New York City’s Earlier Development Needs Persist

The
intense concern over rebuilding Lower Manhattan may presently
overshadow but does not obliterate the long-term development
needs that were facing New York City during its boom years
of the 1990’s and also during the previous boom of the
1980’s.

Through both strong periods, the growth in jobs and population
and the strengthened real estate leasing market fully stretched
the capacity of the City’s housing and commercial office
space. The widespread congestion on both the public and private
transportation systems is symptomatic of the City’s
overstressed infrastructure systems.

While beginning the massive rebuilding phase in Lower Manhattan,
and bringing the City into vigorous economic recovery from
the current recession, New York City must also face issues
of growth and development in the following critical areas.

Developing the Waterfront Compared to other North American
or world cities, New

York City has made little progress in redeveloping its waterfront
for commercial, residential or recreational uses.

The City prepared a Comprehensive Waterfront Plan in 1992,
and a companion Borough Waterfront Plan in 1993-94, both of
which expressed the City’s long range goals for a 21st
Century waterfront. However, little has happened in waterfront
development for NYC in the past ten years, or effectively
during the 1980’s. Battery Park City remains the sole
achievement of waterfront development on either of Manhattan’s
rivers during the

past forty years.

The large development project proposed for Queens West has
languished in the planning stage for over 15 years; the Citicorp
Tower in Long Island City, completed in the early 1980’s,
remains the singular high-rise office building in that district.

Years of squabbling have prevented any development along
the largely abandoned Brooklyn Heights waterfront, although
some preliminary agreement was finally reached at the end
of the 1990’s on a proposed recreational and commercial
park district. While Governor Pataki included a substantial
capital allotment to the proposed Brooklyn Bridge Park Project
in his budget proposal for 2001, it is notable that no site
in Brooklyn is included in any of the State’s designated
52 ‘Empire Zones’.

Without doubt, the long and costly battle with environmental
groups over the future of Westway contributed to what has
been described as the ” ideological paralysis”
in planning and decision-making for the City’s vast
waterfront areas.

Meeting Increased Competition from the New Jersey Waterfront

Development along the New Jersey waterfront, which includes
housing, hotel, retail and marina complexes in addition to
office construction, first began in a burst of construction


during the 1980’s, and has advanced significantly during
the 1990’s, following the setbacks of the early 1990’s
recession.

By the late 1990’s, rising costs and scarcity of prepared
sites for development in the Manhattan CBD became a major
issue for private developers. With no readied sites for development
in the boroughs, such significant New York City firms as Goldman
Sachs, JPMorgan Chase, John Wiley and Sons, and Paine Webber
announced plans to construct new office space along the New
Jersey side of the Hudson River waterfront.

In response to this renewed competition and to offer some
balance to the incentives offered for new office development
on the New Jersey waterfront, in July 2000 New York City tripled
the tax credits available under the NYC Relocation and Employment
Assistance Program (REAP) to $3,000 per job. If fully used,
these credits, which are available as of right on any building
qualifying under the City’s Industrial Commercial Incentive
Program (ICIP) in designated revitalization areas, would effectively
lower rent on a 500,000 square foot office building by $15
per sq.ft.

However, the fact remains that in the aftermath of September
11, when the need for office space for displaced firms was
greatest, substantial volumes of sublet space were immediately
available on the New Jersey waterfront and in Midtown Manhattan,
but no office space was available in Brooklyn or Queens, at
any price or quality.

Providing Sufficient Housing

By the late 1990’s, housing pressures in NYC had once
again intensified, similar to the patterns experienced during
the mid-1980’s. The causes, and consequences, are readily
apparent.

• Lack of Supply
  
  During the first five years of the 1990’s, only 35,000
  housing units were built in New York City, the lowest of
  any period since WWII, according to the Citizens Housing
  and Planning Council (CHPC). The volume of construction
  picked up somewhat during the next five years, with some
  60,000 units built by 2000, but for the entire decade, less
  than 100,000 units of housing were built in NYC.
  
