between local
                                                services, especially public schools, and local
All Renters                    0.734            taxes.
Head Age 31-40                 1.110
Recent Renters                 0.770            The first strategy has been advocated by
   1-bedroom                   0.314            housing experts for many years with little
   2-bedroom                   0.859            success.14    A compensatory program is
   3 or more                   1.587            currently under most active consideration
                                                in Massachusetts. In 2004, the state enacted
Source: 2000 Census                             the Smart Growth Zoning and Housing
                                                Production Act, known as Chapter 40R.
                                                That     law     provides     payments      to
While it appears to be true that most prime-    communities that adopt “smart growth
age homeowning families will not pay local      zoning districts” based on the number of
taxes commensurate with the local               projected new units, and additional
expenditures they generate, that may not be     payments based upon the number actually
the case for multi-family housing. Recent       built. As initially drafted, the law would
movers in suburban rental housing in our        also have provided offsets to the
region have, on average, 0.73 children per      jurisdiction’s school costs but that provision
household and 30 to 40 year-old renters         was not included in the final version of the
have 1.11 children per household. Those         law, which instead required a study of the
figures vary, however, with the size of the     impact of housing development on school
rental apartment. Recent movers into 1-         costs. That study was completed in mid-
bedroom apartments have, on average,            2005 by the Center for Urban and Regional
significantly fewer children than movers        Policy at Northeastern University,15 and the
into 2- or 3-bedroom and larger apartments.     compensatory program was reintroduced in
Many suburban renters moving into small         the legislature as “Chapter 40S.”
apartments are singles and young couples
who place very few demands on local             The CURP study found that new single-
public services and generate large “tax         family homes would have negative fiscal
surpluses.” It appears, then, that the fiscal   consequences for 238 of Massachusetts’ 351
effects of multi-family housing depend on
the mix of units in the development. With       14 Edward J. Logue, “President’s Statement.”
the proper mix of unit sizes, rental housing    New York State Urban Development
can actually help improve the local fiscal      Corporation, Annual Report 1970.
balance.                                        15 Center for Urban and Regional Policy,

                                                Northeastern University. Chapter 40R School
                                                Cost Analysis and Proposed Smart Growth School
                                                Cost Insurance Supplement. May, 2005.


62
communities with independent school               sales tax, a statewide property tax, local
systems. In the other 113 communities             non-residential property taxes, a real estate
school spending is no higher than the state’s     transfer tax and certain excise taxes. On the
“foundation level” and so state payments          expenditure side, a “foundation grant”
would automatically increase to fully cover       system was adopted, under which low-
the increase in enrollments.              Fewer   spending districts would be brought up to a
communities would be adversely impacted           minimum per-pupil spending level while
by multi-family housing, because such             high-spending districts could supplement
development       generates      fewer      new   their state grants with local residential
enrollments.      The proposed legislation        property taxes, but only within state-
would offer school expense compensation           specified limits. An analysis of the new
only for housing built within Smart Growth        system released in 2003 found that local
Zoning Districts, and would cost about $35        property taxes for the average homeowner
million annually by 2014, less than 1 percent     had declined by about $2,000 annually; that
of the state’s education aid to localities.       local school districts had lost virtually all
                                                  control over the amount of money spent on
A second strategy is to pursue more               their schools; and that school funding had
sweeping educational finance reform,              become more equitable.16 Whatever their
leveraging voter dissatisfaction with high        effect on public education, Michigan’s
property taxes or state constitutional            localities no longer have a school finance
requirements for educational equity.              incentive to oppose affordable housing,
                                                  insofar as all property taxes are paid into a
Michigan is the most prominent example of         general state fund. In fact, the study also
reform spurred by voter demands for               found that the new system rewards districts
property tax relief. A number of other            that have growing enrollments and
states, including New Jersey, are more            penalized those with flat or declining school
recently considering reform for similar           enrollments.
reasons. Michigan’s case is notable because
reform came without direct pressure from          In most states, however, the pressure for
the courts and in a state with intense central    school finance reform arises from concern
city-suburban rivalries. In the early 1990’s      about educational equity and is mandated
Michigan’s high and rising property taxes         or otherwise forced by the courts.
(on average, it had the fifth highest level of    Litigation based on state constitutional
property taxes in the nation) made them a         requirements has been successful or is
prominent issue in local and statewide            pending in at least 37 states.17 The litigation
elections. In 1993, after several of Governor     usually argues that the state’s constitution
John Engler’s fiscal reform proposals were        requires equity in educational resources, or
rejected    by    voters,    the    legislature   of educational outcomes, regardless of a
dramatically forced the issue by banning all      community’s property wealth. Litigation
use of local property taxes to fund public        along these lines has been pursued
schools. To fill a potential $6 billion gap in
public school funding, the state’s voters         16 David Arsen and David N. Plank, Michigan

subsequently approved a ballot initiative         School Finance Under Proposal A: State Control,
known as “Proposal A.”                            Local Consequences. The Education Policy
                                                  Center, Michigan State University, 2003.
                                                  17 The US Supreme Court’s ruling in San Antonio
Proposal A replaced local property taxes
                                                  School District v. Rodriguez, 1973, effectively
with a 50 percent increase in Michigan’s
                                                  ended such litigation at the federal level.


                                                                                              63
successfully in states as diverse as               considerations from local land use decision
California, West Virginia, and Connecticut.        making.

One of the earliest and most significant           From Texas to Maine, legislatures and
school finance cases was California’s Serrano      school districts are grappling with the
v. Priest in 1971. Originally decided on the       implications of school finance litigation. In
basis of the U.S. Constitution’s equal             our own region, Connecticut and New
protection clause, it was later upheld on          Jersey have both been influenced by
state constitutional grounds, with California      successful equalization lawsuits while New
courts ruling that an unequal distribution of      York is resisting court rulings that could
educational resources based solely on              shatter its present school finance system. In
differences in local property wealth is            New Jersey and New York especially,
unconstitutional.     A legislative remedy         vigorous participation by planners and
adopted under Governor Ronald Reagan               housing experts can help to ensure that
was soon complicated by the voters’                reforms adopted to minimize educational
adoption of Proposition 13 in 1978, which          inequities also work to reduce incentives for
strictly limited property tax rates. The           fiscal zoning.
combined effect of Serrano and Proposition
13 was to slash the share of public school         School Finance in Connecticut
funding provided by property taxes and to
give the state almost total control over local     Connecticut’s Horton v. Meskill in 1977 was
school spending levels.                            one of the earliest and most definitive
                                                   school finance equalization cases.      The
The distinctive feature of California’s            Connecticut Supreme Court held that while
system is its “revenue limits.” Localities         the state’s constitution did not require
raise property tax revenues within the             complete educational spending equality
constraints set by Proposition 13, and the         from district to district, a system in which
state makes up the difference between those        spending varied according to the wealth of
collections and the nearly uniform per-            the district violated its equal protection
student revenue limits. The system has             provisions.
substantially equalized spending between
poor and affluent districts, but, many critics      Connecticut’s school districts are roughly
argue, has equalized them at too low a             coterminous      with    its    169     town
level.18 The state’s spending on elementary        governments. Prior to Horton, the towns
and secondary education, on a cost-of-living       funded virtually all school operations
adjusted per-student basis, has sunk toward        through local property taxes, with some
the bottom of the national ranking over the        state aid. After the Horton decision, the
past 25 years, as has its educational              state has sought to preserve local spending
achievement.       While few educational           autonomy, initially by adopting a
finance experts suggest that California’s          guaranteed tax base (GTB) approach. In a
system is a model to be emulated, it has           GTB approach, localities with small per-
entirely     removed       school    finance       pupil property tax bases are compensated
                                                   by the state for the amounts they would
                                                   have collected at their chosen tax rate had
18Jon Sonstelie, Eric Brunner and Kenneth          their tax base attained a certain minimum
Ardon, For Better or Worse? School Finance         standard.     One advantage of a GTB
Reform in California, Public Policy Institute of
                                                   approach is that, with each locality having a
California, 2000.


64
guaranteed tax base, communities can             Connecticut’s ECS system of school finance
choose to set their tax rates higher or lower,   appears to enjoy broad support from elected
depending on local preferences for school        officials and voters, and from an
quality. Connecticut set its guaranteed base     educational perspective has maintained the
at a high level, thereby insuring that almost    state’s relatively high level of per-pupil
every community got some equalizing aid          spending. Although a high proportion of
and that school spending levels would be         local property taxes goes towards schools,
generous.                                        property tax rates are among the lowest in
                                                 the region. The state’s equalization formula
The GTB system was in place until 1989-90,       mitigates, but does not entirely eliminate,
when the deep regional recession plunged         the incentives for fiscal zoning.        The
the state into fiscal crisis. The cost and       authority districts retain to spend above the
complexity of the system worked against it,      foundation level gives communities reason
and it was replaced with the current             to resist dilution of the tax base, while the
foundation grant system. Connecticut also        state’s formula for determining community
adopted a statewide income tax in 1991, in       property wealth, which is based on a per-
part to pay for the school equalization          capita rather than a per-pupil calculation,
program.                                         creates a bias against family housing.

Under the current system, known as               School Finance in New Jersey
Education Cost Sharing (ECS), each district
receives a per-pupil grant from the state        New Jersey’s school equity litigation has
that is the difference between the               been long and complicated. In a landmark
legislatively-determined “foundation level”      1973 case, Robinson v. Cahill, the state’s
of spending and the amount that can be           Supreme Court ruled that a heavy reliance
generated at a standardized tax rate given       on the local property tax to fund education
the town’s wealth. About 40 percent of the       is unconstitutional.          A subsequent
statewide foundation level of spending is        legislative impasse over funding an
funded through these grants, with the            alternative system led to a court shut-down
wealthiest towns receiving a negligible          of the state’s public schools during 1976 and
amount. The state does not cap the amount        to the enactment of a state income tax. A
localities can spend above the foundation        subsequent case, Abbott v. Burke, challenged
level, so wealthier districts can and do set     the new system and led to a Supreme Court
their tax rates above what is necessary to       ruling that the state must ensure urban
generate the foundation level of spending.       school district children an education that
Because the system preserves local               enables them to compete with their
discretion over spending, it has not             suburban counterparts. The Abbot v. Burke
eliminated spending differences entirely,        litigation has dominated New Jersey’s
but they are significantly less than they        educational funding decisions for almost a
were prior to Horton.19                          quarter century, with the most recent court
                                                 mandate, known as Abbott X, issued in 2004.

                                                 The Abbot v. Burke case was filed on behalf
                                                 of children in the 28 poorest school districts
19Legislative Program Review and                 in the state. The initial Supreme Court
Investigations Committee, Connecticut General    ruling in 1990, Abbott I, required the state to
Assembly. Connecticut’s Public School Finance
                                                 provide children in those districts with a
System, Annual Report 2001.


