This monograph was written for Wagner College's Hugh L. Carey Institute for Government Reform in February 2020 by Richard Flanagan, Ph.D., Professor in the Department of Political Science and Global Affairs at the College of Staten Island of the City University of New York and Research Fellow for the Carey Institute.

1. The Affordable Housing
Crisis:
A New Mitchell-Lama
Middle-Class Housing
Program for the 21st
Century
DR. RICHARD FLANAGAN
Political Science Professor at the College of Staten Island
and Research Fellow,
Hugh L. Carey Institute for Government Reform
February 2020
A Public Policy Paper
published by the
Hugh L. Carey Institute for Government Reform
at Wagner College
Staten Island, New York

2. The Hugh L. Carey Institute for Government Reform • Wagner College
The Hugh L. Carey Institute
for Government Reform
at Wagner College
Dan Donovan Director
The non-partisan Hugh L. Carey Institute for
Government Reform proposes policies to solve
issues Americans face.
Wagner College
One Campus Road
Staten Island, New York 10301
Tel: 718-390-3297
carey.institute@wagner.edu
www.wagner.edu/carey-institute/

3. The Affordable Housing Crisis
The Affordable
Housing Crisis:
A New Mitchell-Lama
Middle-Class Housing
Program for the 21st
Century
Introduction
DR. RICHARD FLANAGAN
Research Fellow, Hugh L. Carey Institute
for Government Reform
New York City is said to have it all – the best food, arts, street
life, cultural diversity and career opportunities, to itemize just a few of
the qualities that make it a world-class city. Gotham survived the
deindustrialization of the 1970s, the crime wave of the 1980s, and the
catastrophic terrorist attack a generation ago. The city emerged intact,
safer and more economically secure than it has ever been in its long history.
What New York City lost is affordable housing.

4. The Hugh L. Carey Institute for Government Reform • Wagner College
The Affordable Housing Crisis
A New Mitchell-Lama Middle-Class Housing
Program for the 21st
Century
DR. RICHARD FLANAGAN
“In 2018, the
New York
metropolitan
area was the
nation’s people
loss leader, with
a little under
300 people on
average moving
out every day.”
The Crisis of Affordable Housing
New Yorkers have consistently identified the lack of affordable housing
as the most important issue facing the city in recent years.1
And they are not just
complaining about it, they are voting with their feet. In 2018, the New York
metropolitan area was the nation’s people loss leader, with a little under 300
people on average moving out every day. Losses among young adults was
particularly acute, with 29,000 millennials leaving the city in 2017.2
The data about affordable housing backs up the intuition and actions of
New Yorkers – they have reason to be concerned and justification for leaving.
The average rent for a New York City apartment on the market in 2019 was
$3,449.3
The median price for a single-family home was $719,000, and the
average price for a co-operative apartment or condominium was $850,000.4
More than half of those living in New York City’s rental stock have
some sort of price protection against the market, either in the form of direct
subsidy, or rent regulation. Many older New Yorkers purchased properties
before the market for housing took off. But newer New Yorkers, and younger
New Yorkers, are often forced to contend with these high-priced market options.
The lack of reasonably priced housing is a generational problem that falls most
heavily on millennials.
And of course, even with these modest protections against excessive
housing costs for some, like rent stabilization, the housing cost burden is still
quite heavy. In 2017, nearly 29% of all renters earmarked more than half their

