The Effects of Gentrification on Subsidized-Housing Programs in New York City

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The Effects of Gentrification on Subsidized-Housing Programs in New York City The Effects of Gentrification on Subsidized-Housing Programs in New York City A Thesis Presented to the Faculty of Architecture, Planning and Preservation Columbia University in the City of New York In Partial Fulfillment of the Requirements for the Degree Master of Science in Urban Planning Sinae Lee May 2016 Sinae Lee, The Effects of Gentrification on Subsidized-Housing Programs in New York City Abstract Over the several decades, rent-burdens for low-and moderate-income New Yorkers have continued to increase, leading to demands for more affordable housing. This trend has become only worse with citywide gentrification over time. Federal, state and city governments have implemented various subsidized housing programs to support more affordable housing units. One of the key determinants in stocks of affordable units is the opt-out rate, which is dependent on property owners’ decision to leave the program after the contract term. Thus, information on what factors make owners stay in or leave subsidy programs can be useful in policy-makers’ effort to preserve affordable housing units. This study examines factors associated with gentrification and their relationship with opt-out rate of subsidized rental housing programs. Through a statistical logistic regression model, this study investigated if factors associated with gentrification, such as median income, nearby property prices and other neighborhood conditions, have bigger impacts on owner’ decisions to stay or leave subsidy programs than other factors that generally affect property prices or owner’s decision to change property prices. The results suggested that gentrification predictors have substantial impacts on property’s opting-out, comparable to other control factors. The findings of this study highlights the importance of using extensive neighborhood data to develop an effective affordable housing preservation strategy. 2 Sinae Lee, The Effects of Gentrification on Subsidized-Housing Programs in New York City Table of Contents 1. Introduction ………………………………………………………….…………… 4 2. Background 2.1. Affordable Housing Challenge in New York City …………………….…… 5 2.2. Subsidized Housing Programs ……………………………...….…………… 7 2.2.1 Overview of Subsidy Programs …………………....….…………… 7 2.2.2. Opt-Out of Subsidy Programs …………..………....….…………… 9 2.2.3. Factors Associated with Opt-out .…………………..…..………… 10 2.2.4. Neighborhood Condition Factors …………………………....…… 11 2.3. Gentrification in New York City …………………………...….……….…… 12 3. Data and Method 3.1. Data Collection ……………………..…………………..………………… 16 3.2. Methodology ……………………..……………..………..………..……… 16 3.2.1. Regression Model …..……………..…………....………..……… 18 3.2.2. Variables ……………..………………..………..………..……… 18 3.3. Results ……………………..………..…………..………..………..……… 22 4. Conclusion ……………………..………..…………..………...………..……… 28 Reference ………………………………..…………..………...………..……… 31 3 Sinae Lee, The Effects of Gentrification on Subsidized-Housing Programs in New York City 1. Introduction Over the past decades, New York City has witnessed increasing rent-burdens for low-and moderate income renters, and a need for more affordable housing has grown accordingly. Several federal and state subsidized housing programs, such as U.S. Department of Housing and Urban Development (HUD) financing and insurance programs, HUD project-based rental assistance, the New York City and New York State Mitchell-Lama Programs, or Low-Income Housing Tax Credits (LIHTC), have been implemented to create and preserve affordable rental units. Under these programs, private property owners keep rents affordable for the duration of the subsidy term, and upon the expiration of the contracts, they may leave the program. This indicates that the change in the stock of affordable housing units can be heavily dependent on owners’ opt-out rates, not just on new development. Thus, for policy-makers who strive to preserve affordable housing units, it is important to identify what factors make owners stay in or leave subsidy programs. These factors can vary from individual property’s characteristics to neighborhood conditions where the subsidized housing units are located. However, despite the importance, there have not been sufficient studies conducted on these factors. In this sense, this study can shed some lights on this important subject, with a special focus on neighborhood conditions. The findings of this study can be useful in devising incentives for owners to stay in, or even newly opt in subsidized housing programs. 4 Sinae Lee, The Effects of Gentrification on Subsidized-Housing Programs in New York City 2. Background 2.1. Affordable Housing Challenge in New York City For decades, low and moderate income New Yorkers have struggled to find affordable housing in the City’s expensive housing market, and this challenge has only worsened over time. As Table 1 indicates, adjusted to 2010 dollars, while the city’s median household income showed a modest increase from $49,693 to $50,886 between 1970 and 2010, the median rent has almost doubled from $555 to $1,004. In other words, the city’s median household income has remained stagnant, whereas the median rent has been rising considerably faster between 1970 and 2010. 