                                                                                             65
“thorough and efficient education,” as is           Jersey has a state income tax that was
stated in New Jersey’s constitution, and as a       created primarily to fund education, it has
practical matter, to equalize funding               the lowest and least progressive rate of any
between those districts and the wealthiest          of the mid-Atlantic states.
districts. That requirement, focusing on the
spending of the poorest and wealthiest              Like Connecticut’s system, New Jersey’s
districts, has steered the state’s school           method of financing public education
finance decisions ever since.                       mitigates the incentive for fiscal zoning but
                                                    does not eliminate it. Districts can and do
The current aid formula is governed by the          spend in excess of the mandatory amount,
state’s     Comprehensive           Educational     and those in which the voters wish to spend
Improvement and Financing Act of 1996.              more have cause to limit housing
Under the CEIFA, a district’s mandatory             development that may dilute their per-pupil
per-pupil expenditures are based on what            property tax base. Moreover, New Jersey’s
the state determines is necessary to provide        system places most of the funding burden
students a “thorough and efficient”                 on local property taxes, making housing in
education. The amount of state aid a                the state relatively more expensive.
district receives is the difference between
the amount it is required to spend and the          School Finance in New York
amount it is required to raise through
property taxes. That amount is based on its         New York has not had a school equalization
property wealth and income levels. A                ruling analogous to Horton or Abbott.
district can spend more that the “T & E”            However, recent court rulings in the case of
level, but only if the district’s voters directly   Campaign for Fiscal Equity, Inc. v. State of New
approve the expenditures at the ballot box.         York have the potential to destabilize the
                                                    state’s education budget and force the
Despite the effect that the Abbott litigation       legislature to devise a new school finance
has had on the educational resources                system.
available to disadvantaged urban children,
it has not dramatically altered New Jersey’s        The current system in New York allows
heavy reliance on local property taxes for          local districts to spend amounts as they see
funding public school systems. In 2002-03,          fit on local schools, without state-mandated
local sources accounted for 53 percent of the       maximum or minimum amounts. Those
state’s public school system revenue,               amounts are then supplemented through
compared to a national average of 43                over 40 separate state aid programs. Basic
percent. 20 A Federal Reserve Bank of New           Operating Aid, which accounts for about
York study found that from 1977 through             half of all state aid to local school districts,
1997, state aid financed only 25 percent of         is based on average daily attendance with
increased K-12 spending, compared to 70             an equalization adjustment based on the
percent in New York.21 Although New                 district’s real property wealth and the
                                                    average gross income of residents. The
                                                    formula is not dependent on the level of
20 US Census Bureau. Annual Survey of Local
                                                    local effort, although there is a special
Government Finances.                                category of aid for districts with
21 Andrew F. Haughwout, “Fiscal Policy in New
                                                    exceptionally high tax rates.
York and New Jersey: 1977-97.” Current Issues in
Economics and Finance, Federal Reserve Bank of
New York.


66
Although the state share of total school
funding has been increasing since the early       The CFE case provides an opportunity to
1980s, the high degree of local autonomy          reform both the state’s educational finance
and the state’s wide wealth disparities           system and its tax structure. Although
create strong incentives for fiscal zoning.       Governor Pataki has delivered increasing
The Education Trust ranks New York as the         state aid to public education, he has not
state with the largest funding gap between        indicated a willingness to undertake
the highest and lowest poverty districts.22       fundamental school finance reform during
                                                  his final year in office. It should be a high
The Campaign for Fiscal Equity case is            priority    of   housing      and   planning
unusual in that it is not based on a              professionals to make school finance reform
constitutional notion of equal protection;        a central issue of the state’s 2006
rather, the plaintiffs argued that the state’s    gubernatorial election, with the goal of
school finance system did not provide New         removing the incentives for fiscal zoning
York City’s school children with a                and lightening housing’s burden for
constitutionally-required    “sound     basic     financing education.
education.” A series of trials and appeals
relating to the proper interpretation of that
phrase led, in June 2003, to a state Court of     Transportation and Education
Appeals ruling that the funding system            Finance Strategies to Support
must be reformed to ensure that every
school in New York City has sufficient
                                                  Housing Balance
resources to provide its students with a
                                                  The areas of public policy discussed in this
meaningful education through the high
                                                  section—transportation and education—are
school level. The court ordered the state to
                                                  but two of the ways the public sector
implement a three-part remedy by July 30,
                                                  supports, or obstructs, the development of
2004. The state missed that deadline and,
                                                  balanced housing. Others that need to be
after receiving a report from a special panel
                                                  evaluated in light of their housing impacts
of referees, the court ordered the state to
                                                  include environmental policies, especially
provide New York City School Districts
                                                  relating to water supply and sewage
with an additional $18.25 billion in
                                                  treatment facilities, tax policy, and public
operating funding over the four years
                                                  safety. However, we believe that these two
beginning July 2005. The state is appealing
                                                  areas are of particular importance at this
that ruling.
                                                  point in time, because in these areas state
                                                  and regional officials are faced with critical
Although the Court’s order relates only to
                                                  policy decisions that will affect the housing
funding for New York City’s schools, few
                                                  environment for decades to come.
observers believe that the state could
actually provide such sums to the city
                                                  It is especially critical that housing experts
without addressing inequities elsewhere. It
                                                  and advocates involve themselves in the
is the stated goal of the Campaign for Fiscal
                                                  public discourse on these topics, to ensure
Equity to bring about statewide school
                                                  that the housing implications of decisions
finance reform that will ensure a “sound
                                                  are fully recognized. If that is done it can
basic education” for all students in the state.
                                                  not only improve housing outcomes in our
                                                  region, it can contribute to better
22Education Trust. The Funding Gap, 2004.         transportation and educational outcomes as
http://www2.edtrust.org/


                                                                                             67
well. Housing demand and transportation          regional centers and far-flung residential
demand, for example, are simultaneously          suburbs.
determined by market forces and public
policies, and experts in each area need to be    In certain cases, light rail lines can use
“at the table” when critical decisions on        existing rail track in a cost efficient manner.
either are being made. In the educational        In other areas, light rail lines are being
arena, that interdependence of policy            planned without the utilization of existing
decisions is even more true: the difficult       infrastructure. The costs of these lines can
problem of educational equity is, at root, a     be much higher and more difficult to justify
matter of economically and racially              if estimated ridership is low due to lower
segregated residential patterns.                 density residential development.

From the discussions presented above, a          Bus Rapid Transit (BRT) lines can provide a
number of transportation and educational         cost-efficient means of connecting regional
policy strategies that are conducive to          centers to residential suburbs built at a
balanced housing development arise.              variety of densities. BRT service is very
                                                 similar to light rail—service stations are
1. Create intra-suburban and reverse             connected to the line and riders pay before
commute transit connections.                     boarding—in which vehicles travel on a
After several decades of suburban job            fixed guideway so they are not caught in
growth, 7 of every 12 work trips made in         traffic. Besides their low cost compared to
our region are from one suburban location        light rail, they have the flexibility of buses,
to another. Currently, getting to suburban       which fixed light rail lines do not.
job centers is much easier via automobile on
congested highways and arterials.          To    Creating intra-suburban transit connections
facilitate increased transit usage in our        has the potential to alleviate congestion on
region and simultaneously create new             the region’s highways and partially
housing opportunities, many of these             facilitate greater amounts of Transit
locations need to be better connected to the     Oriented Development (TOD). It also can
regional transit grid. It must be possible for   serve to reduce peak flow inefficiencies that
employees      to    have    fast,   reliable,   currently occur on the commuter rail lines
comfortable service.                             that flow into and out of Manhattan.
                                                 Additionally,     intra-suburban      service
There are many potential ways to create          particularly assists households with low
these types of connections—some better           and moderate incomes, leading to greater
than others. There are existing tracks and       accessibility and mobility. TOD will not,
right of ways that could be converted from       however, spontaneously arise near transit
commercial freight to commuter use.              nodes.     For mixed use, higher density
Expanded capacity on existing lines, such as     development to occur near transit, affected
a third track in LIRR’s main line, would         communities need to be directly involved
better facilitate both reverse commutes and      from the outset, and strong commitment
intra-island travel.     Beyond these, new       and planning is needed from local
commuter lines generally require expensive       jurisdictions.
right-of-way corridors, which usually mean
costly spans and tunnels. While there may
be ways to increase commuter rail in our
region, it is a limited option for connecting


68
2. Select Transit with Associated Land Use
Potential.                                       As much as is possible, housing
In    the    current    planning     climate,    professionals and planners should seek to
transportation infrastructure is rarely built    ensure that transportation improvements
on a speculative basis. Yet it is important      are funded through transportation-related
for housing experts to understand that not       sources or general state revenue.
all transportation proposals are created
with equal ability to spur new growth. As        There     are     significant   sources    of
housing     experts    and    transportation     transportation-related revenue that remain
planners decide which projects merit their       underutilized. Most obvious are taxes on
attention, it is important that they assess      gasoline. New York and Connecticut have
each project with an eye toward the              among the highest taxes on gasoline in the
potential for creating a balanced regional       country, but even then they are only about
housing market.                                  $.30 or $.40 per gallon. New Jersey, on the
                                                 other hand, has among the lowest state
An example of this can be found when             taxes on gasoline. Higher gasoline taxes can
assessing the transit future of commuters        raise substantial revenues for transportation
from west of the Hudson River, specifically      improvements, encourage conservation,
those from Rockland and Orange Counties.         reduce roadway congestion, and reduce
One of the current proposals that is being       dependence on foreign energy.              At
discussed involves a transit line that will      minimum, New Jersey’s tax rate should be
run roughly parallel to I-287, bisecting         raised closer to the regional average.
Rockland County from east to west. Much
of the I-287 corridor in Rockland County is      Congestion pricing has the potential to
already developed around auto uses. While        generate significant new revenue streams
a new transit connection would make park         while at the same time encouraging greater
and ride options more attractive for             use of the region’s existing public
residents, it would be much more difficult       transportation      infrastructure.         In
to create the density that would allow           Manhattan, congestion charging would
housing to capitalizing on the line’s value.     reduce the number of annual vehicle miles
                                                 that are lost to congestion. In other parts of
3. Finance Transit Adequately and                the region, congestion pricing in the form of
Appropriately.                                   High Occupancy Toll lanes and other
It is critical to the further development of a   demand pricing schemes has the potential
balanced regional housing stock that             to create greater efficiency on regional
transportation improvements, especially          highways and throughways. It is important
public      transportation,     are   financed   that these revenue streams be dedicated to
adequately. Several significant regional         making transit options more attractive and
transportation projects are in planning or       viable in places that are currently
development that could significantly             underserved.
enhance opportunities for transit oriented
housing development in coming decades.           4. Devise Fiscally-Neutral Housing
The vagaries of transit funding, and in          Models.
particular the financial difficulties of the     When evaluating proposals for new
MTA that came to light in late 2004, could       housing development, municipalities are
jeopardize those projects and the associated     necessarily concerned with their impacts on
housing that could be built.                     local budgets. Especially scrutinized are the


                                                                                            69
potential revenue enhancements the               collections can easily entail a “hidden
developments will produce and the                subsidy” of several thousand dollars per
demands on local school budgets they will        unit per year.      If communities are
place. Housing developers, especially those      compensated for that subsidy they will be
engaged in affordable housing creation,          more welcoming of affordable housing
should exploit the difference in fiscal          projects.
impacts of different types of dwelling units
to make them more appealing to local             Compensation can be provided in several
officials, planning boards, and voters.          ways. Communities can be awarded the
                                                 present value of the fiscal subsidy up-front
The data indicate that certain types of multi-   from a statewide fund established for that
family housing generate fewer school             purpose. The present value of a $3,000 per
enrollments than does new single-family          year fiscal subsidy might range from
housing. A rental development with an            $30,000 to $60,000 depending on the
equal proportion of 1-, 2- and 3-bedroom         discount rate applied.       Although that
units will generate, for example, about as       strategy would be front-loaded and initially
many school enrollments as a single-family       expensive from the housing viewpoint, it
subdivision with the same number of              may have great appeal to local officials and
dwelling units.       If the distribution of     taxpayers facing large capital costs
dwelling unit sizes is skewed towards            associated with school expansions or other
smaller units, the rental development can        public facilities.
generate significantly fewer enrollments
than     the    equivalent       single-family   Alternatively, communities could be
subdivison. Although the fiscal “break-          compensated for the fiscal subsidy out of
even point” will differ depending on the         state educational budgets.        Each state
relative value of the units and a                provides aid to local districts under
community’s property tax rates, rental or        formulas for special education, school
condominium       developments       can   be    transportation, school facility construction
configured to be fiscally neutral or even to     and the like.       Offsetting state aid to
create a positive fiscal impact for the host     communities that accept affordable housing
community.                                       projects could easily be written into school
                                                 finance laws. This is in fact the approach
This model can be extended to multi-family       taken in the Massachusetts bill.        It is
developments that include both affordable        important to recognize that such measures
and market-rate dwelling units, or mixed         would not necessarily increase the
residential and commercial space.                aggregate amount of state aid going to
                                                 education or the total tax bill for state
5. Compensate Communities for Fiscal             residents; it is merely a way of eliminating
Impacts.                                         beggar-thy-neighbor incentives in the
As the Massachusetts legislation recognizes,     existing school finance systems. 23
communities will be resistant to siting
affordable housing if it is expected to have
negative fiscal consequences, particularly
with respect to school district finances. An
affordable housing development that              23
                                                   “Fundamental Property Tax Reform: Land Use
generates proportionately more school            Implications of New Jersey’s Tax Debate.” Regional
enrollments than it does property tax            Plan Association. October 2005. <
                                                 http://www.rpa.org>.


