Another factor in the housing shortage: undertaxed empty land. (And under-developed parcels?)

So, besides unreasonable expectations of financing and tax breaks, another reason New York lags in housing, as the Wall Street Journal's Konrad Putzier explained 11/22/22, is that Housing Shortage Reflects the Cheap Cost of Holding Vacant Land.

The signal example: a six-acre parcel of empty land next to the United Nations headquarters in Midtown Manhattan, zoned to support some 1,500 apartments, but empty for 17 years, because the developer hasn't figured out what to do--and hasn't been pressured to do so.

After all, the site doesn't have a mortgage--which can, of course be a spur to build and reap revenues--and annual property taxes of about $1.5 million per acre are less than one-sixth the rate for nearby apartment buildings.

To the WSJ, an executive with the owner blamed zoning approvals, the pandemic, and other priorities for the delay.

Unapped potential

From the article:

U.S. cities are littered with vacant or sparsely built sites like this one. New York City alone has more than 77,000 lots that are either vacant or have a building that is less than half the size of what zoning allows, according to an analysis of property records by Altus Group for The Wall Street Journal.

Altus, which is a real-estate analytics and advisory firm, counted private lots larger than 3,000 square feet that are likely suitable for development.

If the owners of these lots all developed buildings with the maximum size allowed under current zoning, they could add an estimated 858 million square feet of housing and commercial space, according to Altus. That is equivalent to 306 Empire State Buildings. Around 96% of these sites are zoned for residential use, Altus said.

There are some big unanswered questions there. I tweeted a query for clarification: how does that study divide between vacant lots and underbuilt buildings? (No response yet.)

Obviously vacant lots, presuming there is little remedial work necessary, supply the low-hanging fruit, while built-on parcels, especially if--for example--they contain rent-regulated tenants, get more complicated.

Parcel size

Note that the 3,000 square foot minimum means the calculation would exclude underdeveloped smaller parcels--say, houses--but not larger ones, like, for example, the Atlantic Center mall.

Remember that, for the purposes of the Atlantic Yards Blight Study, lots "built to 60 percent or less of their allowable Floor Area Ratio (FAR) under current zoning" were considered blighted, not 50 percent. (Same for the Columbia University Neighborhood Conditions Study, which was a more cautious way of saying Blight Study.)

That standard is wobbly, as noted during the litigation over eminent domain for Atlantic Yards, since it could--without a minimum lot size--consign much of Brownstone Brooklyn to blighted status.

A national issue

The WSJ notes that this is a national issue, given land-banking by speculators, while some city legislators have proposed higher taxes. From the article:

Under proposals studied by cities like Detroit, each property’s appraised value is divided into land and building. The rate on the land portion is increased, and the rate on the building lowered. That means owners of vacant land and owners of small buildings on valuable lots see their tax bills rise by a lot, while owners of high-rise buildings or duplexes see their bills shrink.

Note that NYC's property tax system is a crazy quilt, and in need of reforms well beyond this issue. 

The history

Taxing The Land: Henry George, NYC, And The Land Value Tax, wrote Daniel Wortel-London in the Metropole Blog 1/7/18, recalling "New York City’s flirtation with the land-value tax in the turn of the last century," inspired by author Henry George and his 1879 book Progress and Poverty.

Wrote Wortel-London:

Liberal reformers at the time advocated building roads and mass-transit lines to the city’s periphery, where land was more affordable, as a means of solving New York’s rent and congestion problem. For George, however, this measure was at best a stopgap. He believed land-values in the city’s peripheries would quickly escalate in the wake of these improvements, making them again unaffordable to the masses.

In George’s view, liberals who took the opposite tack of providing welfare provisions for tenants as a remedy for social inequality amenities directly to tenants were also mistaken, as their remedies would again translate into higher land values.

Of course supporters of his proposal included those who thought it would lower the taxes on their buildings. However, it failed:

The opposition of the city’s growing suburban middle-class – together with the more obvious opposition of the city’s powerful developer and banking interests – was enough to ultimately defeat the land-increment tax campaign by the mid-1910s.

However, a 1920s housing crisis led to a ten-year exemption from taxes on new buildings, prompting a building boom--even as empty land continued to be taxed.

Wortel-London concludes that 1) such a land-value tax would pass only "under particularly dramatic and rare circumstances," 2) it would have to be coupled with changes in zoning, and 3) it would probably have to be coupled with new subsidies.

Still, he supports it as reducing inequality.