1970 1980 1990 2000 2010 Total Occupied 2,836,872 2,788,530 2,819,401 3,021,588 3,109,784 Housing Units Renter Occupied 76.4% 76.6% 71.4% 69.8% 69.0% Units Median Household $49,693 $40,645 $51,865 $50,539 $50,886 Income (2010$) Median Rent (2010$) $555 $628 $779 $853 $1,004 Rent-burdened 28.5% 38.6% 39.0% 40.7% 48.7% households Severely Rent - 20.1% - 22.3% 26.3% Burdened households Table 1. Housing in New York City Source: NYU Furman Center, original data retrieved from U.S. Census, American Community Survey, New York City Housing and Vacancy Survey. As a consequence of these trends, a significant number of New Yorkers have been faced with increasing rent burdens. One of the commonly accepted definitions of a “rent-burdened” household is one that pays more than 30 percent of its income on rent. A “severely rent-burdened household” would be paying more than half of its income on rent (NYC Department of City 5 Sinae Lee, The Effects of Gentrification on Subsidized-Housing Programs in New York City Planning & NYC Department of Housing Preservation & Development, 2015). By this definition, the number of rent-burdened households in New York City has risen sharply over decades, to almost 50 percent of all renter households, and the share of severely rent burdened households amounted to 26 percent, as illustrated in Table 1. Although this rising rent burden is a general trend for all renter households, an analysis of rent burden by income band indicates that lower income households tend to face higher rent burdens. As Figure 1 shows, households at low income bracket or below1 pay more than 30 percent of their incomes toward rents, experiencing serious rent-burdens, while moderate and middle income households pay less share of their incomes to rents. Figure 1. Median Gross Rent to Income Ratio by HUD Income Limits, New York City 2011 Source: 2011 NYC Housing and Vacancy Survey, Mandatory Inclusionary Housing, NYC Department of City Planning, NYC Department of Housing Preservation & Development. (2015). 1 HUD defines income limits as follows. Based on Area Median Income (AMI) for a given geographic area, generally a Metropolitan Statistical Area, households who earn less than 30 percent of the AMI are considered to be extremely low-income, between 30 percent and 50 percent of AMI to be very low-income, between 50 percent and 80 percent of AMI to be low-income, and between 80 percent and 120 percent of AMI to be moderate-income. 6 Sinae Lee, The Effects of Gentrification on Subsidized-Housing Programs in New York City 2.2. Subsidized Housing Programs 2.2.1 Overview of Subsidy Programs To reduce the burden on a number of rental households in New York City, the city, state and federal governments have come up with various affordable housing programs that preserve and provide affordable housing stocks. Besides public housing apartments that are owned and operated by the New York City Housing Authority (NYCHA), a large share of affordable housing units have been provided through subsidy programs. Under these initiatives, private developers build and keep housing stocks affordable to low and moderate income households in exchange for subsidies for a set time period. Major subsidy programs through which a large share of affordable housing units were provided include HUD financing and insurance programs, HUD project-based rental assistance, Low Income Housing Tax Credits (LIHTC), and Mitchell- Lama program. 1960s 1970s 1980s 1990s 2000s HUD financing and insurance 3,079 11,361 14,898 995 173 HUD financing and insurance/project-based rental 467 7,494 22,797 5,326 2,915 assistance Project-based rental assistance 891 4,889 11,803 2,164 1,390 Project-based rental assistance/Mitchell-Lama 0 22,996 248 0 0 Mitchell-Lama 14,772 19,199 0 0 0 Mitchell-Lama/HUD financing and insurance 0 1,788 0 0 0 HUD financing and insurance/project-based rental 0 9,029 0 0 0 assistance/Mitchel-Lama LIHTC 0 0 2,928 29,697 38,383 LIHTC/HUD financing and insurance 0 0 327 1,358 0 LIHTC/project-based rental assistance 0 0 0 103 0 LIHTC/HUD financing and insurance/project-based 0 0 0 0 802 rental assistance Table 2. Number of Units Developed by Decade and Program Subsidy Category Source: Reina & Williams (2012). 7 Sinae Lee, The Effects of Gentrification on Subsidized-Housing Programs in New York City HUD Financing and Insurance The Federal Housing Administration (FHA) of the US Department of Housing and Urban Development (HUD) have financing and insurance programs that provide mortgage subsidies to private owners of multifamily housing to reduce development costs. In return, HUD required owners to agree to low income ‘use restrictions’ which restricted occupancy to households that meet the programs’ income limits and restricted contract renters. A total of 630 properties with 86,600 units of affordable housing were developed through these programs (NYU Furman Center, 2011).
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