70
                                                areas – and higher taxes where growth is
6. Break the Link Between Education             discouraged. On the funding side
Finance and Local Property Taxes.               Michigan’s system is attractive; property
The ultimate goal of housing and planning       taxes were significantly lowered and the
professionals in the realm of local public      vast majority of them now go into a
finance should be to develop alternatives to    statewide educational fund, a system which
property taxes and other local funding. The     almost entirely eliminates the logic of local
traditional reliance on local sources for       fiscal zoning. GTB systems for disbursing
funding schools is the major incentive for      aid, such as those used by Vermont and
fiscal zoning and a root cause of residential   formerly by Connecticut, permit some local
segregation by income and race.                 autonomy in school funding without giving
                                                communities fiscal cause for resisting
Fundamental school reform has been              affordable or family housing. In any case,
undertaken elsewhere, notably in Michigan,      the interest of housing equity and planning
in the absence of direct pressure from the      efficiency is not in raising more or less
courts. In most states, including New Jersey    money for public education, but in ensuring
and Connecticut, it has been undertaken as      that whatever system is adopted does not
a result of court orders. In New York,          distort housing and land use decisions.
where the incentives for fiscal zoning are
greatest, the CFE case and resulting court
orders provide an opportunity to reform the
state’s     antiquated,      arcane,    and
counterproductive system of school finance.
Reform of the state’s system may come
suddenly, especially as a new Governor
takes office in 2007, and housing and
planning professionals should not allow
themselves to be caught on the sidelines
when it does.

Fundamental reform is needed in New
Jersey’s and Connecticut’s school finance
systems as well. Their systems mitigate, but
far from eliminate, the incentives for fiscal
zoning. Moreover, their systems continue
to rely on property taxes as the primary
source of school funding, with a consequent
effect on housing costs in the states.

The optimal system from a housing
viewpoint      would    probably    be   a
combination of statewide taxes for funding
coupled with a guaranteed tax-based
system     for    disbursement.    Another
possibility is to vary taxes according to
planning areas, with lower taxes where
growth is encouraged – such as older urban


                                                                                          71
III.   Housing                      Finance         ($69 billion) and the exclusion of state and
                                                    local property taxes ($17 billion). Tax-
Challenges                                          exempt mortgage subsidy bonds and the tax
                                                    credit for low-income housing add another
                                                    $5 billion in foregone federal tax revenues.
                                                    The subsidy programs administered by the
The usual portrayal of the region’s housing
                                                    Department of Housing and Urban
as being in a state of crisis glosses over the
                                                    Development cost the federal government
complex interaction between public and
                                                    $43 billion in direct spending in 2005, a 43
private housing investments as well as the
                                                    percent increase from 1990 after adjusting
demographic       characteristics    of    our
                                                    for inflation.
population. Most of the region’s 8.6 million
housing units,1 including those that are
                                                    In 2002, the most recent survey year for the
“affordable” by federal guidelines, are in
                                                    Census of Governments, the combined state
fact privately financed and do not receive
                                                    and local governments of New York, New
direct government subsidy.          However,
                                                    Jersey, and Connecticut spent almost $5.2
except for public housing that is almost
                                                    billion on housing and community
completely subsidized and luxury single-
                                                    development-related expenditures: New
family     homes,       cooperatives,     and
                                                    York spent $3.8 billion; New Jersey $940
condominiums that are fully market rate,
                                                    million; and Connecticut $440 million. In all
the vast middle segment of the housing
                                                    cases, the vast majority of housing resources
market requires some degree of assistance.
                                                    were federal with the state and municipal
How the region provides affordable and
                                                    governments directing and overseeing their
diverse housing options for the current
                                                    use.
population of 22 million while preparing for
the 2 million additional residents expected
                                                    Tax-exempt single-family and multifamily
by 2020 will require an unprecedented level
                                                    housing bonds are the primary source of
of housing investment from both the public
                                                    funding for the ownership and rental
and private sectors.
                                                    programs of the state housing finance
                                                    agencies. In the last two decades, the states
The federal government continues to be the
                                                    have also become the primary conduit for
primary source for housing subsidy. In
                                                    the production of rental housing using the
2005, the housing-related expenditures and
                                                    federal Low Income Housing Tax Credit
budget outlays of the federal government
                                                    and HOME programs. Since they rely so
surpassed $172 billion.2 The bulwark of
                                                    heavily on these federal housing resources,
federal support for housing is the favorable
                                                    the role of the states and their HFAs have
tax    treatment     of    homeownership,
                                                    been to channel the resources and, to the
particularly the mortgage interest deduction
                                                    extent allowed by the complex federal
                                                    regulations governing each program, decide
1 At the time of this writing, US Census Bureau     how and where to invest the federal funds.
estimates of housing units at the county level
were available through July 1, 2004. Population     In addition to direct subsidies and tax
Division, U.S. Census Bureau, “Table 4: Annual      expenditures for housing, federal policies
Estimates of Housing Units for Counties: April      provide vital support for the private
1, 2000 to July 1, 2004” Released: July 21, 2005.   housing market. Federal regulation of the
2 This figure does not include the cost of
                                                    banking    industry,   particularly    the
housing programs administered by the
                                                    enactment of the Home Mortgage
departments of Agriculture and Defense.


72
Disclosure Act and the Community               dedicated revenues from a new document
Reinvestment Act in the 1970s, have            recording fee. In August 2005, New Jersey
significantly reduced barriers to mortgage     announced a Special Needs Housing Trust
lending in low-income neighborhoods and        Fund that will be supported by existing
for minority families. The role of the         unused bond capacity to create 10,000 units
government-sponsored enterprises in the        over 10 years.
secondary mortgage market has also been
essential to opening up the residential        In addition to these statewide funds, more
finance market to securitization.              localities are funding local solutions to their
                                               pressing housing problems. Between 1999
Despite the federal resources devoted to       and 2005, New York City spent an average
assisting low-income families and the          $600 million per year to supplement federal
regulatory push to boost private housing       and state resources for its primary housing
investment, almost 30 percent of the           and homeless services agencies. Suffolk
households in our region paid more than 35     County has recently appropriated $15
percent of their income on housing,            million for infrastructure improvements to
according to the 2000 Census. This simple      stimulate workforce housing developments.
measure of the state of the region’s housing
excludes other alarming aspects such as the    To alleviate the existing housing imbalance
large number of families that live in          and to increase its competitive advantage,
overcrowded or physically dilapidated          regional     policymakers     and    housing
homes, the limited residential options         advocates will need to act in concert to
available, increasing commuting times, and     defend and expand the federal subsidies
the increasing need for renters and owners     that are so crucial to the provision of low-
to hold more than one job.                     income housing. Beyond this important
                                               first step, additional sources of state and
In response to reduced federal support for     local housing subsidies must be established
heavily-subsidized housing and recognizing     to further stimulate private investments.
the challenges facing our mature, high-cost    These       coordinated      efforts   could
area, state and local governments have         significantly facilitate the financing for a
begun to increase their funding for housing    balanced housing market.
development and preservation. The state
HFAs have raised modest internal
resources, which have been used as another
layer of subsidy for low-income projects
                                               Regional Housing and                      the
that use federal programs. On a larger         Private Mortgage Market
scale, state housing trust funds have
become an increasingly popular response to     Although the overwhelming majority of the
addressing housing needs. In 1985, New         region’s households do not receive direct
York State created an Affordable Housing       subsidy, federal policies provide crucial
Corporation and a Housing Trust Fund           support for privately-financed housing.
supported with annual appropriations that      Government       mortgage        insurance
provide subsidy grants for ownership and       guarantees provided by the Federal
rental opportunities for moderate-income       Housing Administration (FHA) and the
households. In 2005, Connecticut created a     Department of Veterans Affairs, as well as
multi-purpose Housing Trust that will be       the mortgage interest tax deduction, are
funded by general obligation bonds and by      well-known housing support policies.



                                                                                           73
Beyond these obvious efforts, the private         The size of the GSEs portfolio, the
housing    finance   system,   and     the        perception of a government guarantee for
government’s broad support of it, has             their securities, and access to a federal line
continued to evolve and the net effect has        of credit have prompted some competitors
made the financing of homes accessible to         and federal regulators to call for their
more segments of the population than ever         reform. These efforts have intensified since
before.                                           both Freddie Mac and Fannie Mae disclosed
                                                  accounting irregularities meant to spread
The evolution of the housing finance              earnings and avoid market volatility.
system, including the shift from heavily-
regulated thrift institutions to less regulated   In 2005, then Federal Reserve Chairman
mortgage bankers and brokers, the                 Alan Greenspan urged policymakers to
development of a secondary mortgage               limit the mortgage portfolio of the GSEs,
market, and the securitization of mortgages,      pointing to an increased systemic risk
has spurred efficiencies that better integrate    should the GSEs experience financial strain.
it into worldwide capital markets.                However, some lawmakers like New York’s
Although homebuyers may not recognize             Senator Charles Schumer, a member of the
the profound impact of this restructuring         Senate Banking Committee, have argued
and the government’s role in it, they benefit     that portfolio limits may harm the ability of
from the greater availability of mortgage         the GSEs to provide considerable liquidity
funds on more favorable terms than was            to the mortgage market and thereby
available to earlier generations.                 compromise their affordable housing
                                                  mission.
The major force in the residential mortgage
market in the past two decades has been the       Consensus opinion seems to have formed
government-sponsored entities Fannie Mae          around the need for a more powerful
and Freddie Mac. Since Fannie Mae’s               federal regulator than the current Office of
creation in the 1930s, and Freddie Mac’s in       Federal Housing Enterprise Oversight
1970, the GSEs have played a growing and          (OFHEO).        Unresolved issues remain
crucial role in the nation’s housing finance      regarding portfolio limits and whether to
system. Congress has entrusted GSEs with          dedicate a small portion of GSE profits for
buying and securitizing mortgage loans.           an affordable housing trust fund.        No
They do so by purchasing mortgages from           matter which vision of reform ultimately
primary market originators, thereby freeing       prevails, the impact of the GSEs has been to
up their capital for further mortgage             open the mortgage market to international
lending. In 2004, the GSEs purchased 34           capital flows, allowing mortgage funds to
percent of all single-family mortgage             be continuously available, and at better
originations, down from 54 percent the            rates, than previously.
previous year.      While they hold some
mortgages in their portfolios, they package       Better access to mortgage capital has
others as mortgage-backed securities. The         apparently been matched by a greater
GSEs have come to dominate the secondary          desire for homeownership. In our region,
mortgage market because their special             the number of conventional mortgage
status allows them to raise funds at rates        applications rose significantly for all income
lower than many financial institutions.           groups between 1997 and 2003, ranging
                                                  from a 51 percent increase for low-income
                                                  families to 67 percent for those of middle


