The lack of affordable housing is a huge threat to American society and economy. Conservative estimates suggest the country needs nearly seven million single-family housing units due to a 20-year period of underbuilding, and a gap economists estimate costs the economy at least 2 percent of the US GDP each year. Those who are most likely to bear the consequences are low- and moderate-income folks, who wind up in poorer neighborhoods with fewer social services, lower quality education, and higher crime, and subject to higher pollution, longer commutes, and other health risks.
As the flooding of basement apartments in New York City this summer demonstrated, affordable housing is also a climate equity issue. Many basement apartments in the city are illegal—they don’t meet the requirements for light, air, sanitation, and exits—and lack features that would make them safer as a result.
Basement apartments are one form of accessory dwelling unit (ADUs), which also include “granny flats,” in-law apartments, converted garages, casitas, and other forms of infill housing added to single-family properties. ADUs can be an affordable rental option, since they are generally small and often repurpose existing space. Their construction can be done at lower cost than other housing options, since the owner already has title to the land. That makes it quicker to develop ADUs compared to other forms of affordable housing, like multifamily homes underwritten by government or philanthropic funding, or inclusive zoning, where a developer agrees to rent a certain percentage of units in a new development at affordable rates. Owners may have a financial motivation to create an ADU for rental income, or as housing for a family member, once zoning barriers are removed.
The Hudson Valley region forms a microcosm within the national housing crisis: all the pressures affecting affordable housing elsewhere are present here. We’ve seen the influx of new residents moving from urban centers because of the pandemic, for example, and the rising prices that started even before COVID-19 have only accelerated.
The same barriers to countering the housing crisis exist here, as well. In other parts of the country, state legislatures, such as Oregon, have passed new laws that directly attack residential zoning, which more than any other factor has slowed the building of new housing where people want to live and work. Bills have been introduced in the New York State Senate and Assembly that propose a top-down overhaul of zoning regulations, in essence standardizing zoning ordinances across the state that relate to ADUs and removing many of the prerogatives of municipal zoning boards that historically have blocked higher density developments in general, and ADUs specifically.
But so far, New York has refused to act.
The Housing Crisis
There are really two different housing crises: a lack of affordable housing for low- and moderate-income residents, and a skyrocketing marketplace for single-family homes among high-income residents. The latter trend has been brought into high relief by the pandemic, while the former is the outgrowth of long historical patterns of racist segregation: the redlining that forced African Americans and other marginalized groups into less desirable areas and blocked their access to the financial system for acquiring property and building equity.
But in one sense, these two crises are aspects of the same problem: land use regulation (zoning and other laws) that block the construction of new homes or the repurposing of existing ones, therefore placing arbitrary caps on housing and limiting migration from less attractive neighborhoods into more attractive ones.
This is a national problem, and in particular, low-income renters are those most disadvantaged by the housing system. As Wally Adeyemo, the deputy secretary for the treasury, pointed out in June, “no state in the country has an adequate supply of affordable housing for the lowest-income renters.”
US housing stock grew at an average annual rate of 1.7 percent between 1968 and 2000, but that rate fell to 1 percent in the subsequent two decades, according to the June 2021 report “Housing is Critical Infrastructure,” prepared for the National Association of Realtors. Since 2010, the rate has been even slower: 0.7 percent.
To fill that underbuilding gap over the next decade, the construction of new homes would have to rev up to a pace of at least two million units per year, an increase of 60 percent over 2020. “In terms of lost economic activity, this prolonged shortfall in residential fixed investment translated to a $4.4 trillion gap in housing investment during the past two decades,” the researchers write.
The Root Cause of the Crisis? Exclusionary Zoning
Moody’s sums this situation up in one line: “Much of the housing shortage that has developed since the financial crisis is due to land constraints.”
Those hit hardest by the rising cost of housing are low- and moderate-income renters priced out of attractive locales. Those who benefit? Homeowners who sell property in high-priced neighborhoods, and landlords who are able to charge higher rents.
These market forces lead to the concentration of affluent people in the most attractive neighborhoods, and segregation of low- and moderate-income citizens—who are often people of color—in less desirable settings. As two of the leading US housing economists, Edward Glaeser and Joseph Gyourko, put it, “the great challenge facing attempts to loosen local housing restrictions is that existing homeowners do not want more affordable homes: they want the value of their asset to cost more, not less.”
