Blog

Jul 26, 2023

New York Plans to Open Parts of Midtown Manhattan to Housing

Advertisement Supported by Mayor Eric Adams announced plans to rezone manufacturing areas south of Times Square and allow more office buildings to be converted to housing. By Mihir Zaveri New York

Advertisement

Supported by

Mayor Eric Adams announced plans to rezone manufacturing areas south of Times Square and allow more office buildings to be converted to housing.

By Mihir Zaveri

New York City officials announced plans on Thursday to ease the conversion of office buildings to housing and to open manufacturing areas south of Times Square to new residential development, as part of a broader push to reinvent the struggling business district in Midtown Manhattan and address the city’s housing crisis.

The plans, outlined by Mayor Eric Adams at a news conference in a vacant office building, would allow for more housing to be built by rezoning manufacturing areas between 23rd Street and 40th Street from Fifth Avenue to Eighth Avenue. A separate plan focusing on conversions of office buildings into residential could allow for 20,000 new homes, the city estimates.

Both plans would require City Council approval, and are expected to be put to a vote next year.

Even if the plans succeed in ushering in conversions and new development, they fall far short of the housing need in New York, which is dealing with a shortage estimated to be in the hundreds of thousands of homes.

Still, developers and advocates for building more housing commended the city for taking steps to address some of New York City’s most urgent problems: dealing with a housing crisis and rebuilding its economic power after the pandemic pushed a growing number of residents toward working from home.

“The world has changed,” Mr. Adams said. “We have to be willing to change with it.”

The announcements come at a precarious time for housing affordability in New York.

The median asking rent on new leases in Manhattan is about $4,400 now, according to the brokerage Douglas Elliman, after rents rebounded from their low point during the pandemic. Evictions are on the rise and the population of people in homeless shelters has swelled to more than 100,000 people, many of them migrants who crossed the southern border seeking asylum. Earlier this year, state leaders failed to pass ambitious legislation that could have made way for more housing.

Office conversions remain an attractive solution, in part because they feel so intuitive: Many office buildings, particularly older ones, are losing tenants as more people embrace hybrid work, while an intense demand for a limited supply of housing is pushing rents up ever higher.

But conversions have not taken place in meaningful numbers because of regulations and restrictions over what kinds of buildings can be converted and a lack of funding.

The plans announced by the mayor on Thursday, which will be a part of broader zoning changes, address the former problem by allowing buildings that were built as recently as 1990 to convert to housing; currently, only buildings built before 1977 or 1961 are eligible, depending on where they are in the city. The city would also allow buildings to convert to housing anywhere in the city if the zoning regulations allow for residential.

The plans do not provide any funding for the conversions, which can sometimes require extensive renovations. It is not clear how many building owners or developers will be eager to move forward without financial incentives in the form of tax breaks or subsidies.

Susan Mello, executive vice president and group head of capital markets at Walker and Dunlop, a commercial real estate company, said she thought any broader change in Midtown would take several years at least, in part because there are still a lot of regulations to deal with and the cost can be high. She said lenders have to be willing to take a risk and finance the conversions.

“It’s still very expensive to do a conversion, especially a conversion of office to residential,” she said.

Paul Selver, co-chair of the land use department at Kramer Levin Naftalis & Frankel, a law firm that works on conversions, said he thought the move was “going to be a significant step in expanding the number of housing units.”

The Midtown rezoning plan may prove to be contentious among some city residents, even though the plan has the support of two local Council members, Erik Bottcher and Keith Powers, who appeared alongside the mayor on Thursday.

Currently, no new housing is allowed in the target area, city officials said.

Without action from the state, the reach of the city’s conversion efforts may be limited.

This year, Albany failed to make any serious moves on housing, despite a push from Gov. Kathy Hochul. Two bills that would have offered tax incentives for office conversions in exchange for the inclusion of affordable housing and that lifted a limit of how much floor space can go toward residential both died.

So did bills that could have limited egregious rent hikes in private apartments and tax breaks for developers that might have made it more attractive to build in Midtown Manhattan.

Mihir Zaveri covers housing in New York. More about Mihir Zaveri

Advertisement