74
income and above. The total number of                among households with the highest
mortgage applications approved rose from             incomes (over $79,000), this income group
224,000 to 364,000 during that period.               had 5,400 fewer homeowners in 2000. One
Likewise, the number of loans originated             can assume that the decline among the
rose from 165,000 to 246,000, a 49 percent           highest income households was a matter of
increase from 1997 to 2003. Although it is           choice and not inaccessible financing. The
tempting to attribute the increase in                data suggest that the private mortgage
mortgage applications and approvals to               market, through which the majority of
falling interest rates, home prices have             housing is purchased, has become more
increased at a rate that exceeds the carrying-       accessible and affordable to families looking
cost savings attributable to lower rates. It is      to become homeowners.
truly remarkable that so many families in
our region have sought to buy homes in               Selling the American Dream to All
recent years, and have succeeded in doing
so, despite the unprecedented increase in            Since the 1960s, federal policy has aimed at
home prices.                                         reducing the mortgage credit barriers faced
                                                     by minority and low-income families. This
                                                     goal has been pursued through the Fair
Regional Applications for Conventional
                                                     Housing Act of 1968, the Equal Credit
Mortgages by Income Group
                                                     Opportunity Act of 1974, the Home
                             1997 2003 Change
                                                     Mortgage Disclosure Act of 1975, and the
HHs below 50% AMI           10,507 15,816 51%
                                                     Community Reinvestment Act of 1977.
HHs at 50-79% AMI           33,736 54,129 60%
                                                     These laws essentially extended civil rights
HHs at 80-99% AMI           30,064 45,600 52%
                                                     and equal opportunity into the realm of
HHs at 100-199% AMI         29,153 45,924 58%        housing and housing finance. Nevertheless,
HHs at 120% AMI or more     120,748 202,245 67%      the homeownership gap between whites
                                                     and minorities remained steady, and even
Source: HMDA aggregate data by MSA, 1997 and 2003.   rose slightly, through 1990.
According to the 2000 Census, the region’s
homeownership rate stood at 53 percent, a            The past decade witnessed a renewed
1-percentage point increase from 1990. In            federal effort that featured a revised and
absolute terms, almost 380,000 families in           expanded HMDA, lower FHA insurance
our region became homeowners during the              premiums, and more diligent enforcement
1990s.3     In addition, the gains in                efforts of discrimination cases by the
homeownership occurred at almost all                 Department of Justice.       Perhaps most
levels of income. By 2000, the number of             important was the enactment of the Federal
homeowners with incomes in the bottom                Housing Enterprises Financial Safety and
quintile (roughly under $17,000) grew by             Soundness Act of 1992, which required the
more than 45,000 families since 1990.                GSEs to increase the mortgages purchased
Households with incomes in the middle                from     low-      and     moderate-income
quintile (between $32,000 and $50,000)               households and neighborhoods.4 In 1994,
added more than 148,000 families to the              Fannie Mae announced its “Trillion Dollar
ranks of homeowners. Surprisingly, the
only net loss of homeowners occurred                 4Lance Freeman and Darrick Hamilton, “The
                                                     Changing Determinants of Inter-racial Home
3CHPC and RPA calculation of 1990 and 2000           Ownership Disparities: New York City in the
Census microdata.                                    1990s” in Housing Studies 19:3 (May 2004).


                                                                                                   75
Commitment,” which was followed by the           The        region’s      African-Americans
$2 trillion “American Dream Commitment”          households, however, increased their
six years later. Together, the two initiatives   ownership at almost twice the rate of other
facilitated access to homeownership for 28       black households in the country. Although
million first-time, minority, and low-income     it is unclear why this occurred, a recent
families. In January 2004, Fannie Mae            study of the homeownership gap between
expanded its commitment, targeting an            racial groups in New York City suggested
additional 6 million families with the goal      that the decreasing homeownership deficit
of raising the minority homeownership rate       among blacks might be due to a decline in
to 55 percent.                                   discriminatory treatment as a result of
                                                 public policies that encouraged ownership
Nationally, the minority homeownership           and discouraged lending bias.6
rate increased by almost 8 percentage points
between 1990 and 2004, from 43.1 percent to          Regional Mortgage Approval Rate, 1997-
51 percent, respectively. Because white                              2003
homeownership rates also rose, the gap           Approval Rate                     1997   2000 2003
between the white and minority rates             White HHs below 120% AMI          82%    80% 82%
declined only slightly, to 25 percentage         Black HHs below 120% AMI          65%    60% 68%
points in 2004.5
                                                 Asian HHs below 120% AMI          80%    80% 80%
                                                 Hispanic HHs below 120% AMI       71%    69% 73%
    Regional Homeownership Rate by Race
                   1990        2000   Change     Source: HMDA aggregate data by MSA, 1997, 2000,
                                                 2003.
Overall           52.4%       53.3%     0.9
White             60.7%       63.4%     2.7      The HMDA data for our 15 subregional
Black             26.1%       30.7%     4.6      MSAs show steady or improving mortgage
Asian             42.4%       44.2%     1.8      approval rates for households with incomes
Hispanic          19.2%       22.5%     3.3      below 120 percent of area median for all
Source: 1990 & 2000 Census.                      racial groups. However, one should not
                                                 draw conclusions about the approval
The New York metro region experienced a          disparities based on race. Further analysis
similar trend between 1990 and 2000. The         of the microdata is necessary to better
ownership rate increased for all racial          understand the impact of other household
groups while the inter-racial disparity          characteristics, beyond race and income,
remained almost unchanged, with only a           such as credit and employment history as
small reduction for both blacks and              well as debt to income ratios.
Hispanics and a slightly larger gap for
Asians.    Although the region’s overall         Although families in the region appear
ownership increased only half as fast as the     increasingly  willing   to   commit     to
nation’s, the metro area’s minority              homeownership,        their      financial
households generally matched the national        circumstances may not allow it.        The
pace.                                            HMDA data shows that in addition to the
                                                 rise in applications, the number of
                                                 households not approved rose in absolute
5U.S. Census Bureau, Current Population          number as well as percent. In 1997, almost
Survey March Supplement, Table 6--
Homeownership Rates by Race and Ethnicity:
1975 to Present.                                 6   Freeman and Hamilton, 2004.


76
20 percent (roughly 44,000) of the regional        ownership among households that are not
mortgage applications were rejected. In            able to buy.8
2003, those cases grew to over 22 percent or
more than 81,000.7 Put another way, in             In the 15 MSAs that roughly make up our
2003, more than 2 percent of the region’s          metro area, applications for FHA-insured
households sought to buy a home and one-           loans decreased by 27 percent from almost
fifth of them were not approved for a              38,000 in 1997 to about 28,000 in 2003.
conventional mortgage. This suggests that          Although many parts of our region qualify
the region has not reached its latent              as high cost areas for FHA mortgage limit
homeownership potential and that some              purposes, the increase in the loan ceiling
families require some degree of assistance         from $160,950 in 1997 to $280,745 in 2003
to become homeowners.                              did not keep pace with the increases in
                                                   home prices. In more than one third of the
For families such as these who are shut out        counties in our region, the median sales
of the conventional mortgage market due to         price exceeded the FHA loan ceilings.9
poor credit quality, lack of downpayment,          Even the conforming loan limit of the GSEs,
or insufficient income requirements, various       generally 15 percent higher than the FHA,
federal programs offer an alternative path         may not be high enough to serve
to homeownership. The best known of                homebuyers in counties such as Bergen,
these programs is the Federal Housing              Hunterdon, Nassau, Westchester, and
Administration mortgage insurance for one-         Fairfield.
to four-family homes, begun during the
Great Depression.                                  Whether due to the homeownership base
                                                   expanding to lower income groups or to
Historically, the Section 203(b) insurance         higher home prices, the number of
program has been critical in expanding             homebuyers who do not make a 20 percent
homeownership opportunities for first-time         downpayment has increased since the
homebuyers who would not otherwise                 1980s. Nationally, the share of single-family
qualify for conventional mortgages. It only        mortgages with loan-to-value ratios over 90
requires a 3 percent downpayment and uses          percent increased dramatically from less
more flexible household income and                 than 10 percent of the originations in 1990
payment ratio underwriting guidelines,             to a peak of 25 percent by 1995. In 2004, the
which were adopted by conventional                 last year for which this data is available, 18
lenders and the GSEs to meet Congressional
mandates. However, some have suggested
that the FHA insurance program today only
serves to accelerate the purchase of a new
home and does not actually enable
                                                   8 Rachel G. Bratt, “Financing Production of Low-
                                                   and Moderate-Income Housing” Presented at
                                                   Community Development Finance Research
7 The HDMA database categorizes the                Conference, Federal Reserve Bank of New York,
applications as follows: received, loans           December 8-10, 2004.
originated, approved but not originated, denied,   9 RPA/CHPC, Out of Balance (April 2004). Table

withdrawn, and closed as incomplete. In this       5 (Median Home Prices) shows 11 counties in
case, applications not approved include denials,   our region had median sale prices that are
withdrawals, and closed as incomplete              higher than the FHA limit and that data does
applications.                                      not include the 5 counties of New York City.


                                                                                                77
percent of single-family loan originations           OFHEO, originations of single-family
had an LTV higher than 90 percent.10                 subprime mortgages reached a new peak
                                                     for the third year in a row. A record $530
For homebuyers who do not qualify for                billion of single-family subprime mortgages
federal mortgage insurance, the availability         were originated in 2004, an increase of 60
and decisions of private insurers may mean           percent over the record level reached in
the difference between buying and renting            2003. The surge in subprime lending in
their home. In 2003, over 77,000 regional            2004 represented almost 19 percent of total
mortgages received private mortgage                  mortgages originated that year, surpassing
insurance, 9 percent higher than in 2000.            the previous peak of 14 percent in 1999.
Further research is needed to determine
whether previous findings of bias and                Although some fear that subprime lending
discrimination in the private mortgage               may lead to a rash of defaults and
insurance market affects the functioning of          foreclosures, a recent report finds that the
the finance system in our region. A 1994             credit quality of subprime originations has
study found that private mortgage insurers           steadily increased in recent years, as lenders
were less likely to insure mortgages for             have focused more on the low-risk end of
condominiums or with adjustable interest             the spectrum. Approximately 81 percent of
rates.11 If this finding holds true in our           the subprime originations in 2003 were Alt
metro area, it would be particularly                 A or A- loan risks.13 Previous research has
troubling since more than 411,000 or almost          shown that three-fourths of subprime loans
10 percent of the owner-occupied housing is          in the New York City area were
in multifamily structures, compared to less          refinancings, which may explain why the
than 3 percent nationally. The following             risk profile of subprime loans has
year, a Boston Federal Reserve report based          improved.14 Nevertheless, some subprime
on a small survey of Boston lenders found            lending, particularly among low-income
evidence that the racial composition of the          and elderly homeowners, may be predatory
neighborhood where the property was                  in nature. Predatory lenders often require
located, not the race of the applicants              borrowers to pay excessive mortgage fees,
themselves, determined whether the private           include abusive prepayment penalties, and
insurers granted the PMI.12                          insist on mandatory arbitration. Although
                                                     very troubling, this does not appear to be
Since 1990, the amount of home financing             bulk of subprime lending activity in our
available to individuals with tarnished or           region.
inadequate credit histories has grown
significantly.   According to the 2004
Mortgage Market and the Enterprises report by

10 Office of Federal Housing Enterprise
Oversight, Mortgage Markets and the Enterprises in
2004, August 2005.
11 Glenn B. Canner, Wayne Passmore and

Monisha Mittal, “Private Mortgage Insurance”
Federal Reserve Bulletin (October 1994).             13 OFHEO, MME 2003 report. The 2004 report
12 Geoffrey M.B. Tootell, “Discrimination,           did not provide updated figures.
Redlining, and Private Mortgage Insurance”           14 HUD, “Unequal Burden in New York: Income

Federal Reserve Bank of Boston, Working Paper        and Racial Disparities in Subprime Lending”
No. 95-10 (October 1995).                            May 2000.


