Midtown South Rezoning Clears Key Committee, But Other Barriers Remain

A rezoning that could unleash a tsunami of housing upon 42 blocks in Midtown Manhattan has been unanimously approved by the city council Land Use and Zoning committees, clearing one of the last hurdles before the proposal can become reality.

Wednesday’s vote on the Midtown South Mixed-Use Plan did come with slight modifications to the proposed rezoning that reduce density and height maximums on certain blocks within the proposal. The changes reduced the city’s previous goal of creating 9,700 units of housing through the plan to 9,500, more than 2,800 of which would be affordable under mandatory inclusionary housing requirements.

The plan affects areas currently zoned for manufacturing that either completely prohibit or severely limit housing construction. If passed, the rezoning could provide a lifeline to unwanted office buildings in the area and bring thousands of residents to parts of the city that heavily rely on office workers. 

In the hours leading up to the vote, at Bisnow’s New York Affordable Housing Conference, developers and other experts expressed excitement about the plan while warning others against getting tunnel vision.

“It does have a tremendous opportunity to create an influx of housing,” Magnusson Architecture and Planning principal Brian Loughlin said. “It's good when you do that, but you also have to make sure that you're supporting the infrastructure that's necessary to make that housing successful.” 

The plan targets four quadrants, roughly bounded by West 23rd and West 40th streets between Fifth and Eighth avenues. Those zones surround Penn Station, the Port Authority Bus Terminal, Herald Square and Bryant Park — huge economic centers and transit hubs that are particularly attractive to developers. 

What’s missing, however, are schools, grocery stores and other neighborhood elements that are essential for residents.

The Adams administration committed to providing $340M for upgrades to parks, subway stations, bus routes and local hospitals, along with more than $120M to assist apparel businesses in the area, which includes the Garment District. Still, more capital may be required from private investors to fulfill resident needs. 

“When we're talking about market rate, your chances of that housing being relatively successful are pretty high,” Loughlin said. “But when you start talking about low-income affordable housing, if that infrastructure is not there, then that housing starts to really have a lot of pressure put on it that it might not do well.”

That hasn’t stopped many developers from eyeing the area in the months leading up to the rezoning’s passage. Defaults and foreclosures have picked up in the area, providing opportunities to grab sites at discounts. Office-to-residential conversions and demolitions that clear the way for new developments, both pricey endeavors, are likely to be popular in the area. 

TF Cornerstone Vice President of Acquisitions and Development Derek Marcus said onstage at Convene 360 in Manhattan that the firm has been “tracking many sites” in the area. 

He said the area has several properties fit for larger developments. That will be further supported by the rezoning’s creation of R11 and R12 districts that allow floor area ratios of up to 15 or 18, above the previous 12 FAR cap.

In the past, such density would be appealing to developers. Today, building those projects comes with new challenges.

Under the 485-x tax abatement program for rental housing, developers are subject to higher prevailing wage requirements for multifamily developments with more than 100 units or 150 units. As a result, the tax incentive, made to boost housing production, has limited construction to smaller buildings. 

Of the 158 new building filings in the second quarter, just four had between 100 and 149 units, 40% below historical averages since 2008, according to a report by the Real Estate Board of New York. Four others had more than 150 units, 79% below previous averages.

“It will create a lot of housing ultimately, but we’ll have to see where these deals transact,” Marcus said. 

The rezoning is targeted at bringing more housing construction to Manhattan as developers have flocked to the outer boroughs, where land is cheaper, wage requirements are less strict and other rezonings, including the City of Yes, have allowed for larger multifamily development. 

Manhattan had just 436 new units of housing proposed in the second quarter, ahead of only Staten Island, according to the REBNY report. For comparison, the Bronx had nearly 3,000 units added to the pipeline, Brooklyn had just over 2,000 and Queens had roughly 1,000. 

Alloy Development President AJ Pires said that City of Yes and 485-x have had “a really nice synergy” in the outer boroughs, but more policy support is needed to address the housing crisis. 

The city previously estimated that 500,000 units of housing had to be added to the market by 2032 to close the shortage. The Midtown South rezoning is part of Mayor Eric Adams’ Manhattan Plan, announced this year, which calls for 100,000 new homes in New York County.

“It would require hundreds of smaller-scale projects to be built every year to keep up with the demand,” Pires said. “You only need a dozen or so 500-to-1,000-unit projects to meet a year's demand. That's where the current 485-x is coming up short.”

Due to the tweaks made by the committees, the Midtown South plan will have to be reviewed and approved by the City Planning Commission before being voted on by the full city council.

The rezoning is just one of several that have either recently received the green light or are working their way through the city’s approval process. That includes Brooklyn's Atlantic Avenue Mixed-Use Plan, which was approved in May, and the OneLIC Neighborhood Plan in Queens, which is undergoing public review.

“There's still standing regulatory barriers and zoning barriers that limit our ability to really meet our fair housing obligations to the residents of New York,” New York City Housing Preservation and Development acting Commissioner Ahmed Tigani said. “We have five neighborhood rezonings that are going, and then we need ideas for the future.”