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As New York Rezones, Developers Insist Density Doesn't Have To Mean Displacement

Neighborhood rezonings can be divisive, often seeming to pit the real estate community against local community members who are afraid of disruptive change.

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The Crossing at Jamaica Station

Widespread zoning changes have been a signature policy for Mayor Bill de Blasio, who in 2015 announced a plan to rezone 15 neighborhoods as part of his pledge to create 300,00 affordable housing units by 2026. Planners are trying to create benefits to when they rezone a neighborhood and ease the affordable housing crisis that continues to grip New York City.

But each rezoning process often raises the ire of locals, many of whom fear rising costs, overburdened infrastructure and displacement of longtime residents. Commercial real estate players told Bisnow that, although they are challenging and complicated, they need not be so fraught. 

Rezoning takes thoughtful planning, intense local engagement and a commitment from developers and policymakers to follow through on job creation, affordable housing and infrastructure investments, they said.

“If we have proper planning, well laid-out, well-thought-out rezoning, it’s a way to increase the housing stock, not only for the well-to-do, but for every income strata,” BRP Cos. co-founder Meredith Marshall said.

Marshall is speaking at Bisnow’s Hottest Investment Opportunities event May 14, where the impact of rezoning on the city and new areas for investments and developments will all be discussed.

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A courtyard at Industry City, a major development in Brooklyn's Sunset Park

“There’s been a connection to rezoning with gentrification and displacement and other things when really you just have a lack of supply,” said Marshall, whose firm is developing The Crossing at Jamaica Station, a mixed-use complex across from Jamaica Terminal in Queens that will feature 669 affordable units.

The development makes use of a decade-old rezoning in the area, and is one of six projects BRP has developed following a neighborhood rezoning.

“They have to point to something, and they point to rezoning,” Marshall said of neighbors' frequent outcry. “There's a cause and effect that I think is incorrectly assigned to rezoning when in fact it's just lack of housing, tremendous job growth and population growth.”

Housing supply lagging behind population growth has been an ongoing problem in the city. Between 2000 and 2016, the number of jobs in the city went up by nearly 17%, but the housing units went up by just 8%, according to New York University's Furman Center. 

Upzoning with tax incentives is the only solution, some developers argue, to a complex set of challenges — chiefly increasing land costs and construction pricing — that have led to builders opting for luxury condominiums above all else in the city's most desirable areas.

“The magic wand is an upzoning and tax incentives to build like Affordable New York,” Hodges Ward Elliott Managing Director Daniel Parker said.

The city understands the need for a mix of zoning for residential, jobs centers and some industrial use, he added. He highlighted the rezoning of Jerome Avenue in the Bronx, which covers 90 blocks in the poorest congressional district in the United States, according to the New York Times, and may result in 4,000 new affordable units.

“The Jerome Avenue rezoning is an example of a thoughtful rezoning that took into account the local community,” he said. "The city officials really listened to the community and created a plan that served everyone."

Some tenant advocates still harbor concerns about a negative impact on small businesses and low-income residents. 

Inwood’s rezoning last year, which is expected to create 1,600 new affordable units between city-owned sites and the Mandatory Inclusionary Housing program, was mourned by some who saw it as the death knell of the area as a middle-class renters' haven. In East Harlem, which also falls within a federal opportunity zone, advocacy groups fear rising rents will drive more locals out.

In March, plans for a 13-acre rezoning of Brooklyn's Industry City, which would have created the opportunity for 1.5M SF of new construction at the site, including two hotels, screeched to a halt.

Lawmakers wanted more time to examine the potential displacement and gentrification impacts on the working class neighborhood. The rezoning application, which was set to start the Uniform Land Use Review Procedure, was submitted in February. But the owner of Industry City — a partnership between Jamestown, Belvedere Capital, Cammeby’s International and Angelo, Gordon & Co. — have put the process on hold for now, Curbed reported.

Meanwhile, on Staten Island, the Department of City Planning approved a 14-block rezoning of the Bay Street corridor last week, which has critics concerned about the strain on the infrastructure. Borough President James Oddo called the plan “half-assed,” according to Commercial Observer, while the city says the upzoning will generate 1,800 new apartments for 6,500 new residents.

In Gowanus, a plan to rezone the area to spur residential development — which could bring some 18,000 new people there — has some concerned about increased raw sewage in the already-toxic canal.

The city is now weighing a rezoning of SoHo and NoHo that has ignited anxiety among some local artists. The community board has been running public planning workshops.

RXR Realty Executive Vice President Seth Pinsky, a former Bloomberg administration official, said there are legitimate reasons for people to be concerned about increased development, but failing to spur housing construction has an even greater cost: a worsening housing crisis.

“The problems with opponents to development is their answer is always ‘no development.' That’s not an answer,” he told Bisnow. “That’s an exacerbation of the existing problem. The answer is that development has to happen, but it needs to be done more sensitively.”

Developers, Pinsky said, often underappreciate their impact on surrounding development. They should be making sure local residents benefit from the jobs that are created through projects, that affordable housing is built with the new development, the most vulnerable people in the communities are protected from displacement and infrastructure investment is there.

“It’s very difficult to get it right ... There is some evidence that when development happens in [a] neighborhood where it hasn’t happened in the past, that prices rise and the incumbent residents over time are displaced,” he said. “But at the same time, if you prevent development from happening everywhere, the displacement will happen market-wide.”

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Midtown in New York City

The are already clear examples of how a rezoning has been successfully executed and community concerns have been addressed, said Paimaan Lodhi, Real Estate Board of New York senior vice president of policy and planning.

Lodhi was involved in the Midtown East rezoning, which was approved in 2017 following a five-year process, as well as the rezoning of the Garment District that received City Council approval late last year.

The Midtown East rezoning affected about 78 blocks and could allow for around 6.5M SF of new office space to be built in the neighborhood

The Garment District rezoning, which removed a 32-year-old rule that required some landlords to keep industrial space at a one-to-one ratio with office space when they converted manufacturing buildings, included subsidies aimed at keeping garment makers in the area.

Both rezonings, Lodhi said, were unique because they started with in-depth community engagement for about a year, before the process moved to formal public review. The result, he said, was established buy-in from the stakeholders involved in the ULURP process.

“What that has done is it has given you a model that shows when you have a complicated, neighborhood-wide rezoning that this is an approach that can work. You can build consensus, you can solve problems, and ultimately you can do public good,” Lodhi said. “It’s an acknowledgement of all the different voices within an area, it gives them an opportunity to voice their concerns and to be heard, it fosters an environment where you can solve those problems with everyone in the room.”

Hear Marshall, Lodhi and Parker May 14 at the International Gem Tower during Bisnow's NYC Hottest Investment Opportunities event.