78
                                                  The minimum payment option can lead to
                                                  negative amortization although this is
                                                  limited to 110 or 125 percent of the original
                                                  loan amount. Borrowers who choose the
                                                  minimum payment option risk significantly
                                                  higher payments as interest rates rise and
                                                  when the loan becomes fully amortizing.

                                                  As the new mortgage products show, the
                                                  private finance system continues to evolve
                                                  as it attempts to meet the changing needs of
                                                  prospective buyers and reacts to changing
Even though the interest rates on fixed-rate      financial conditions.         Likewise, the
mortgages have reached historic lows in           government’s role continues to be vital as it
recent years, the private mortgage market         ensures that all segments of society have
has produced a broad array of mortgage            access to capital and regulating the markets
products to enable borrowers to buy homes         to prevent or correct abuses.
they could not otherwise afford either due
to rising sales prices or due to limited          Subsidizing Homeownership
income. Adjustable-rate mortgages (ARMs)
have become a standard consideration for          For some families however, facilitating
prospective homebuyers. In 2004, the ARM          mortgage credit through the GSEs and FHA
share     of    conventional      single-family   insurance is not enough to make
originations was 34 percent, compared to 19       homeownership a reality for them. The
percent in 2003, and 17 percent in 2002.          federal government has provided interest
The lower initial interest rates of ARMs save     rate subsidies, reduced acquisition and
money for households that expect to move          rehabilitation     costs,   as    well   as
before the interest rate readjusts and enable     downpayment assistance grants to make
other families to qualify for larger home         homeownership possible for families with
loans. However, the biggest concern with          low incomes. These efforts have succeeded
this type of loan is the potential for higher     to varying degrees. For example, from 1968
monthly mortgage payments when interest           through 1973, the Section 235 program
rates increase.                                   assisted almost 400,000 families to become
                                                  homeowners. Partly as a result of poor
Interest-only mortgages give the borrowers        management under the FHA, by 1979
the option of paying only the monthly             almost 18 percent of the Section 235
interest for a specified period, usually 5 or     mortgages had been foreclosed compared to
10 years. After that, the payments would          rates of 6 percent for standard FHA-insured
increase as borrowers begin paying off the        loans. Although the program was revived
principal like a regular fixed-rate mortgage.     in modified form and assisted another
A newer, and many believe, riskier product        125,000 moderate-income families, it
offering is the flexible payment ARM, or          ultimately was eliminated in 1987.15
option ARM. With interest rates that adjust
monthly and payments adjusting annually,
borrowers have the option of making
interest-only or a minimum payment that
                                                  15 Michael S. Carliner, “Development of Federal
may be less than the interest-only payment.       Homeownership ‘Policy’ “ Housing Policy Debate
                                                  9:2 (1998)


                                                                                               79
In 1990, Congress created the HOME               homeownership option to its Section 8
Investment Partnerships program, which           families because the program imposes
provides federal funds to state and local        additional administrative costs without
governments for affordable rental and            providing an increase in federal funds.
homeownership programs. Since the mid-           Even among the handful of agencies that
1990s, this block grant program has              have a Section 8 homeownership program,
received an average appropriation of $1.7        many believe that in response to a reduction
billion.     Program regulations require         in overall Section 8 funds, the ownership
participating jurisdictions to match every       option will become the first casualty.
dollar of federal subsidy with 25 cents in
local funds. The HOME-funded homebuyer           The American Dream Downpayment
programs require that assisted units remain      Initiative, enacted in 2003 as a suballocation
affordable for a minimum of 5 to 15 years,       of the HOME program, allows localities to
depending on the level of subsidy. In 2002,      grant first-time homebuyers the greater of
roughly one-third of HOME funds were             $10,000 or 6 percent of the purchase price
committed to homeownership activities            for downpayment or closing assistance.
such as downpayment or closing cost              Although it is too early to assess, the
assistance, development, acquisition and         interim regulations were only published in
rehabilitation,   interest  subsidy,   loan      March 2004, the generous subsidy amount
guarantee, and lease/purchase assistance.        as well as the broad eligibility for home
Between 1990 and 2003, HOME funds                options      (1-    to    4-family     homes,
helped approximately 250,000 families buy        condominiums, and cooperative shares)
a home of their own.16                           may prove useful to the local agencies and
                                                 the low-income families they serve. To
More recent federal homeownership                date, our region’s housing agencies have
initiatives have tended to be much smaller       received $18 million in ADDI funding,
in scale and rely on existing sources of         including $11 million for New York City
funding. The Section 8 Homeownership             alone. So far, 338 families have become
Program, authorized in the Quality               homeowners with this latest DAP vehicle.
Housing and Work Responsibility Act of
1998, allows public housing agencies to use      State Homeownership Efforts
their Section 8 voucher allocation to cover
the gap between 30 percent of a family’s         The main sources of funding for state HFA
income and their monthly mortgage. This          homeownership programs are federal tax-
option has been little used in our region,       exempt    bonds.17    The      basic    HFA
with     only    120   families   achieving      homeownership program relies on the sale
homeownership through this program.              of tax-exempt bonds to offer homebuyers
Many PHAs in our region and throughout           lower mortgage interest rates; usually 1 or 2
the country have chosen not to offer this        percentage points lower than the prevailing
                                                 market. Some have estimated that the
16Jennifer Turnham, Christopher Herbert,
Sandra Nolden, and Judith Feins, Study of        17The calendar year 2006 tax-exempt private
Homebuyer Activity through the HOME Investment   activity bond cap is set at the greater of $80 per
Partnerships Program. Prepared by Abt            capita or $247 million per state. The states then
Associates, Inc. for the U.S. Department of      allocate their volume cap for various allowed
Housing and Urban Development, Office of         uses. For example, Connecticut dedicates
Policy Development and Research, January         almost 60 percent of their $281 million bond cap
2004.                                            for single- and multiple-family housing.


80
actual subsidy provided is relatively              result of reduced incomes, in 1987,
shallow, with the typical homeowner                Congress created an FHA-insured, reverse
saving approximately $100 a month                  mortgage demonstration program to assist
compared to a conventional mortgage                2,500 elderly homeowners.        The Home
loan.18 Although this may be true in low           Equity Conversion Mortgage (HECM)
interest rate environments, the flexible           program allows homeowners age 62 or
underwriting guidelines used by the HFAs           older to access the equity on their homes as
are still an important factor in facilitating      monthly payments, lump sum, or as
homeownership.                                     unscheduled installments against a line of
                                                   credit. The loan is repaid when the elderly
 HFA Financed Single-Family Mortgages,             borrower no longer occupies the home. The
               1998-2003                           FHA insures HECM loans to protect lenders
                                                   against loss if amounts withdrawn exceed
                                                   equity when the property is sold. Although
                     Loans      Annual Average
                                                   the program has been positively reviewed
New York             10,569         1,762
                                                   and was made permanent in 1998, the
New Jersey           7,697          1,283
                                                   program remains little known. According
Connecticut          11,088         1,848          to an Abt Associates report, between 1987
Pike County, PA       123            21            and 1999, only 38,000 reverse mortgage
NY Metro Area        29,477          4,913         loans were made nationwide. 19

Source: Housing Finance Agencies of Connecticut,   With more than half of the region’s housing
New Jersey, New York, and Pennsylvania.
                                                   stock built before 1960, the state HFAs have
A growing trend among state HFAs has               focused on offering a variety programs to
been the creation of niche mortgage                facilitate financing for the renovation of
programs for particular occupations or             existing homes. These programs serve to
populations. In our region, New Jersey and         stabilize neighborhoods while expanding
Connecticut have taken the lead in such            homeownership opportunities.           These
efforts. These niche programs often offer          purchase/rehab programs build off the
interest rates below the standard HFA              federal 203(k) insurance program, which
homeownership program. The additional              combines the cost of renovation and the
reduction is usually funded by agency              purchase within one mortgage loan up to
reserves or an outside source of support.          the FHA loan maximum, requires a
For example, special mortgages for police          minimum amount of work, and requires a
officers are popular with politicians and          HUD-approved consultant to identify the
state legislatures have been able to secure        most urgently needed rehabilitation
additional subsidy for them in the past.           projects. Use of the 203(k) program did not
                                                   expand until 1994, when HUD streamlined
Homeownership programs targeted at the             the program to make it easier to use for
elderly are the most numerous type of niche        both borrowers and lenders. As a result, the
program. Recognizing the high housing              number of 203(k) insured loans grew from
costs among many elderly homeowners as a
                                                   19David T. Rodda, Christopher Herbert and
18Sylvia Martinez, “The Housing Act of 1949: Its   Hin-Kin (Ken) Lam, “No Place Like Home: An
Place in the Realization of the American Dream     Evaluation of FHA’s Home Equity Conversion
of Homeownership” in Housing Policy Debate         Mortgage Insurance Program” Prepared by Abt
11:2 (2000), pg. 473.                              Associates, Inc. for HUD. March 2000.


                                                                                            81
about 4,000 in 1994 to more than 18,000 in
1997.20    In the mid- to late-1990s, the          Aside from the ownership programs that
program gained attention for fraud and             employ federal tax-exempt bonds to lower
higher claim rates.21 Nevertheless, both the       the interest rates for homeowners, some
203(k) insurance and purchase/rehab                HFAs also offer locally-funded grant
products offered by Fannie Mae have                programs to assist homeownership in our
facilitated the purchase of existing homes.        region. New York has taken the lead in
                                                   such efforts.      The Affordable Home
One standout homeownership program                 Ownership Development Program and the
designed by the Pennsylvania HFA to                NYS Housing Trust Fund offer $20,000 and
prevent foreclosures is unparalleled in our        $55,000 per unit subsidies for homebuyers
region.     In 1983, PHFA created a                with incomes up to 80 percent of area
Homeowners’        Emergency      Mortgage         median. New York funds these programs
Assistance Program (HEMAP) that offers             through its Housing Trust Fund, which was
owners loans to help bring delinquent              created in 1985. Although traditional trust
payments current. In addition to one-time          funds are funded by a dedicated revenue
assistance, families may be eligible for           stream, New York’s HTF relies on annual
continuing monthly assistance up to 24             appropriations from the state legislature.
months or a total of $60,000. Depending            Since its creation in 1985, the HTF has
upon their financial situation, homeowners         generally received between $25 to $35
may be required to pay up to 40 percent of         million annually. In real terms however,
their income for total monthly housing             the $39 million appropriated for the current
expenses. HEMAP covers the difference              fiscal year, represents 14 percent less than
between the borrower’s contribution and            the funding in 1985.
the lender’s required payment, sending
mortgage payments directly to the lender           New Jersey has also committed state
on the homeowner’s behalf. In the last             general funds to create a revolving loan
decade, PHFA has made an average of 20             fund to promote the production of
HEMAP loans per year in Pike County.22             homeownership housing by nonprofit,
                                                   community-based organizations. Begun in
20 U.S. Government Accountability Office.          2003 with a $5 million appropriation, the
Problems Persist With HUD’s 203(k) Home            Predevelopment Loan & Acquisition Non-
Rehabilitation Mortgage Insurance Program. GAO-    Profit Fund (PLAN) will work in
01-1124T (September 10, 2001).                     conjunction with the Market Oriented
21 New York City was particularly hard hit by
                                                   Neighborhood Investment Program that
fraud in its 203(k) properties in Brooklyn, the    provides low-interest construction loans,
Bronx, and Harlem. In some cases, appraisers
                                                   grants, and below-market permanent loans.
inflated their valuations of these properties,
while borrowers and lenders colluded to obtain     PLAN       addresses      the     lack   of
203(k) insured loans, repair funds were diverted   predevelopment funding necessary to
from their intended use and borrowers              maintain an active pipeline of projects.
ultimately defaulted on the loans. See testimony
of John C. Weicher (Assistant Secretary for        In addition to federal and state
Housing-Federal Housing Commissioner at            homeownership       efforts,   public-private
HUD) before House Financial Services               partnerships have also played a key role of
Subcommittee on September 10, 2001.                producing     affordable     homeownership
22 Electronic communications with Lori Toia,
                                                   opportunities. The New York City Housing
Manager of HEMAP Loans for the PHFA,
                                                   Partnership is probably the best known of
September 2004 and August 2005.


