A report by NYU’s Furman Center finds that the neighborhoods City Hall has been eyeing as places for upzoning and affordable housing, like East New York and the Jerome Avenue corridor in the Bronx, won’t really work out. According to the report, the mayor’s plan to propose upzoning, or more dense development, in low-rent areas will fail because developers won’t be able to charge enough in rent to justify construction costs, WSJ says. The only way upzoning will work in those neighborhoods is if the city steps in and foots aconsiderable amount of the bill.
The report found that tenants would need to pay about $3,600/month for a one-bedroom for developers to see a profit on an entirely market-rate building with no tax abatement within an upzoned area. To contrast, the Journal points out that the median asking rent in a new building in East Harlem, another eyed neighborhood, is $2,295/month according to StreetEasy.
According to the report, upzoning will work in neighborhoods that are able to sustain higher rents like Downtown Brooklyn. WSJ points out that it’s economically feasible to dedicate about 30-percent of apartments to inclusionary housing in buildings in neighborhoods that sustain higher rents whereas in low-rent neighborhoods, only about 4-percent of apartments could be set aside while still being able to justify construction costs. “In much of the city rents are not high enough to generate high-rise development, so additional density isn’t going to spur” developers to build, the executive director at the Furman Center told WSJ.
TL;DR: rezoning on its own won’t be enough to spur new residential development in low-rent areas. The mayor’s plan to upzone areas in order to see the development of affordable housing will work better in neighborhoods that command higher rent.