5. The Affordable Housing Crisis
income to housing.5
The Lay of the Land
This problem of affordable housing has not escaped the notice of elected leaders,
even as the size and scope of the problem has exceeded the capacity of local government
to effectively address it. Mayor Ed Koch (1978-1989) pumped $4 billion of municipal
capital funds into dilapidated, depopulated neighborhoods across the city, such as the
South Bronx, to build low income housing. The four mayors that succeeded Koch
maintained this commitment to promote affordable housing, and many
outer-borough neighborhoods were reborn as a consequence, including Brownsville
and Bedford-Stuyvesant in Brooklyn, and Highbridge/Concourse and Fordham/University
Heights in the Bronx6
. The Koch framework extended into the late 1990s through the
mayoralties of Dinkins (1990-93) and Giuliani (1994-2001).7
The three mayors had
different management styles and governing philosophies, but they all faced the task of
reviving a city that had fallen on hard times, so they used the same affordable housing
playbook.
The model was straightforward. The city government took ownership of
abandoned property, rehabilitated it, and delegated management to local non-profits.
However, as the city recovered from its economic nadir of the ‘70s and ‘80s, the unit cost
of city provision of subsidized housing rose as the stock of abandoned property dried up.
Yet the problem of affordability became worse, as formerly neglected and unsafe
neighborhoods became sites of gentrification. City government policy could not keep
pace with exploding growth.
Directly addressing these new realities about the provision of affordable housing
in a growing city, Mayor Michael Bloomberg’s approach was quite different from his
predecessors. Bloomberg (2001-2013) made voluntary inclusionary zoning the centerpiece
of his affordable housing plan. Developers got a floor area bonus of 33% over the standard

6. The Hugh L. Carey Institute for Government Reform • Wagner College
zoning requirement in a neighborhood in exchange for a 20% set-aside of units for
low income renters. This program generated a little under 3,000 units in the second
and third Bloomberg terms.8
And this brings us to the challenges faced by Mayor Bill de Blasio (2014-).
The greatest single category of expenditure to support affordable housing, just as
with his predecessor, Mayor Bloomberg, has been directed toward preserving or
rehabilitating affordable housing with loans for improvements, or increased
expenditure for subsidies. But these efforts, as essential as they are to stop the
hemorrhaging of units from affordable housing stock, do nothing to expand it.
Like his predecessor, Mayor de Blasio has been using inclusionary zoning policy as
a tool to boost the number of affordable housing units. Whereas the program was
optional for developers in the Bloomberg years, and therefore underutilized, the de
Blasio administration requires participation of all developers building in a select
number of up-zoned neighborhoods such as Brooklyn’s Fourth Avenue corridor. De
Blasio’s policy offers a sliding scale for developers to negotiate the ratio of
affordable housing set-asides and floor area bonus percentages.
Although the de Blasio reforms were intended to spur the construction of
new units, for the most part developers have declined to play ball under the new
rules. Indeed, no public/private partnership is ever truly “mandatory,” since the
private partner can simply refuse the deal and not build if the terms will not result in
a return on investment. Of the forty developments in the pipeline in de Blasio’s four
year old program, the Commercial Observer reports that the majority are built with
some sort of charitable subsidy, or on low-cost land provided by the city or a not-
for-profit land trust.9
Without additional subsidies, developers see profit
opportunities under the program only in neighborhoods with rapidly appreciating
land values.

7. The Affordable Housing Crisis
Mayor de Blasio has, however, spent more capital funds than any of his
predecessors on a grab bag of housing programs for vulnerable populations
including senior citizens, the homeless and mentally ill. Working in tandem with
state government, protections for tenants in the city’s rent stabilization program
has been strengthened as well in recent years.
Despite this serious commitment by Mayor de Blasio, two problems
remain. First, the forces of gentrification that are pushing up the market rate cost
for both rented and owned units are moving at a faster clip than government-
supported rehabilitation and construction efforts. Inclusionary zoning in both its
voluntary and mandatory formulations failed to build many affordable units
outside of a few hot neighborhoods where there was sufficient profit for
developers to absorb the costs of the below-market units.10 Inclusionary zoning
has done little to advance the cause of a more affordable city.
The other limitation with inclusionary zoning is its narrow target
population of the very poor and the working poor. Recent mayors have not offered
a more holistic affordable housing program that would offer some relief to the
middle class. This narrow focus is understandable. The New York State
Constitution provides for a right to shelter for the homeless, and an obligation for
the state and its local governments to provide aid to the needy.11 New York City’s
long tradition of urban liberalism—while not uncontested in city politics—
supports government relief programs. Within New York City, the advocacy lobby
for supportive housing for the poor is quite influential.
But, with its exclusive focus on housing for the poor, the city risks losing
its middle class. And this will, in fact, hurt the poor in the long run as well. The
middle class is the backbone of the city. As urbanists Joel Kotkin and Wendell
Cox note, the middle- and working- class once served as the “ballast” for the city,
“… with its
exclusive focus
on housing for
the poor,
the city risks
losing its
middle class.”