82
the affordable development intermediaries.      mostly in Suffolk and a small number in
The NYCHP was established in 1982 to            Nassau.
create affordable ownership opportunities
in collaboration with city government.
                                                Subsidizing Rental Housing
Their flagship New Homes program, begun
in 1984, relies on a generous combination of    Public housing, Section 8 tenant-based
subsidies to reduce the cost of the homes.      subsidies, as well as Section 202 and 811
In addition to providing the land, the city     housing for the elderly and disabled,
provides a $10,000 per unit grant and a 20-     represent the majority of the federally-
year partial real property tax exemption for    subsidized rental stock in our region. These
the homeowner. The subsidized ownership         programs along with federal Low Income
housing may also receive $15,000 from the       Housing Tax Credits (LIHTC) have
New York State Affordable Housing               produced or otherwise facilitated more than
Corporation to further reduce the               544,000 housing units, approximately 12
homeowner’s mortgage debt.                      percent of all rentals in our region.
Since the program’s inception in 1984, the
NYCHP has produced approximately                Public housing, often maligned by policy
15,000 housing units, concentrated in           makers and taken for granted by housing
Brooklyn and the Bronx. During its peak         advocates, forms the bedrock of low-income
production years in the early to mid-1990s,     housing, representing more than 6 percent
the New Homes program built almost 1,300        of the metro area’s rental stock. The federal
per year. As the city’s inventory of vacant     government provides the majority of capital
land has dwindled, the production has           and operating funding for these agencies
fallen to an average of 400 units in the last   although this has declined by more than 12
five years.       In addition to creating       percent since 1990 when adjusted for
homeowner opportunities, this program has       inflation. Between fiscal years 2000 and
resulted in the new construction of over        2005, public housing has lost $700 million in
5,000 rentals units. A 2001 study analyzed      federal funding, a 26 percent decline.
the program data through 1999 and found
that 70 percent of the New Homes                The stark change in the funding
production had been two- and three-family       environment has compelled public housing
homes that included an owner’s unit and         authorities to seek new ways of covering
one or two rentals.                             their costs. In 2001, the Chicago Housing
                                                Authority became the first to securitize
The Housing Partnership’s program quickly       future subsidies to address current capital
became a model for other cities and             needs. In this fashion, the PHAs have not
organizations. One such example is the          only raised much needed repair funds but
Long Island Housing Partnership, formed         have also locked HUD into providing
in 1988. The LIHP provides mortgage             sufficient subsidy to cover the bonds.
counseling,    develops    housing,   and       Others cities around the country have
facilitates  financing    for   affordable      followed suit; New York City joined the
ownership and rental units in Nassau and        trend in February 2005. The city’s Housing
Suffolk counties. According to the most         Development Corporation issued $600
recent available data, LIHP has developed       million in bonds on behalf of the city’s
almost 800 ownership and 150 rental units       public housing agency. In addition to these
                                                bond transactions, some PHAs have


                                                                                          83
84
                                 Federally-Assisted Rental Housing by County

                            Assisted     Assisted
                              Units         Units
                              (% of    (% of Total    Assisted      Public      Section 8     Section          LIHTC
                            Rentals)    Housing)        Units      Housing      Vouchers     202/811       Allocations
Bergen, NJ                     7.6%          2.5%       9,422        2,261         5,555          864             742
Dutchess, NY                   6.4%          2.0%       2,436          604         1,012          355             465
Essex, NJ                     14.8%          8.0%      26,069        9,766         7,797        1,840           6,666
Fairfield, CT                 13.9%          4.2%      15,373        5,456         5,982          983           2,952
Hudson, NJ                    10.4%          7.2%      18,354        8,971         5,013        1,142           3,228
Hunterdon, NJ                  9.9%          1.6%         751            0           377           14             360
Litchfield, CT                 6.1%          1.4%       1,290          379           507          147             257
Mercer, NJ                    12.1%          4.0%       6,130        2,270           222          817           2,821
Middlesex, NJ                 10.1%          3.3%       9,716        2,328         3,834          573           2,981
Monmouth, NJ                  12.9%          3.2%       8,563        2,062         3,676          860           1,965
Morris, NJ                     8.4%          2.0%       3,722        1,039         1,415          218           1,050
Nassau, NY                     8.0%          1.6%       7,775        3,881         2,426          551             917
New Haven, CT                 16.0%          5.9%      21,235        5,652        10,137        1,142           4,304
NYC                           15.5%         10.6%     355,512      180,851       116,183       16,996          41,482
Ocean, NJ                     10.3%          1.6%       4,114          725         1,996          174           1,219
Orange, NY                     7.9%          2.5%       3,387          270         1,124          276           1,717
Passaic, NJ                   12.0%          5.3%      10,002        2,505         4,786          974           1,737
Pike, PA                       1.3%          0.1%          36            0             0            0              36
Putnam, NY                     2.0%          0.3%         147            0             0           29             118
Rockland, NY                  11.5%          3.3%       3,717          346         2,400          605             366
Somerset, NJ                   3.4%          0.8%       1,155          100           394          283             378
Suffolk, NY                    6.5%          1.2%       7,722          484         4,781        1,312           1,145
Sullivan, NY                  11.4%          2.6%       1,241          138           653           92             358
Sussex, NJ                     1.3%          0.2%         124           80             0            4              40
Ulster, NY                     5.1%          1.5%       1,213          226           561           56             370
Union, NJ                     11.3%          4.4%       8,917        2,762         3,431          496           2,228
Warren, NJ                    13.7%          3.7%       1,739          580           876          205              78
Westchester, NY                9.7%          3.8%      14,340        4,950         7,146          938           1,306
NY Metro Area                14.3%           6.5%     544,202      238,686       192,284       31,946          81,286


Sources: Public Housing and Section 8 voucher data from HUD PHA Profiles; LIHTC data from CT HFA (through 2005), NY
DHCR (through 2005), NYC HPD 2005 QAP, NJMHFA (through 2004); Section 202/811 from HUD; and 2000 Census;
compiled by CHPC.




                                                                                                                  85
decided to unpeg their rents from the             Tax-Exempt Multifamily Financing
tenant’s income with the goal that rental
revenues cover the cost of operating them.        Tax-exempt bonds are issued by the states
                                                  and their suballocating agencies to assist
The other segment of the rental housing           single-family homeownership, multifamily
stock that is significantly subsidized by the     rentals, infrastructure, and other activities.
federal government is even more vulnerable        Currently,     the    federal    government
and subject to changing budget priorities.        authorizes each state to issue up to $80 per
Tenant-based Section 8 vouchers and Low           capita in bonds and the states decide for
Income Housing Tax Credits units comprise         themselves how to allocate their bond cap
another seven percent of the rental stock in      among the allowable uses. To receive bond
the region. These developments are subject        financing, multifamily rental housing
to annual appropriations and expiring             developers must agree to reserve 20 percent
affordability requirements. As a result,          of the apartments for families with incomes
policymakers as well as advocates have            below 50 percent of area median or 40
focused on new production of rental               percent of the units for families below 60
housing to replace the dwindling affordable       percent AMI for a period of 20 years or the
stock.                                            life of the bonds, whichever is greater. To
                                                  date, tax-exempt bonds have financed
In addition to direct spending through            800,000 rental units nationwide.
HUD programs, which totaled over $43
billion in 2005, the federal government           Since the majority of developers choose the
leverages private sector investment in low-       first set-aside option, tax-exempt bond
income housing through tax-exempt bonds           developments are commonly referred to as
and LIHTCs, adding another $5 billion in          80/20 housing. In addition to the favorable
foregone federal tax revenues. Despite the        financing these projects receive, the market-
sizeable subsidies, housing developers must       rate units are essential to the financial
often cobble together various sources of          viability of the development and often
funding to make the housing affordable to         cross-subsidize the affordable housing.
low- and moderate-income families. This           This explains why 80/20 projects tend to be
sort of “creative finance,” although              located in upscale neighborhoods where
necessary, makes it more challenging to           market rate rents are sufficiently high to
produce low-income housing.1 Each source          help offset the foregone rents on the
of federal subsidy comes with a complex set       affordable units. In New York City, for
of regulations that significantly limit the       example, few 80/20s have been developed
range of state and local flexibility. The         outside of Manhattan.
piggybacking of subsidies also makes it
difficult to inventory the actual number of       New York State’s HFA and its related
assisted housing as the same unit is counted      agencies administer seven multifamily
in the production data of each separate           rental programs, all of which depend on
program.                                          federal subsidies of one type or another.
                                                  The All Affordable, HOPES, and Senior
                                                  Housing Financing programs employ
                                                  combinations of tax-exempt and taxable
1Michael A. Stegman, “The Excessive Costs of      bonds as well as LIHTCs to achieve 100
Creative Finance: Growing Inefficiencies in the   percent affordable units. In some cases, the
Production of Low-Income Housing” Housing
                                                  NYS HFA also funds the gap that remains
Policy Debate 2:2 (1991).


86
for a LIHTC-funded project after the sale of      PennHOMES, offers interest-free, deferred
tax credits and the maximum available             payment loans to support the development
mortgage loan based on the expected rental        of affordable rental housing for low-income
revenue from the assisted units. The NYS          residents. The financing is structured as
HFA uses a variety of resources to provide        primary or secondary mortgage loans. The
gap financing, it can provide per unit grants     PennHOMES program combines LIHTC
using federal HOME funds or it can provide        allocations with additional resources from
no- or low-interest loans using HFA monies        the unrestricted reserves of the PHFA and
raised by the refunding of agency bonds.          the federal HOME program.

New Jersey’s HMFA stands out in its               LIHTCs and Local Priorities
variety of supportive and special needs
programs. The agency provides loans for           Since its inception in 1986, the Low Income
transitional housing for homeless, AIDS-          Housing Tax Credit (LIHTC) program has
impacted individuals, and for youth aging         helped finance almost 1.8 million low-
out of foster care. The agency also offers        income housing units. Shortly after its
gap financing for supportive and special          creation, federal law amended the program,
needs projects receiving loans and grants         requiring states to establish a Qualified
from HUD. These efforts will continue to          Allocation Plan (QAP) to evaluate and
expand now that New Jersey has                    select projects for tax credit awards. While
established a Special Needs Housing Trust         these plans must be compatible with broad
Fund.                                             federal criteria,3 the QAP must be revised
                                                  annually to reflect changing housing needs
The Connecticut HFA’s Rental Housing              and state-level or administering-agency
Program couples its share of federal              priorities. This built-in adaptability is one
resources with agency’s own discretionary         of its great programmatic and political
financing to require developers to set aside      strengths.
a higher share of the units as affordable.
Generally, no units in the subsidized             Housing agencies typically employ two
developments may be rented to households          broad mechanisms to direct the allocation of
earning above 150 percent AMI and units           their tax credits: set asides and preferences.
must remain at affordable rent levels for 30      Set asides are credit allocations that are
years beyond the term of the CHFA                 reserved each year for specific uses. While
mortgage. Of the 10,500 affordable rentals        federal law requires a 10 percent set aside
in the CHFA portfolio,2 over 70 percent           for projects sponsored by non-profit
relied on federal tax credit allocations. The     organizations,      states    often    specify
remainder also used federal housing               additional set-aside categories such as
resources, especially project-based Section 8     senior or family developments. In general,
contracts and tax-exempt bond financing.          however, credit allocation agencies rely on
                                                  preferences more than on strict set asides to
The    Pennsylvania    HFA's           primary    guide tax credit development.
multifamily     production            program,
                                                  3 According to the Revenue Reconciliation Act of

                                                  1989, the QAP must take into account project
2Connecticut Housing Finance Authority,           location, housing needs characteristics, sponsor
Multifamily Housing Units by County, July 2003,   characteristics, participation of local non-profit
updated with data from LIHTC allocations and      organizations, tenant populations with special
Annual Reports.                                   housing needs, and public housing waiting lists.


