Critics Say Housing Incentives Do Not Work

The suburbs prefer carrots.

That is, incentives to grow their housing stock, rather than mandates that trigger penalties if not met.

Supporting that preference, the state legislature last week pitched a warm and fuzzy version of Gov. Kathy Hochul’s housing plan. It offers carrots — $500 million for municipalities that meet certain housing growth targets — rather than sticks, which in Hochul’s plan is a way for developers to circumvent local zoning.

The problem, say proponents of the governor’s plan, is that carrots can be ignored. And usually are.

Pro-housing groups argue that incentives are not enough to create the 800,000 homes statewide that Hochul’s Housing Compact promises to add over the next decade. Open New York’s Andrew Fine said legislators’ budget resolutions show an unwillingness to deal with the housing crisis and that the Senate and Assembly majorities have “put their heads in sand.”

Similar incentives have proven ineffective in other states, including Massachusetts and Connecticut, where exclusionary communities tend to be well off and are not moved to action by government cash, the group’s policy director explained.

“Funding incentives will not put a real dent in the housing crisis,” Fine said.

In response, Massachusetts and Connecticut have moved away from housing incentives, pivoting to programs that allow developers to override local zoning when building affordable housing, a 2020 report by New York University’s Furman Center found.

In Massachusetts, the state’s incentive program created only 3,500 units between 2007 and 2017, while its override policy led to 20,000 during the same period, according to the report. An incentives-only approach in New York would have a “very limited aggregate effect,” the report concluded.

“This approach has not been successful in other states,” Rachel Fee, executive director of the New York Housing Conference, said in a statement last week. “By focusing on weak incentives that will not motivate local leaders to act, the legislature has endorsed the status quo and enabled the regressive forces working to keep New York unaffordable and segregated.”

Hochul’s plan sets three-year housing goals for localities and offers multiple paths to compliance. If localities fail to take action, certain housing projects could move forward regardless of local zoning rules.

Builders would not have carte blanche, but would go through a state-orchestrated approval process instead.

Even lawmakers are not confident that the proposals in their budget resolutions will adequately address the state’s housing crisis. Senate and Assembly Democrats told New York Focus that incentives could lead to more housing, but admitted that not all communities would opt in. Nassau County Assembly member Charles Lavine told the website that “some communities will resist emphatically.”

Republican lawmakers from Nassau and Suffolk counties have raised concerns that some localities cannot handle an infusion of new housing without significant investments in infrastructure. They have also balked at the idea of losing local control over zoning rules.

Hochul’s plan is also drawing opposition from the left, with progressive lawmakers objecting to the lack of affordable housing requirements. (Hochul includes an incentive for affordability.) Some unions, including the New York District Council of Carpenters, are complaining that a path around local zoning would diminish their influence on housing projects.

Mike Florio, chief executive officer of the Long Island Builders Institute, said his organization supports increasing housing production, but that it is “best achieved through an investment of state incentives to help local communities meet their housing and infrastructure needs.”