8. The Hugh L. Carey Institute for Government Reform • Wagner College
“The interaction
of classes in the
city—
particularly in
public schools—
enhances the
life-chances of
students of all
socio-economic
groups.”
and “supplied the workforce for a diverse urban economy.” Now, public servants,
and skilled blue-collar and artisan professionals, “are struggling to afford homes
in many of America’s major cities.”12
This group provides neighborhood stability,
and work in the vital aforementioned service positions that the city needs to grow
and prosper. The presence of middle-class communities and jobs in the city
provides for an obtainable and aspirational model for the poor. The interaction of
classes in the city—particularly in public schools—enhances the life-chances of
students of all socio-economic groups.13
The city will become a sadder, more
transient place too if younger workers cannot maintain family ties to the place
where they grew up. If young families cannot afford housing here, the city will
miss out on the dynamism of young workers. As the young workers leave, job
opportunities, and economic growth, will follow along with them.
The middle class must be part of the equation to build new affordable
housing coalitions that can help both the middle- and working- class as well as the
poor. In an earlier housing crisis after World War II, this insight was more
intuitively understood by city leaders. It is an insight contemporary leaders would
do well to rediscover.
The Spirit of Mitchell-Lama Housing
In 1955, in an annual message to the city council, New York City mayor Robert
F. Wagner warned that the city’s lack of affordable housing for the middle class
“was driving the city’s most valuable residents to the suburbs.”14
City and state leaders partnered that year to pass the state Mitchell-Lama Housing
Act, an ambitious and path-breaking public-private partnership that provided
developers with a package of low-interest mortgages and tax abatements in
exchange for caps on profit, and a requirement that building shareholders

9. The Affordable Housing Crisis
recruited as tenants be working-class wage earners.
The financing deals that created Mitchell-Lama could be complex, but
projects were generally of two types, namely, rental properties and limited equity
cooperatives.
The second part of the Mitchell-Lama approach, the limited equity
cooperatives, is the lost tradition that needs attention and revival. Regrettably,
government promotion of limited equity cooperatives fell out of favor in the 1970s.
The reasons were numerous. It was a period of government fiscal stress. Many
middle-class New Yorkers migrated to surrounding suburbs. Interest cooled among
labor unions that had enthusiastically leveraged pension funds, as well as political
capital, to partner with government to build Mitchell-Lama complexes. Another
problem with the original legislation and major amendments was a phase-out
provision that allowed developers to leave the program and sell or rent units at market
price after about twenty years. Many affordable units have gone to market price as
buildings have opted out of the Mitchell-Lama system. So, the Mitchell-Lama system
as presently constituted is eroding, although both the state and city governments have
offered aid over the years to incentivize building to remain.
But, under the Mitchell-Lama program, a number of successful, legendary
limited equity cooperatives continue to serve working-class New Yorkers include
Co-Op City (Bronx), Rochdale Village (Queens), Starrett City (Brooklyn) and 1199
Plaza and Penn South (Manhattan). Indeed, there continues to be tremendous, unmet
demand for units in the successful aforementioned developments, and applicants can
spend years on the waiting list. Some buildings have lists that will take fifteen years to
clear.
Under the terms of limited equity cooperatives, applicants for housing must
meet income criteria. Income eligibility depends on household size, but the overall