                                                                                                 87
                                                       recent study found that, while almost 42
Preferences consist of housing priorities that         percent of tax credit units were built in
are awarded extra points when scoring a                suburban areas, compared to 24 percent of
credit application. Nationally, the most               other types of federally-assisted housing,
common preferences are designed to                     LIHTC projects continue to be sited in
encourage developments that leverage                   disproportionately black neighborhoods.8
funding from other government programs                 New York
or that serve special needs populations.
Federal law now requires 30-year                       The Division of Housing and Community
affordability although many states have                Renewal (DHCR) is the primary tax credit
adopted longer lock-in periods as part of              allocating agency for New York State.
their allocation plans.4      While QAPs               DHCR has three suballocation agencies: the
typically do not specify the length of the             NYS HFA; the New York City Department
affordability period sought, researchers               of Housing Preservation and Development
believe that the average lock-in period                (HPD); and the Development Authority of
nationwide is approximately 42 years.5 The             the North Country.9 DHCR and the NYS
most common geographic preference was                  HFA allocate tax credits to projects
mandated in 2000 by federal law to favor               throughout the state while HPD serves the
projects sited in HUD-designated qualified             five boroughs of New York City.
census tracts (QCTs).6
                                                       DHCR’s QAP does not contain set-aside
Although tax credits are increasingly sought           requirements.     Instead, it gives scoring
after by investors and the program is the              preferences to projects that serve very low
primary federal housing production                     income families, that use public housing
program, recent research has questioned                waiting lists or give preference to special
whether the program is functioning as well             needs population for tenant selection, and
as it might.      Although the National                that agree to an extended regulatory period
Affordable Housing Act of 1990 requires                by waiving its right to request a Qualified
that the housing needs stated in the state’s           Contract.10
Consolidated Plan govern the allocation of
federal funds, a 2002 Urban Institute study            Department of Housing and Urban
commissioned by HUD found no                           Development, May 2002.
                                                       8 Lance Freeman, “Siting Affordable Housing:
correlation between statewide indicators of
housing needs and the local QAP.7 Another              Location and Neighborhood Trends of Low
                                                       Income Housing Tax Credit Developments in
                                                       the 1990s,” The Brookings Institution, Center on
4 New Jersey typically requires 45-year income         Urban and Metropolitan Policy, March 2004.
and rent restrictions.                                 9 The Development Authority of the North

5 E&Y Kenneth Leventhal Real Estate Group,             Country facilitates affordable housing in the
The Low-Income Housing Tax Credit: The First           counties of Jefferson, Lewis, and St. Lawrence in
Decade. Prepared for the National Council of           New York.
State Housing Agencies, May 1997.                      10 Projects receiving a tax credit allocation after
6 Defined as areas in which 50 percent of the          1989 agree to maintain the percentage of low-
households are below 60 percent of area median         income tenants for at least 15 years beyond the
income.                                                LIHTC compliance period, this is commonly
7 Jeremy Gustafson and J. Christopher Walker,          referred to as the “extended use period”[IRC §
Analysis of State Qualified Allocation Plans for the   42(h)(6)]. However, in the last year of the
Low-Income Housing Tax Credit Program.                 compliance period or subsequently, the taxpayer
Prepared by the Urban Institute for the U.S.           may enter into a qualified contract with the


88
In addition to these preferences, DHCR has           Like DHCR, HPD’s QAP does not contain
allowed itself a parallel allocation method.         set-aside requirements. It does include a
Regardless of the applicant’s point ranking,         wide array of preferences for tax credit
DHCR can allocate tax credits “in a manner           projects    that    target  special   needs
which yields an equitable distribution of            populations      (homeless,  mentally    ill,
credit, based on population, throughout the          disabled, HIV, victims of domestic
state.” If employed, this method could               violence), use other forms of government
potentially work against New York City’s             financing, agree to extended low-income
affordable housing efforts since the 5               use agreements, and are located in target
boroughs have only 42 percent of the state’s         areas (SONYMA target area, in-rem
population but 62 percent of the individuals         acquisition,          or       high-poverty
living below the federal poverty line.               neighborhoods). By 2005, LIHTCs allocated
DHCR can also deny a credit allocation               though HPD helped create or preserve more
request irrespective of the applicant’s point        than 25,200 housing units.
ranking if the DHCR Commissioner deems
the project inconsistent with the state’s            New Jersey
housing goals.
                                                     The New Jersey Housing Mortgage Finance
It is unclear if DHCR has bypassed the               Agency (NJHMFA) administers the state’s
competitive credit allocation process in the         LIHTC allocations. Each year the agency
past but the data do not suggest that has            holds four funding cycles with set aside
occurred frequently. By 2004, DHCR tax               allocations. The 2005 QAP reserved $5
credit allocations have helped create                million for the Family Cycle, $2.4 million for
approximately 23,000 units in the New York           Seniors, $1.2 for Special Needs, and $1.8
counties within our metro area, including            million for the catchall Final Cycle. To
over 16,000 apartments in New York City.             prevent the concentration of LIHTC
                                                     developments in one area, the QAP limits
The NYS HFA typically reserves its tax               the LIHTC allocations to two per funding
credits for projects that receive financing          cycle or three annually for projects located
from the agency. Both applications for               in the same municipality or sponsored by
private activity bonds and LIHTC requests            the same developer.
are received and processed on a rolling
basis. In addition to federal threshold              Within each cycle, NJHMFA has created
requirements, the NYS HFA has preferences            preferences for projects that a serve a very
for tax credit projects that serve very low          low income population, utilize HOPE VI
income populations, special needs groups             funding,       create       housing      for
such as homeless or elderly, and that waive          developmentally disabled persons, and
their right to request a Qualified Contract.         preserve the existing stock. The agency also
                                                     strongly favors projects that help fulfill
credit-allocating agency. The agency has one         New Jersey’s court-ordered “fair share”
year in which to find a buyer for the taxpayer’s     distribution of affordable housing among
interest in the project and continue to operate      communities.       By the end of 2004,
the building as a qualified low-income property.     approximately 25,500 tax credit units had
If no buyer is found, the extended use period        been placed in service in the 14 New Jersey
ends the day after the expiration of the qualified   counties within the NYC metropolitan
contract. See Novogradac & Company’s LIHTC
                                                     region.
Monthly Report, Volume XV, Issue V (May 2004).


                                                                                                89
                                                    Pennsylvania. It was a 36-unit elderly
Connecticut                                         housing development built in 1996.

The Connecticut HFA’s QAP establishes               State & Local Funds for Rental Housing
three allocation priority classes: Class I is
for developments in Urban Regional                  Long waiting lists for public housing and
Centers, that serve the homeless, or that           Section 8 vouchers are only one indication
meet the federal 40-60 test; Class II is for        of the excess demand for low-cost housing.
developments in Urban Neighborhood                  Recognizing the continued unmet needs,
Conservations areas, Urban Growth Areas,            states and localities have sought new
or Rural Community Centers in specific              sources of funds. These efforts have been
towns; and Class III covers all other               relatively   modest    given    competing
remaining applications. Each tax credit             priorities in state and city budgets.
request is evaluated, rated, and ranked             Moreover, the additional sources have been
within its Class with preferences given to          generally used to add another layer of
projects that target households below 25            subsidy for projects that already receive
percent AMI, use public housing waiting             federal housing funds.
lists for tenant selection, utilize other federal
funding, target large families, and are             The State of New York created a Housing
sponsored by women/minority-owned or                Trust Fund in 1985 and a state tax credit
Connecticut-based organizations. By 2005,           program in 2000 to further advance the
CHFA’s credit allocation process had                production and preservation of affordable
created or preserved approximately 7,400            housing. The HTF provides funding for the
units of housing in Fairfield, Litchfield, and      construction, rehabilitation, and conversion
New Haven counties.                                 of property for occupancy by low-income
                                                    renters,       tenant-cooperators,      and
Pennsylvania                                        condominium owners.          It is currently
                                                    funded by a $39 million appropriation.
The Pennsylvania HFA is the sole
Commonwealth agency responsible for the             New York’s State Low-Income Housing Tax
administration of the LIHTC program.                Credit (SLIHC) is patterned after the federal
PHFA allocates 75 percent of its tax credits        LIHTC program, except that it requires 40
through regional set asides, 20 percent to          percent of the units to be affordable to
preservation projects, and 5 percent to             households earning up to 90 percent AMI.11
developments that have previously been              Like the federal credit, the SLIHC offers a
awarded credits. It holds two application           dollar-for-dollar reduction in state tax
cycles and gives preferences to projects that       liability to the project owners. Housing
reserve half of the units for households            produced under the program must remain
below 50 percent AMI, that serve special            affordable for a period of 15 years or more.
needs populations and provide supportive            Since its inception, the state tax credit has
services, and that waive their right to             received      $2    million     in    annual
request a Qualified Contract or offer               appropriations.
homeownership to qualified residents after
the initial 15-year compliance period. To
date, the PHFA has allocated LIHTCs to
only one development in Pike County,                11For New York City projects, the maximum
                                                    household income is 80% AMI.


90
In addition to state efforts to increase the      percent of the units for low-income families,
production of affordable housing, New             uses NewHOP subsidies for 30 percent of
York City’s housing agencies, particularly        the units while the other half of the units
the Housing Development Corporation               rent at market rate. Begun in 2002, the first
(HDC), have expanded the resources for            50-30-20 building was completed in 2004
assisted housing. Very similar in structure       with 231 residential units. Other 50-30-20
to a state HFA, the city’s housing finance        developments with 500 housing units are
corporation issues tax-exempt and taxable         under construction.
bonds,12 while using its sizeable reserves to
offer housing opportunities beyond those          In 1985, New Jersey raised its realty transfer
available with federal subsidy.                   tax to serve as a dedicated revenue stream
                                                  to fund the implementation of the Fair
HDC’s creation of the New Housing                 Housing Act of the same year.             The
Opportunities Program (NewHOP) in the             Neighborhood        Preservation     Balanced
late 1990s was welcomed by housing                Housing program provides grants and
advocates as an important step toward             loans to municipalities seeking to fulfill
stabilizing and renewing New York’s               their fair share obligations under the state’s
neighborhoods.          NewHOP provides           Fair Housing Act. Among the eligible uses
families with incomes up to 175 percent           of the funds are: rehabilitation of
AMI with the opportunity to find modern           substandard housing units; creation of
housing that is within their financial reach.     accessory apartments; conversion of
The NewHOP program offers developers a            nonresidential     space     to    residential
first mortgage financed with the proceeds of      purposes; construction of new housing; and
the sale of taxable bonds. HDC reserve            providing assistance to local housing
funds provide up to $45,000 per unit to           authorities, nonprofit organizations or
reduce the interest rate on the second            limited dividend housing corporations.
mortgage to one percent.           In many
instances, the city also donated the land on      In addition to its low-income housing
which the NewHOP developments were                efforts, New Jersey has also focused in
built. Since its implementation in 1998, the      recent years on financing market-rate
NewHOP         program      has     financed      housing in poor urban areas of the state. In
approximately 5,000 units of middle-income        response to former Governor McGreevey’s
housing.13                                        housing plan that focused on urban
                                                  redevelopment, the NJHMFA created
HDC’s newest multifamily financing                various rental programs that emphasize
vehicle, the 50-30-20 Mixed Income                market-rate and mixed-use housing. The At
program, combines LIHTCs to produce 20            Home Downtown program assists the
                                                  construction or rehabilitation of 1- to 4-unit
12 In 2004, the NYC HDC became the number 1       buildings with commercial space on the
issuer of multifamily bonds in the nation ahead   ground floor.      The City Living new
of the NYS HFA ranked 2nd and the 8th ranked      construction program, supported with $15
NJHMFA. SDC & Bear Stearns Ranking of             million of agency administrative funds,
Multifamily Bond Issues                           finances market-rate developments with 50
http://www.nychdc.com/pdf/about/rankings.         or more residential units.
pdf.
13 NYC Independent Budget Office, A Closer
                                                  In addition to allocating federal housing
Look at the New Housing Opportunity Program,
                                                  resources, Connecticut’s housing finance
Background Paper (July 2004).