That residential “caste system” is maintained today by zoning regulations and related conventions, rather than the explicit conspiracy of redlining between banks, real estate businesses, and governments that was widely practiced in the 20th century. But the effect is the same: would-be residents with lower incomes are being blocked from moving into areas with better schools and better public services, and are still being kept out of the wealth-creation opportunities of property ownership.
The University of Berkeley’s Othering and Belonging Institute attempted to quantify what racial residential segregation in the US looks like in the 21st century. In a report published this June, they found that 83 percent of neighborhoods that were given redline in the 1930s by federal mortgage policy were as of 2010 highly segregated communities of color, and that 81 percent of metro regions with a population above 200,000 were more segregated in 2019 than they were in 1990.
In other words: Residential segregation is increasing.
Some opponents of loosening zoning restrictions argue that we are running out of space to build, and that keeping restrictive zoning in place is necessary to maintain the character of neighborhoods. Wharton researchers have demonstrated this is not true:
Community wealth is strongly positively correlated with the degree of local land use regulation…If a fundamental scarcity associated with communities “running out of land” were causing the implementation of more regulation, one would expect the most highly regulated places to be the most dense. That they are not casts serious doubt on the validity of that hypothesis and suggests researchers and policy makers should look elsewhere for an explanation.
The rising cost of building housing is not driven only by rising land values, labor, and construction costs. In New York City, for example, researchers have determined that maintaining lower density is a major factor in driving higher building costs for new housing. If New York allowed more of the sorts of densities that were more common historically, “rents and house prices would fall towards construction costs, and the city would at least double in population, to over 40 million people.”
The direct economic benefits of confronting this shortfall in housing are staggering:
The total economic impact of building 550,000 additional new homes per year for the next 10 years would support an estimated 2.8 million new jobs, spread across numerous sectors in the economy, and generate approximately $411 billion per year in additional economic activity (including direct, indirect and induced measures). This additional new residential construction would also be expected to generate more than $53 billion dollars in new annual tax revenue, including $18 billion in state and local taxes and $35 billion in federal taxes, reflecting a wide range of activity, including considerable new federal income taxes related to the new job creation.
There is every reason for the country—and every state and region—to push hard toward this new day for housing. The only rationale for protecting the status quo is pandering to the propertied.
Accessory Dwelling Units Are the Tip of the Spear
ADUs are not a new idea—they have been around for decades, in municipalities across the country. However, the nature of American zoning is based on local municipalities determining local rules about their legality, size, lot setbacks, heights, and parking requirements. This approach leads to few ADUs being approved and built over the past 20 years, except in certain farsighted communities.
Everything terrible about housing in America is at its worst in California. Median house prices there are now above $800,000, and half of all unhoused Americans live in the state, which has 12 percent of the US population.
However, California’s last two governors, Jerry Brown and Gavin Newsom, plus the state legislature, which now has a Democratic supermajority, have worked aggressively to amend the state’s zoning regulations. In early 2021, a set of laws was passed to make ADUs legal in zones that allow single-family and multifamily uses. These and earlier regulations have been formulated to boost the number of ADUs by decreasing the red tape involved in building them. These laws have evolved to counter the biggest traditional barriers to ADU, as made clear in Los Angeles, which was forced by SB 1069 to open up to ADUs. Permit applications in Los Angeles jumped from 257 in 2016 to 3,818 in 2017, and by 2018 were 20 percent of all housing permits in the city.
In effect, the new structure of California zoning is geared to stimulate the creation of new, affordable housing, and to remove zoning barriers that slow or completely block various sorts of housing in traditional single-family housing zones. The first aspect of this is taking away much of the local control over the process of permitting and compelling local agencies to follow state-ordained procedures and processes, like the duration of local review before granting permits, requirements for additional parking, restrictive setbacks for converted garages and other detached ADUs, and requirements for “passageways”—paths from the street to the ADU—that are theoretically a safety requirement but are used to rule out many units from being built. New rules now allow for the construction of up to four ADUs in what were formerly considered single-family lots, as well as duplexes.
A group of researchers at the Berkeley Terner Center for Housing Innovation found that “one of the state’s more effective housing solutions has been recent laws removing barriers to the construction and financing of ADUs.” They go on to estimate that 700,000 new housing units would become “market feasible”—in other words, right-side up economically for homeowners and attractive for bank financing—which would represent a 40 percent increase in existing development potential across single-family housing projects. Since the motivations of homeowners are highly differential, it is difficult to estimate how many units will be built, and therefore how such development would impact housing prices, but it certainly should lead to more low- and moderate-income housing in the state. With these bills, California has taken the lead on ADUs nationally.
