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#To boost recovery, New York City should end the zoning insanity

#To boost recovery, New York City should end the zoning insanity

July 15, 2020 | 7:27pm

New York City is in a steep recession, with about 850,000 jobs lost over the past year, most owing to the novel-coronavirus lockdowns. Some of these job losses will be temporary and will return as ­restrictions are lifted and businesses reopen. But the longer that takes, the more businesses will fail — and the more job losses will become permanent. We’ll need to create new jobs for those who can’t simply return to their old ones.

Rethinking zoning is central to this task.

In good times, the city’s workforce — particularly people without a college education — relied on industries that have taken a direct hit, ­including hotels, restaurants and retail. These job losses also affect the city’s real estate, where vacancies have risen and once-inflated values have plummeted. City tax revenues have also taken a dive.

City officials face a choice. They can grimly conclude they are in a downward economic spiral, which can be reversed only by massive — and unlikely — federal subsidies. Or they can do something to jump-start the economy.

Their hands aren’t as tied as they might think. In a new Manhattan Institute report released this week, I suggest that the decline in real-estate values and ­increase in vacancies is an opportunity to encourage private investment in new buildings and new uses for old buildings.

Real-estate investment often leads the economy out of recession, because financing costs are so low. Construction creates both jobs and tax revenues — workers’ income taxes, as well as sales taxes on construction materials and furnishings.

However, to take advantage of this opportunity, the city needs to get out of its own way. Outdated zoning requirements make needed new investments harder than they should be, by requiring parking even where people can walk or use transit, for example, and preventing businesses that want to pay rent from occupying vacant space.

Zoning changes would make it easier to reuse vacant space and redevelop properties that have lost value in a changing economy.

Even before the current recession, retail vacancies troubled the Big Apple. The pandemic and the continued rise of online shopping will only exacerbate this long-term decline.

As tourism boomed in pre-pandemic New York, the number of restaurants grew with it. Now, with tourism unlikely to recover quickly and many New Yorkers staying home, the restaurant industry will no longer be able to alleviate the retail-vacancy problem.

Much of this vacant (or-soon-to-be-vacant) retail space, outside the densest parts of the city, is in one- or two-story commercial buildings. It might make sense to redevelop much of this space for new apartment buildings — but the city’s zoning creates huge hurdles like parking requirements for both new housing and new ground-floor retail, even in neighborhoods with good transit.

Many retail corridors are also subject to outdated rules about the kinds of businesses that can locate there. What was once aimed at engineering an “ideal” mix of businesses will now keep desperate owners from renting to the few commercial tenants that can pay rent. The city needs to sweep these impediments away and welcome new housing and businesses.

The steep decline in tourism will likely cause some hotels to close. Recent years saw a boom in hotels, driven by growing tourism and artificially spurred by ill-considered zoning restrictions. Now, with hotel occupancy plummeting, some hotels will go out of business — freeing up space for more housing.

Redeveloping a hotel would be fairly simple: A hotel room becomes a studio apartment just by adding a kitchenette. But don’t forget the zoning. Many neighborhoods that have surplus hotel space don’t even permit housing. A zoning fix would facilitate new housing in redeveloped hotels that are no longer in demand.

Removing these zoning impediments would create real opportunities to provide new housing and jobs the city can seize now — and stop waiting for a federal rescue that may not come. Gotham can’t afford to tangle potential investment in red tape and unrealistic ­demands. We owe it to New Yorkers who want to get back to work.

Eric Kober is an adjunct fellow at the Manhattan Institute and ­author of its new report, “Barrier to Recovery: How New York City’s Obsolete Zoning Prevents Property Owners From Reusing Land and Buildings.”

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