New York City’s Most Misallocated Asset Could Help Solve Its Housing Crisis
By Robert Knakal March 12, 2024 10:16 am
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What would you do if you desperately needed money and desperately needed more housing, and were sitting on an asset worth about $26 billion?
If you were New York City, I guess the answer would be, “Not much!”
What I am referring to is the massive amount of land that NYC owns: approximately 196 acres of mostly prime land. Oh, and that’s just in Manhattan south of 96th Street on the East Side and south of 110th Street on the West Side.
Yes, that’s right. I have counted it all. The city in this area owns about 8.5 million square feet of land currently under 20 million square feet of public housing. This stock is mostly not in great shape as evidenced by the horror stories reported in the media almost monthly. And the buildings are in such bad shape, with so much deferred maintenance, that investing in these buildings is throwing good money after bad.
During the pandemic, I did a walking tour of every street in this area of Manhattan. One of the most stunning impacts the tour had on me was the minuscule lot coverage public housing has relative to private sector housing. In the private sector, lot coverage is probably 80 percent on average. In public housing, the lot coverage is probably in the 12 to 15 percent range. This is a very important fact.
The reason coverage is so important is because new buildings can be constructed on most sites without having to relocate any tenants. There are superblocks on which 1,500 people might live today while there could be 15,000 living on that land if it was used properly. A new building could be constructed, and tenants asked to move 100 feet into a brand-new building at the same rent. Who wouldn’t want to do that? Then the older buildings can be demolished to make way for more new buildings.
There are currently about 13 million square feet of unused air rights on city land in the area I tracked, and that is with poor zoning. These parcels should be rezoned to a 10 floor area ratio, which is a reasonable residential density given where most of this land is.
For example, from 14th Street south to just beyond the Brooklyn Bridge is essentially prime waterfront property that could easily accommodate this zoning or higher. This rezoning would mean 85 million square feet should be sitting on this land rather than the 20 million feet that exists. Each of those 65 million buildable square feet would have an average value of about $400 today, or a total of about $26 billion. Some of this land could be sold; some ground-leased to provide an annuity for the city or financed to provide a lump sum of cash; and some could remain city-owned. And we would have 100,000 new units of housing for folks to enjoy.
Regardless of how you look at it, it is nothing short of wasteful that all of this land is just sitting there while there is such a dire need for housing people within all economic strata. This is the answer.
And these numbers are just in prime Manhattan. Can you imagine what could be done if all of the city-owned land in the outer boroughs was counted and included in a massive housing initiative?
Robert Knakal is an independent broker in New York City.