What About New York?
The median home value in New York State in June 2021 was $385,000, up 28.3 percent year over year. In the Hudson Valley, home sales grew as homeowners cashed in on the spike in prices, rising the most in Westchester (+60.2 percent), Rockland (+71.6), Orange (+53.5), Dutchess (+56.5), and Greene (+42.9) counties.
In many areas, low- and moderate-income housing is almost impossible to find. The two arms of the housing crisis—exploding prices for single-family homes and the cumulative shortfall of affordable rental units—pinch those most in need.
The Hudson Valley shares this problem, especially parts of Dutchess, Ulster, and Rockland counties, according to Moody’s. Pattern for Progress publishes an annual Out of Reach report that plots the fair market rent (FMR) in the region. In 2021, FMR increased in all nine counties tracked except Westchester, and rents grew faster than wages in six of the nine counties.
In Dutchess County, for example, affording a two-bedroom FMR apartment would cost $1,467 per month, while someone making the average $13.79 per hour can only afford $717 per month. This forces workers to spend too much of their income on housing—if they can even find something available, since the rental vacancy rate in a vast majority of the region’s communities is well under 5 percent, and affordable housing complexes have waiting lists ranging from two to five years.
New York is an outlier regarding the degree of control it allows localities in land use regulation, as Noah Kazis of NYU’s Furman Center, a housing and urban policy research institute, wrote in November 2020:
New York stands alone among its peer states—i.e. coastal states with high housing costs and healthy regional economies—in giving its local governments such broad authority over local land use…Essentially every one of New York’s peer states with respect to housing markets—Massachusetts, Connecticut, New Jersey, Pennsylvania, Illinois, California, Oregon, Washington, and Florida— have adopted state-level reforms to promote housing development in high-cost suburban areas, and the few similarly-situated states that have not are prominently debating the issue.
Two New York legislators—Senator Pete Harckham (D, Senate District 40, Westchester and lower Hudson Valley) and Assemblymember Harvey Epstein (D, Assembly District 74, Manhattan)—have sponsored a pair of bills that echo the efforts in California and other peer states.
I spoke with Senator Harckham, who has a long background in housing issues, starting as a board member of A-HOME, a nonprofit that builds affordable housing in Westchester, and working with Allied Community Enterprise on accessory units in the suburbs and rural areas. As a Westchester County legislator, Harckham was in the fray of the Westchester federal housing suit, which involved the county diverting funds designated to fair housing to other projects. Harckham explained that he voted for the settlement with the Anti-Discrimination Center after it sued the county for false certifications of compliance with fair housing principles; the court found that Westchester had drawn down $52 million under false pretenses. Harckham was hired by Governor Andrew Cuomo to administer the rollout of actual fair housing in the county. Subsequently, he ran for the Senate.
Harckham says that he was motivated to draft new state-level legislation due to frustration with local efforts being stymied. “Where I am in northern Westchester, there are some communities that have very good ordinances,” he says. “But we know throughout the state, they have ordinances in a sense to blockade us.”
Harvey Epstein has a similarly long involvement in housing issues, starting with the NYC BASE Campaign, a coalition of community groups, advocates, lawyers, and planners fighting to make basement apartments safe, legal, and affordable. Three years ago, the campaign launched a pilot program for ADUs, but Epstein realized that statewide action was needed. “We started building up a coalition over the last year and a half or two, figuring out what our priorities are,” he says. “We’re gonna manage it in the context of larger housing struggles. ADUs are a statewide problem and need a statewide solution.”
One of the most sweeping changes laid out in the Harckham/Epstein bill would overturn localities’ ability to determine their own ADU ordinances. Right now, that authority is protected by New York’s strong home rule powers, which are among the most far-reaching in the country for how much control they give local governments over planning and quality-of-life issues. Joe Czajka, who leads the Center for Housing Solutions and Community Initiatives at Pattern for Progress, is “not so sure” that overturning home rule is a good thing. “If the state were to do that, there has to be a system in place,” he says. “It’s got to be established ahead of time, there needs to be a clear role for each of the entities involved, and there needs to be a very specific approval process. Without that, it’s going to be very convoluted.”