10. The Hugh L. Carey Institute for Government Reform • Wagner College
thrust of the programs allows for the admittance of middle class families. A
household of three, for example, can earn up to $120,125.15
(Increasing the cap may
be good policy to encourage income diversity and stability for the buildings.
Households that, over time, exceed the cap pay a maintenance fee surcharge, and
that practice could pave the way for higher income caps if the Mitchell-Lama
program is scaled up. The buildings can become sites of class diversity and true
shareholder equality in a way that traditional inclusionary zoning buildings cannot.)
Indeed, there is quite a bit of income variability in the Mitchell-Lama program now
as tenants age in place and move toward fixed (and lower) incomes, slipping below
the eligibility income for admittance.
To secure an apartment, applicants buy below-market shares of the
cooperative, priced in a range from $5,000 to $80,000. Shareholders must also pay a
monthly fee to cover the building’s capital costs, operating expenses and taxes.
Shareholder rights can be transferred to family members.
Unlike the stigma attached to units obtained through the inclusionary zoning
lottery, the limited equity cooperatives under the Mitchell-Lama program provide
the dignity of homeownership, and allow for democratic participation in the
management of the buildings. Shareholders in the cooperatives vote for members of
the board. This system provides for a level of dignity that the city’s subsidy schemes
and inclusionary zoning plans cannot match. Homeowners with a stake in the
building are more participatory citizens, both in the management and care of the
buildings they inhabit, and their community as a whole.16
The empowerment of homeownership, combined with the more
participatory qualities of middle-class homeowners, would create a powerful
constituency to extend and protect the full range of affordable housing programs.
Indeed, state and local politicians are very solicitous of the larger Mitchell-Lama

11. The Affordable Housing Crisis
buildings in their districts. Mitchell-Lama was “the best affordable housing
program ever created,” according to New York State assembly member Jo Anne
Simon in 2017. State and local leaders have organized efforts to refinance
buildings in fiscal trouble using public funds, and the state and city have made
efforts to stop the conversion of Mitchell-Lama cooperatives to the private market
when building shareholders have unified behind that goal and lobbied well.
Additional buildings in the system would only increase the clout of cooperative
shareholders in city politics.
The strong civic and political culture of Mitchell-Lama cooperatives is
quite different from the less empowering inclusionary zoning approach that treats
affordable housing recipients as charity cases, not citizens. Affordable housing
programs of the past generation have too often treated many New Yorkers as
second-class citizens. No better example of this was the “poor door” controversy
of 2014, when an investigation revealed that an Extel Corporation’s luxury
building in Manhattan built a separate entrance for less well-heeled residents in
subsidized units under the city’s inclusionary zoning housing plan.17
While that
practice is now outlawed, the spirt of second class citizenship under the city’s
affordable housing program continues. Residents in inclusionary zoning buildings
still complain of apartment appliances and other finishing touches in their
apartments that are not as nice as the market-paying residents, and the persistent
social stigma of being the subsided neighbors.
Between 1955 and 1981 the Mitchell-Lama program created 66,000
rental and 69,000 cooperative units.18
Mitchell-Lama cooperatives account for
about 6% of the total homeownership in the city.19
A revitalized program should
seek as a first step to increase to 10% the percentage of Mitchell-Lama
cooperatives accounting for the total share of homeownership in New York City.
“Mitchell-Lama
was ‘the best
affordable
housing
program ever
created,’”