  


• Increasing Demand
  
  Meanwhile, the City’s population grew by 685,000 during
  the 1990’s, and the number of households increased
  by more than 200,000. While some of this increase likely
  occurred during the previous decade and has been captured
  by better enumeration methods for the 2000 Census, this
  still indicates exceptionally strong growth in population
  and households during the 1990’s.Also, average household
  size, after falling for the previous four decades, increased
  to 2.59 by 2000, a turnaround that is indicative of the
  intense pressure on scarce housing capacity.
  
  


• Backlog of Demand
  
  The market forces during the 1990’s added pressure
  to an existing backlog of housing demand, estimated by the
  CHPC to be a shortfall of 225,000 units. This estimate includes
  accommodations for the homeless and for those families living
  together, as well as replacement of seriously deteriorated
  stock.This volume of housing completions would also provide
  enough capacity to yield a vacancy rate of 5 percent, a
  rate that is considered necessary for maintaining a normal
  market situation. Notably, the vacancy rate for New York
  City in 1999 was estimated by the Housing and Vacancy Survey
  (HVS) to be only 2.7 percent.
  
  


• Rising Prices
  
  By the spring of 2000, the average cost of a condominium
  apartment in Manhattan broke through the $700,000 threshold,
  an increase in price of 24 percent in just one year. Increases
  for renters, who form the bulk of households in NYC, have
  also been reported as substantial in those higher priced
  apartment units that have moved out of rent stabilization
  and into full market pricing. For the overall renting population,
  despite the prevalence of rent stabilization, the HVS found
  that in 1999 one fourth of all renters were paying one-half
  of their incomes on rent.
  
  


• Disappearance of Most
  Government Programs for Housing
  
  During the 1990’s, the volume of City, State, or Federal
  funds for either housing construction or housing subsidies
  fell dramatically. The only notable effort was made by the
  City, through its program to return In-Rem housing units
  back to private or non-profit owners under agreements to
  rehabilitate deteriorated stock.

Office Development

Despite an increase of over 450,000 jobs, there was less office
construction in Manhattan during the 1990’s than in
any decade in the last half of the 20th century. Only 14.5
million square feet of new office space was completed, a sharply
reduced volume from the over 45 million square feet completed
in the 1980’s. Seven years elapsed during the 1990’s
when no new office building was completed. This occurred despite
the boom time prosperity of the decade and the substantial
growth in office-based jobs, largely because the severe recession
at the beginning of the 1990’s left a substantial overhang
of new and sublet space in the office market.

The concern underlying the report issued in June of 2001
by the Group of 35 was “not that new employment growth
might wane in the short term – it is that there is not
enough new office space to support future employment growth”.1

And while the current recession has temporarily increased
the availability of office space in Manhattan, the basic long-term
situation has not measurably changed: additional new space
is needed to retain those displaced firms in the City, as
well as to provide for future growth.

Some of the key reasons why office development in Manhattan
has been hampered during the boom years, as advanced by the
Group of 35 and by experts interviewed for this report, follow.

• Finding More Space for
  Development Within the Manhattan CBD
  
  Despite the density of land use in Manhattan, a considerable
  amount of land exists for development. There are large sites
  of abandoned and dilapidated land, and extensive sections
  of deteriorated waterfront on the Hudson, the Harlem and
  East Rivers that could be made ready for intensive mixed
  use and recreational development.
  
  
  
  In addition, there are numerous smaller parcels of land
  throughout Manhattan where re-zoning, assemblage, or enabling
  transportation could provide significant volumes of space
  for further development. In almost all cases, the public
  sector role is essential before private development could
  occur.
  


• Pursuing Office Development
  in the Four Boroughs and Upper Manhattan
  
  While there has been significant private sector renovation
  and development of residential and commercial projects throughout
  New York City during the 1990’s, there has been a
  notable scarcity of public sector planning and programs
  from the City, State or Federal governments that could stimulate
  large-scale office and commercial development outside of
  Manhattan’s central business district.
  
  
  
  New York City’s capital expenditures on economic development
  in the boroughs during the 1990’s have been meager.
  (The exception would be the City’s construction of
  two minor league baseball stadiums, in Staten Island and
  in Coney Island, at an estimated total cost of over $110
  million.)
  