Czajka says he has not yet read the proposed law in full, but that designating the state Division of Homes and Community Renewal to lead review and enforcement would address his concerns.
Beacon Mayor Lee Kyriacou also has not read the proposed law, but sketched out a fairly progressive outline of what Beacon’s City Council might be planning, which lines up well with the state law. “What we’re proposing is to allow an accessory apartment, probably allowed not only in single-family neighborhoods but other areas, probably still requiring owner-occupied,” Kyriacou says. “But I think we would change the 600 square feet maximum to allow larger accessory dwellings (where the property can tolerate it), limiting the setback requirements, so that you can get them onto smaller lot sizes. We will probably remove the special use permit requirement and allow it as a matter of right, and then have a more rapid approval process.”
The Proposed Legislation
The Harckham and Epstein bill (S4547/A4854) cuts through the arcane and highly variable zoning rules and regulations across the state, covering ADU regulations and ordinances; handling applications, permits, and appeals; state review and enforcement; a low- and moderate-income homeowners program; and evictions.
First and foremost, the proposed law establishes uniform ADU regulations and ordinances and mandates that municipalities shall create ordinances that “provide for the creation of ADUs.” The bill sets a legal baseline allowing at least one ADU on single-family lots, which cannot be sold or conveyed independently. These include attached garages, storage areas, basements, cellars, similar spaces, or an accessory structure or detached from the proposed or existing primary dwelling, which spans the range from basement apartments to freestanding backyard granny flats.
Municipalities cannot create ordinances that establish certain limitations on ADUs; specifically, they must follow the guidelines of the bill on ADU size, and not set onerous minimum or maximum sizes intended to block ADUs. In particular, the bill blocks municipalities from requiring additional parking for ADUs. For example, the conversion of a garage to an ADU shall not require the parking lost to be replaced elsewhere on the lot.
I have reviewed a number of Hudson Valley zoning regulations regarding ADUs, and the proposed law is significantly more permissive than any I have seen. Its parking requirements are likely to be a point of contention. Water and sewage was another concern expressed by the legislators, Kyriakou, and Czajka. Many localities have aging, overused sewer systems, and limited water. So bringing ADUs onto those systems may pose challenges that need to be addressed in any final law.
The bill lays out processes and procedures that municipalities and state agencies must follow for handling applications, permits, and appeals. In particular, applications for ADUs must be handled “ministerially,” which is to say without discretionary reviews or hearings, and municipalities must approve all applications that meet state rules within 60 days.
The proposed law names the New York State Division of Homes and Community Renewal as the division to review and enforce the law, and spells out the steps toward ensuring that local ordinances meet the law’s requirements. It also lays out a procedure to fix any conflicts between state and local regulations, and requires that localities send their own ADU ordinances to the division within 180 days of the enactment of the law. The state will create a “model ordinance” which localities can simply adopt. Any local ordinance that blocks the intent of the state law will be null and void.
One of the most progressive and innovative aspects of the proposed law is the formation of a lending program to assist low- and moderate-income homeowners financing ADUs. At this time, the plan is just an outline of what is intended, but it is sweeping. Aside from the financing and various programs to technically assist such homeowners in ADU creation and management, the bill offers a below-market rate for 15 years to units financed through this program—a clear effort to jumpstart affordable housing.
Finally, the proposed law details a series of conditions to limit eviction of ADU tenants to “good cause” only, meaning failure to pay rent, violating terms of occupancy, being a nuisance, breaking the law, or using the unit for illegal purposes. In all these cases, the infractions have to be proven in court. At the end of the lease, there is a loophole that allows eviction if the homeowner or a close family member needs to live in the unit.
Epstein and Harckham say they have heard a great deal of feedback from legislators, county executives, mayors, and policy experts and that we should expect a redraft of the legislation—with potentially quite different language—in the next legislative session.
Many factors are making the housing crisis in New York worse, but two stand out: underbuilding over the past few decades, and statewide exclusionary zoning. The housing market has led us to a shortage of millions of housing units, and the economic impact of that has fallen hardest on low- and moderate-income families.
New York’s government cannot control the housing market by the stroke of a pen, legislating housing into existence. However, the proposed legislation from Harckham and Epstein can pull New York into the 21st century through statewide redress of arcane and restrictive zoning that blocks creation of accessory dwelling units. These and other housing initiatives are essential if New York is to close the housing gap and house our people.