12. The Hugh L. Carey Institute for Government Reform • Wagner College
Put differently, the goals should be double the number of units in Mitchell-Lama
program to 140,000 units in ten years. Such a number and time frame is consistent
with the ambitious targets set by the three “housing mayors” of the recent past—
Koch, Bloomberg and de Blasio—while still leaving some room within this policy
area to pursue time-tested housing improvement policies such as renovation of
public housing and targeted housing programs for the homeless and mentally ill.
While inclusionary zoning has been the centerpiece of the housing policies of both
mayors Bloomberg and de Blasio, its poor track-record of generating affordable
housing units suggests that it should only play a minor role in the city’s efforts.
A revitalized Mitchel-Lama limited equity cooperative program could be
improved by eliminating the buyout option for shareholders after the payoff of the
government subsidized mortgage and related subsidies. New buildings should be in
the program permanently. A revitalized program should also increase income caps
for eligibility. New York is an expensive town. The Pew Research Center defines a
middle class income for a family of three in the New York metropolitan area as
topping out at $165,000.20
This is a good number to build on for a revitalized
Mitchell-Lama program. Income caps currently in place based on family size should
be lifted by 33%. A new and improved Mitchell-Lama program will thus offer all
residents the positive externalities associated with robust socio-economic diversity
without the social stigma associated with inclusionary zoning.
A recommitment to Mitchell-Lama limited equity cooperatives to ameliorate
the city’s affordable housing crisis is not without significant challenges. Land
acquisition and construction costs are much higher than they were in the heyday of
the Mitchell-Lama program in the 1950s and 1960s. Construction of multi-family
units in New York City is among the most expensive in the nation, averaging $375
a foot.21
Breaking even on rent for new construction, which includes land,

13. The Affordable Housing Crisis
construction, maintenance, and taxes, requires a rental payment of at least
$2,500 for a two-bedroom apartment, well beyond the means of many New
Yorkers to cover comfortably.22
Covering the costs of a revitalized Mitchell-Lama program could
include ideas such as repurposing land owned by the state and city, and
integrating future Mitchell-Lama buildings into climate change mitigation
strategies in recognition of the fact that the city’s landscape will have to
be greatly reconfigured in the next few decades to withstand the damage from
rising seas. Costs of these limited equity cooperatives could be folded into
the immense project of abandoning parts of the New York shoreline and
making the city more resilient. New Yorkers living in flood zones that cannot
be protected will have to find new places to live. Market-priced commercial
and residential construction could be taxed to subsidized Mitchell-Lama
development, particularly if this approach replaces inclusionary zoning
efforts. New York’s affordable housing crisis, when combined with the
vulnerability of the city to climate change, will likely require federal support
too.23
This will require tremendous effort and great expense, but the future
of the New York depends on its reinvention as an affordable, sustainable
city in the decades ahead. If New Yorkers and leaders do not rise to this
challenge, the nation’s greatest city will be eclipsed by urban rivals who more
forthrightly confront the set of undeniable, challenging circumstances they face.
1
The Spectrum News - NY1/Baruch College City Poll identified affordable housing as the most
important issue facing the city in its 2017 poll. Grace Rauh, “The City Poll: New Yorkers on the
Best and Worst of de Blasio’s Term,” May 19, 2017.
2
“More People Are Leaving NYC Daily than Any Other U.S. City,” Crain’s New York
Business, August 29, 2019, <https://www.crainsnewyork.com/news/more-people-are-leaving-
nyc-metro-area-daily-anywhere-else-us>; “Three Reasons So Many People Are Getting the Hell
Out of the Northeast.” Market Watch, December 19, 2019.