  
  
  Most of Brooklyn’s Metrotech development took place
  in the 1980’s, and only Renaissance Plaza, which includes
  the new Marriott Hotel, opened during the 1990’s.
  The Queens West project in Long Island City has been stalled
  for several years, and there has been no effective development
  anywhere along the Brooklyn or Queens waterfront. Similarly,
  there have been few significant large-scale developments
  in either the Bronx, Staten Island, or in Upper Manhattan
  during this past decade.
  
  
  
  The major public development thrust in Queens has been led
  by The Port Authority of New York & New Jersey in its
  redevelopment programs at both JFK (including construction
  of AirTrain) and La Guardia Airports, and by the individual
  air carriers at their respective terminal buildings.

Finding the Solutions

In
addition to the immediate needs of rebuilding and
repairing Lower Manhattan and achieving recovery from the
recession, New York City needs to: frame a vision and a program
for future growth; formulate a new slate of economic development
strategies, processes and programs; and, provide the public
sector infrastructure that will stimulate and accommodate
private sector investment.

Reformulate the City’s
Economic Development Strategies and Programs

Of particular importance will be a City strategy to:

• reform zoning policies and land-use regulations;


• establish a ‘one-stop shopping’ process to
  consolidate economic development policy, programs, investment
  and business services;


• increase public capital investment in site acquisition
  and assemblage and in basic preparatory infrastructure,
  to attract private sector development.

Formulate A Vision and Strategy
for the Development of Major Vacant Sites

There is a critical need for a new vision and strategy
for development of existing large tracts of land that have
either been abandoned or serve as rail storage yards, (e.g.
Manhattan’s West Side Yards, Sunnyside Yards in Queens,
or Oak Point Yards in the Bronx) as well as large tracts of
dilapidated land in Downtown Jamaica and Downtown Brooklyn,
or in the outer stretches of Atlantic Avenue and East New
York. These sites, together with Governor’s Island,
offer potential for large-scale, multiple-use development.

• Provide the flexibility of land use policy and zoning
  regulations to accommodate development of smaller sites
  throughout the City’s five boroughs, for new housing,
  or for flexible live-work zoning that would accommodate
  work spaces for high technology and artisan ventures with
  living quarters and small scale commercial uses.

Formulate Strategies and Programs
for Developing the Waterfront

The vast stretches of the New York City waterfront
surrounding Manhattan and, particularly, the inner waterfront
areas of Brooklyn and Queens that have remained fallow and
undeveloped represent a major opportunity for investment and
development.

Not only has development proven successful along the New
Jersey side of the Hudson River, but other major seaport and
riverfront cities across North America and in Europe have
similarly proceeded with bold, imaginative and successful
redevelopment of

their waterfronts. Clearly, the waterfront perimeter remains
one of New York City’s great potential assets.

There are multiple challenges to:

• clear sites that are at best dilapidated and at worst
  contaminated with toxic waste;


• change zoning restrictions;


• settle issues of riparian rights and coordinate the varying
  environmental policies of the City, State and Federal governments;


• initiate detailed planning and preparation of land for
  public-private mixed use development along prime stretches
  of the East River waterfront in Brooklyn and Queens, on
  Manhattan’s lower East Side waterfront, and along
  the prime blocks of Midtown Manhattan’s Hudson River
  waterfront;


• plan and protect necessary stretches of waterfront in
  Brooklyn,Queens and the Bronx for industrial and shipping
  functions;


• plan for major upgrading in capacity and quality of recreational
  stretches of waterfront in all five boroughs.
  
  
  
  Most likely, the basic preparation of waterfront sites will
  require public investment. But above all, the City’s
  waterfront land use and development policy needs firm vision,
  leadership and guidance.

Formulate
Strategies and Programs for Increasing the Supply of Private
and Public Housing

Despite the current recession in the City’s economy,
all evidence still points to a continuing demand for additional
housing in New York City, for all income levels, and in all
boroughs. The need is particularly acute for public planning
and programs to encourage construction of middle-and lower
income housing.