                                                                                             91
agency administers the state’s Housing Tax       Housing Finance Strategies for
Credit Contribution (HTCC) and Employer          Balanced Housing
Assisted Housing Tax Credit (EAHTC)
programs.      The HTCC is a nonprofit           The housing finance challenges facing our
multifamily rental program that allows           region will require continued federal
nonprofit developers and managers to             subsidies to support the preservation and
apply to CHFA for an allocation of up to         creation of housing affordable to our lowest
$400,000 in state tax credits. Investors         income residents.        Increasing federal
receive a dollar-for-dollar reduction in their   support for housing is a commonly stated
state tax liability in exchange for their        goal that has been neither consistently nor
financial support of the affordable housing      aggressively pursued by state and local
program. CHFA allocates $5 million in            representatives.     A higher level of
HTCC credits annually, which produced            coordination is needed to press for the
439 affordable units in 2003.                    housing concerns of our region.

Begun in 1994, the EAHTC program allows          In addition to increasing federal, state and
participating employers to set up a              local housing resources, the private sector
revolving loan fund from which eligible          must be further induced to invest in
employees can borrow to purchase a home          housing for families at a broader range of
or rent housing within Connecticut. The          incomes. This could be accomplished by
company's contribution into the fund earns       the judicious use of new subsidy sources
a dollar-for-dollar reduction in tax liability   and through tax expenditure policies.
for their investments. The tax credits are
applied to business taxes incurred in the        1. Coordinate State and Local Advocacy for
income year the investment is made. After        Housing Subsidies.
a minimum five-year period, the unused           Recognizing that the federal government
remainder of the initial capital investment is   provides the majority of housing subsidies,
returned to the firm. A company that does        the region’s government representatives,
not loan at least 60 percent of the fund's       business and real estate groups, as well as
capital within three years is subject to         community development and housing
recapture of some or all of its credits.         advocates need to coalesce around certain
                                                 key issues—public housing, Section 8 rental
Although this program has the potential to       assistance,     and      the   Community
ease employees’ housing needs, there has         Development Block Grant programs—to
been little demand on the part of businesses     present a unified front.
for these tax credits because many
companies are now exempt from the                Any reduction in federal subsidy programs
Connecticut business tax, some small firms       will affect the most vulnerable families in
are discouraged by the administrative            our region.        To prevent this from
requirements of the program, and the             happening, state and local housing agencies
recapture provision put in place in 1998         in our region could better coordinate their
cooled the interest of even experienced          response and efforts in Washington, DC. A
participants.                                    small public housing agency in Litchfield
                                                 County may seem like a world apart from
                                                 the New York City Housing Authority with
                                                 its 500,000 residents, and yet they all rely on
                                                 the same sources of funding. One possible


92
strategy is to establish a coordinating group    by the traditional federal subsidies such as
that would create a housing database             tax-exempt bonds and LIHTCs.             As
related to Congressional districts. In such a    discussed earlier, New York City’s Housing
way,      regional      representatives     in   Development Corporation has developed
Washington DC would better understand            several middle-income housing programs
the budget impact in their areas. A better       that could serve as models.
coordinated policy analysis and advocacy
campaign is sorely needed to resist              Connecticut is now in an excellent position
proposed budget cutbacks and detrimental         to break the 80/20 mold with its new
program changes.                                 dedicated source of funding. On July 2005,
                                                 Connecticut Governor Jodi Rell approved
2. Create State and Local Housing                $100 million in general obligation bonds to
Resources to Fund Housing for Moderate-          fund a Housing Trust Fund for Economic
and Middle-Income Families.                      Growth and Opportunity for 5 years. More
A new source of revenue, independent of          importantly, the new law also created an
federal subsidies and limitations, would         additional $30 document recording fee that
allow HFAs and localities to take a lead role    will support a multi-purpose fund. With $4
in creating truly sustainable mixed-income       remaining at the local level, the rest of the
housing that blends public and private           document fee will be evenly divided among
investments to serve families at a broader       four established purposes: farmland
range of incomes. Federal subsidies have         preservation,    open     space,     historic
income targets of 80 percent AMI or below.       preservation, and affordable housing. It is
Only a few programs in the region address        estimated that CHFA will receive $6 million
the large income gap between the assisted        annually to fund existing or new housing
and market-rate housing.                         programs.

In strong market areas such as Manhattan,        3. Promote Tax Credits for Employer-
these federal subsidies are used to produce      Assisted Housing Opportunities.
20 percent of the units for families with        Employer-assisted     housing      programs
incomes in the bottom quintile while the         benefit all parties involved. Companies
other 80 percent of the housing is market        benefit by building employee loyalty and
rate (80/20 projects). In weaker real estate     reducing turnover. Employees gain access
environments, government agencies often          to homeownership education as well as
couple various subsidies in order to achieve     downpayment or rental assistance while
larger affordable set asides or even to          reducing their commuting time.           The
ensure 100 percent low-income housing.           community as a whole benefits from a more
                                                 stable population, higher real estate tax
In both cases, the 80/20 and the all-            revenues, and decreased traffic congestion.
affordable models exclude moderate- and
middle-income families whose incomes             States can take the lead in encouraging
exceed the limits for the low-income units       employer-assisted housing opportunities.
and yet, are not high enough to compete for      Like    Connecticut’s   Employer-Assisted
the market-rate units. As a result, these        Housing Tax Credit program, states can
families often cannot afford the modern,         provide local businesses that offer their
multifamily housing being created in our         employees     downpayment       or     rental
region. Local sources of housing funds           assistance a reduction in tax liability. To
should be devoted to fill the large gap left     lessen the problems experienced by the


                                                                                           93
Connecticut program, future initiatives in      broader GSE reforms and the latest
our region might benefit by borrowing           incarnation is part of the Hurricane Katrina
features from other established programs.       recovery legislation introduced in February
                                                2006.
One such example is the Illinois Housing
Tax Credit, which was begun in 2002 as a        However,      if    the    proposal   regains
five-year initiative to encourage private       momentum in the current legislative
corporations to invest in affordable housing    session, it might be more effective to
and which was recently extended for             structure it specifically for acquisition
another five years. The Act provides a 50-      purposes for permanent affordability of
cent tax credit for every dollar invested in    rental housing.       Increasingly, privately-
homeownership or rental assistance. The         owned assisted projects are reaching the
tax credit can be carried forward for up to     end of their mandated affordability periods.
five years and can be transferred under         Given the strong demand for housing and
some circumstances. Moreover, the Illinois      rising market rents in some areas of our
Housing Development Authority matches           region, some owners are choosing not to
the employer’s contribution up to $5,000 per    renew their assisted contracts or are
eligible   household.         The    Chicago    prepaying       their     government-insured
Metropolitan Planning Council’s Regional        mortgages.
Employer Assisted Collaboration for
Housing has publicized the state tax credit.    HUD’s Mark-Up-To-Market program and
The MPC has also helped companies design        other local efforts have delayed the flow of
their employer-assistance housing program       opt-outs and buy-outs by increasing the
and have matched employers with local           financial incentives for the owner in
housing counseling organizations.               exchange for an additional period of
                                                regulation. However, these efforts only
A program similar to Illinois’ is currently     delay the conversion to market-rate housing
under consideration in both chambers of the     since these developments will once again
U.S. Congress. Senator Hillary Clinton and      reach their maturity date and the owners
Congresswoman Nydia Velazquez of New            may wish to exercise their legal right to
York sponsored the bills although, to date,     leave the subsidy program.
they have garnered few other cosponsors
from our regional delegation.                   Lack of funding has prevented the adoption
                                                of a permanent preservation strategy. A
4. Create Acquisition Funds to Preserve         national or regional acquisition fund could
Existing Low-Rent Housing.                      allow for some of the expiring affordable
A bill proposing the creation of a national     developments to be purchased by local
housing trust fund has been introduced in       housing agencies or nonprofit organizations
the last three sessions of the U.S. Congress    to ensure permanent affordability. The
but has yet to be adopted. The various          acquisition fund might also provide the
proposals would set aside a percentage of       new owners with technical assistance as
the after-tax profits of the GSEs for the new   needed.      Such capacity-building efforts
construction or rehabilitation of rental and    would increase the likelihood that the
ownership housing for low- and extremely        properties are operated in a way that
low-income households. While the first          ensures their long–term physical and
attempt was a stand-alone bill, other trust     financial viability.
fund efforts have been incorporated into


94
5. Create and Expand Subsidy Grant               Low-income homeowners may already be
Programs for Low-Income Housing.                 stretched financially by the monthly
As has been discussed previously, the            mortgage and tax payments, leaving some
equity raised through the sale of tax credits,   of them unable to afford maintenance and
the low-interest financing provided by           repairs. For these owners, any decrease in
federal tax-exempt bonds, and state HFA          income due to divorce, job loss, or illness
programs are often not enough to                 could significantly jeopardize or potentially
sufficiently lower rents for very low income     terminate their ownership.             More
households. In the past, Section 8 vouchers      homeowner programs are needed to
have been utilized to afford the                 address repair needs and to provide a safety
development to carry a larger mortgage           net for owners who experience income
loan. However, this option is increasingly       declines.
unavailable as Congress has barely
maintained its funding for existing Section 8    A few such models currently exist in our
vouchers.                                        region although they can be expanded and
                                                 replicated throughout our metropolitan
In the years ahead, state and local subsidies    area. New York City’s Home Improvement
for low-income housing developments must         Program, which is funded with city general
be offered as grants rather than as              revenues, provides up to $20,000 as a low-
additional low-interest loans. The New           interest repair loan for small homeowners.
York HFA already operates several                The flexibility of the Pennsylvania HEMAP
programs that offer per unit grant subsidies     program, discussed previously, allows for a
funded through the state’s Housing Trust         variety of ways to help homeowners avoid
Fund.     New York City’s HDC also               foreclosure. They can receive up to 2 years
structures some of its subsidies as grants       of mortgage assistance and caps their
that lower the development costs for             housing costs at 40 percent of income.
multifamily housing.       These programs
should be expanded and replicated in other
parts of the region in order to meet the
needs of our region’s growing low-income
population.

6. Provide Additional Support for Low-
and Moderate-Income Homeowners.
The individual benefits of homeownership
are      undisputable;     they     include
accumulation of wealth through home
equity, tax advantages, and a greater sense
of security. However, as more federal and
state programs aim to increase the number
of lower income homeowners, it is crucial
that the assistance not end when the home
mortgage loan is closed.        Additional
supports may be needed to sustain their
ownership.




                                                                                           95
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