14. The Hugh L. Carey Institute for Government Reform • Wagner College
3
“Rent Trend Data in New York, New York,” Rent Jungle
4
Alex Schwartz, “New York City’s Affordable Housing Plans and the Limits of
Local Initiative,” Cityscape: A Journal of Policy Development and Research 21:3
(2019), p. 357.
5
Ibid., 357.
6
Jill Jonnes, South Bronx Rising: The Rise, Fall and Resurrection of an American
City (Fordham Univ. Press, 2002); Nicholas Dagan Bloom and Matthew Gordon
Laser, eds., Affordable Housing in New York City: The People, Policies and
Places that Transformed a City (Princeton: Princeton Univ. Press, 2016);
“Housing Policy in New York City: A Brief History,” Working Paper 06-01,
Furman Institute for Real Estate and Urban Policy, NYU School of Law &
Wagner School of Public Service, n/d, p. 6. These neighborhoods received the
most attention and subsidy under Koch’s housing program.
7
Bloom and Laser, Affordable Housing, p. 76.
8
Floor bonus plans have long been a tool of city planning since the 1970s, but it
was never a central feature of mayoral policy for affordable housing until the
Bloomberg administration. Eric Kober, “De Blasio’s Mandatory Inclusionary
Housing Program,” Manhattan Institute Report, January 2020, p. 5-7.
9
Michael A. Tortorici, “Checking In on NYC’s Mandatory Inclusionary Housing
Program” Commercial Observer, September 23, 2019.
10
Kober, “De Blasio’s Mandatory Inclusionary Housing Program,” p.17.
11
Sarah F. Liebschutz, “The Character of New York: Competition and
Compassion,” in Sarah F. Liebschutz, ed., New York Politics and Government:
Competition and Compassion (Lincoln: Univ. of Nebraska Press, 1998), p. 19
12
Joel Kotkin and Wendell Cox, “The Failed Promise,” in Beyond Gentrification:
Toward More Equitable Urban Growth, The Center for Opportunity Urbanism, p.
13.
13
Amy Stuart Wells, Lauren Fox, and Diana Cordova-Cobo, “How Racially
Diverse Schools and Classrooms Can Benefit All Students,” Century Foundation
Report, February 9, 2016.
14
“100 Million Seen in Housing Loans,” New York Times, March 27, 1955, p. 75.
15
New York City Department of Housing Preservation & Development,
“Mitchell-Lama: Income Limits.”
16
Denise DePasquale and Edward L. Glaeser, “Incentives and Social Capital: Are
Homeowners Better Citizens?,” NBER Working Paper Series, Working Paper
6363, January 1998, < http://www.nber.org/papers/w6363 >.
17
Emily Badger, “When Separate Doors for the Poor are More than They Seem,”
Washington Post, July 31, 2014.
18
Tom Waters and Victor Bach, “A Plan for the Next Generation of Affordable
Housing in New York: Reinventing the Mitchell-Lama Program,” Community
Service Society, April 2015, p. 3.
19
“Affordable No More: New York City’s Looming Crisis in Mitchell-Lama and
Limited Dividend Housing,” New York City Office of the Comptroller, February
18, 2004, p. 3.
20 Christina Caron, “Are You Middle Class? This Calculator Claims to Tell You,”
New York Times, September 12, 2018.
21
Kathryn Brenzel, “Construction Costs Continue to Climb in New York City,”
The Real Deal, February 7, 2019.
22
Rahul Jain and Michael Dardia, “The Cost of Affordable Housing,” Citizens’
Budget Commission, December 15, 2015.
23
“Only the federal government commands the financial resources necessary to
solve the affordable housing crisis – in New York City and the rest of the nation,”

15. The Affordable Housing Crisis
noted Alex Schwartz in his review of city policy. Schwartz, “New York City’s
Affordable Housing Plans,” p. 338. “Climate adaption requires national as well as
local solutions,” noted Steve Cohen in a recent article on the cost of climate change
for the city. Steve Cohen, “The Politics and Cost of Adapting to Climate Change in
New York City,” State of the Planet, The Earth Institute, Columbia University,
January 21, 2020.

16. The Hugh L. Carey Institute for Government Reform • Wagner College
The Hugh L. Carey Institute
for Government Reform
at Wagner College
Dan Donovan
Director
Dr. Abraham Unger
Research Director
Maya Barr
Research Assistant
Holly Alexander
Administrator
The Hugh L. Carey Institute
for Government Reform at Wagner
College conducts non-partisan
studies proposing policy to solve
issues Americans face.
Wagner College
One Campus Road
Staten Island, New York 10301
Tel: 718-420-4131
carey.institute@wagner.edu
www.wagner.edu