New programs to stimulate construction could include:

• public sector investment to improve and increase the
  supply of vacant land as encouragement for private development;


• public sector land preparation and purchase grant mechanisms
  to bolster housing programsof charitable and community groups;
  


• public sector leadership, possibly with the
  
  assistance of public sector unions, to establish investment
  pools for public sector housing;


• a new type of ownership program for middle income housing,
  similar to the successful Mitchell- Lama co-op and rental
  programs of earlier decades;


• tax abatement for private sector housing in designated
  development zones.
  
  If no help is forthcoming from Federal or State agencies,
  the public sector role would obviously fall to New York
  City government to find scarce public capital for basic
  infrastructure and land preparation, as well as to mobilize
  institutional and philanthropic funds for investment in
  housing. The City would benefit, however, from the current
  climate of low interest rates that will help ease construction
  costs, and from the economic stimulation of a large housing
  construction program.

Provide for Added Transportation
Capacity

Despite the two recent decades of economic and population
growth, the last major addition to transportation in New York
City was the completion of the Verrazano Narrows Bridge in
1964. Further growth in the City’s economy and population
base will be seriously hampered without major investment in
new transportation capacity, in public subway, commuter rail,
and bus systems, and in improved highway and street capacity
for passenger vehicles and goods movement.

In addition to providing needed transportation access to
Lower Manhattan during the years while the subway and PATH
systems destroyed at the World Trade Center site are being
repaired or replaced, over the longer term, expansion of mass
transit clearly must

be directed to underserved areas of Manhattan’s East
and West sides and congested areas of Brooklyn and Queens.

Preliminary planning and financial estimates need to be completed
and reviewed for such proposed additions as the Second Avenue
Subway, extension of the #7 subway line to Manhattan’s
West Side, and for commuter rail access to Lower Manhattan.
These proposals also need to be weighed against other potential
long-term expansions of mass

transit within, and to, the five boroughs.

Provision of new water transportation services has the potential
for dramatically changing land use and furthering development
along the Brooklyn and Queens waterfront. Vehicular congestion
on access routes to, throughout and within the City’s
five boroughs remains a particular challenge and will require
substantial investment to:

• maintain and repair the City’s vast network of
  streets and bridges;


• improve the condition of major thoroughfares;


• formulate pricing strategies that would curb or shift
  peak hour usage;


• plan and finance new bridge and tunnel capacity.

Support New York City’s
Cultural, Higher Education, and Medical Research Institutions

New York City’s preeminent arts and cultural
facilities, together with great medical and educational facilities,
are major contributors to the City’s economy and fundamental
to its quality of life. Additional investment in and expansion
of these facilities is an important component of the City’s
long-term development strategy.

A development strategy, including zoning changes where necessary,
is vital to maintain and advance New York City’s comparative
strength in its:

• arts and cultural facilities;


• great teaching hospitals and medical and biomedical research
  facilities;


• public and private higher educational complexes, and
  student housing.

Assure Additional Electricity
Generation in New York City

Years of growth and increased electricity usage by
both businesses and residents during New York City’s
economic boom of the 1990’s occurred without any significant
increase in the City’s electrical generating capacity.
Official estimates call for between 2,000-3,000 MW of new
capacity by 2006 to accommodate further growth and ongoing
usage increases, to replace aging, environmentally problematic
plants, and to assure sufficient capacity to stabilize energy
costs.

In the recently deregulated electricity market in New York
State, construction of new facilities rests with private companies,
who must seek State and Federal approvals for plant siting.

New York City’s Development
Needs are also Development Opportunities

This development strategy for New York City is resource-conserving
in its focus on the urban

structure, and will produce major benefits in both the short-term
and long-term for the City’s economy, its residents,
and businesses:

• The planning and construction phases of development projects
  will result in substantial short-term job creation.


• Continued new investment in commercial, office, housing,
  transportation, institutional and neighborhood development
  will yield long-term
  
  benefits in permanent jobs, higher incomes, and increased
  productivity.


• These investments will provide increased capacity to
  accommodate future growth in New York City’s economy
  and population as well as improve the quality of life for
  its citizens and workforce.