Month: April 2011

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Early Vesting v. Late Vesting

A perennial controversy in land use law is the distinction between early-vesting and late-vesting policies for land development rights.  The issue: whether the right to build on a parcel, in accordance with the current zoning specs, vests at the time of the initial application for a building permit (early vesting), or only at the time when the permit is issued (late vesting), or even later.  The former approach gives property owners and developers a predictable set of guidelines that, if followed, will allow the project to go forward; the latter approach allows local governments to change the rules of the game once a development proposal is made that politicians or neighbors do not like.

Public comment is not always favorable.  Source: AP

It strikes me that this distinction presents such a clear-cut issue of basic fairness that early-vesting ought to be the universal rule.  After all, a municipality is free to revise its zoning ordinances at any time it likes.  So, why should a builder be subjected to a sudden rezoning that occurs only after (and presumably, in response to) his permit application?  And yet, in the majority of American states, the rule favors late vesting.  Such a policy allows local government to sit on its right to act, and to avoid any land use controversy until an unpopular proposal is actually made; and it shifts the costs and risks of political uncertainty to property owners and developers, who can never be sure that their investment will be viable until a period of political purgatory has been allowed to run.

Of course, before the million-dollar question is ever answered, developers are required to invest in optioning the property; hiring engineers, architects, environmental consultants, and land use planners; and hiring lawyers to advocate for the proposal’s approval.  Now, I’m all for professional services being kept in high demand.  But I think it’s fair to say that those services should be retained pursuant to projects that are predictably going forward, and not for work that’s going to end up in the proverbial circular file.  An early-vesting rule would provide an incentive for local governments to maintain zoning policies that are up to date, and which provide honest reflections of local priorities.  It would also be favorable to competition, by allowing smaller, less well-connected investors to manage the risk of making development proposals.

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Limited Equity: Why It Matters

Penn South, NYC.

The Times has a two-page piece on the financial challenges facing Penn South, the last of the big limited-equity (LE) co-ops remaining in Manhattan.  The LE developments– championed by local labor unions and left-wing organizers– filled a crucial gap in the New York City land economy, providing decent housing at a price-point between the public housing projects for the poor and the market-rate units whose price tags predictably soared with every boom-time economy.  The LE co-ops sold their units to middle-income buyers at reliably low prices, with two major caveats: (1) Buyers were required to meet the co-op’s household income guidelines (which tended toward union wages), and (2) co-operators who moved out were only permitted to sell their stake back to the co-op board for a comparable price to what they had paid; there were no opportunities for boom-time windfalls.

In the mid-20th century, the LE co-op model was big in NYC.  Men like Abraham Kazan, Sidney Hillman, and Herman Jessor championed the cause and built prolifically throughout the city.  In Manhattan, the LE model included Penn South, in Hell’s Kitchen, with nearly 3,000 units; a couple of large developments known together as Co-op Village, on Grand Street; and the smaller, adjacent Amalgamated Co-op.   In the boroughs, even larger LE co-ops would come to dominate the skylines of far-flung neighborhoods like Coney Island, Jamaica, and Baychester by the early 1970s.  The LE’s created large, stable, affordable communities of middle-income stakeholders in a city whose vacillating real estate landscape was anything but friendly toward middle-income workers.  In context, the LE co-ops were the vanguard of the NYC labor movement that took off in the heady years after the Triangle Shirtwaist fire, and lasted until the NYC financial crisis and the US-left meltdown of the 1970s.

Twin Pines, symbol of co-operative principles, can be found at many NYC LE complexes.

Today, with Manhattan housing having become a costlier proposition than ever, an experiment like Penn South seems almost preposterous.  And yet, it has survived for more than 40 years, representing a viable private-sector alternative to the disastrous public housing projects of the same period.  Its units– when they become available– remain priced at the unbelievable value of just $12k per room.  Much credit is due the Penn South co-operators, who (mostly in their 70s, according to the NYT article) are still refusing to convert their priceless Chelsea complex into a market-rate windfall.

Penn South and the other remaining LE co-ops of Greater New York are the legal remnants of a fading past, when middle-income Americans were able to leverage their collective clout into a meaningful economic stake.  They stand as massive, brick-and-mortar testaments to what once was possible, even in the mad real estate marketplace of 20th century New York; and to the occasionally realized ideal of the inclusive American city.  Their dwindling numbers stand as a counterpoint; a sad illustration of the economic trajectory of the US middle classes over the last two generations.

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Old Urbanism: Why Not Break Up New-Town Development?

Exhibit B: Artist’s rendering of the proposed Wesmont Station TOD, Wood-Ridge, N.J. Source: WSJ.com

The WSJ has the story of Wesmont Station, a new mixed-use, transit-oriented development in Wood-Ridge, New Jersey.  It looks nice, and I’m glad to see that it’s going ahead.

But, a rant: The more I watch, the more I see the ambition of projects on these kinds of tabula rasa sites as an indictment of the maddening American land use regime that governs neighborhoods.  Consider three alternatives: Exhibit A is the assortment of ideas and practices that have become calcified in the Byzantine processes of local government.  Some work, others don’t, but we go with them as a package because they look right on the official map.  Exhibit B is Wesmont Station, and similar developments: what’s possible when the standard sixteen layers of local-government approval can be reduced to the blessing of a single, politically-supported superblock.  The Wood-Ridge project is planned for the sprawling grounds of a former factory.  In Edgewater, NJ, a new city has appeared since the mid-1990s on a strip of disused industrial sites along the Hudson River.  A generation ago, Battery Park City rose a few miles south, where piers had once extended into the same waterway.  On a small scale, projects like these are America’s new towns.

The Exhibit B examples are well and good, but there’s also a potential Exhibit C: an artful zoning approach to building a new neighborhood that has a similarly planned and efficient layout, but which could at once be more individualized, and yield a higher quality product.  More individualized, because it would not require large developers to purchase multimillion-dollar sites, and to develop those all at once.  Instead, a third approach could establish the legal framework of an authentic neighborhood, and allow individuals and small businesses to incrementally fill in their respective pieces of a grand puzzle.  While controlling for nuisances and incompatibilities, it could provide those myriad participants enough flexibility to customize their land uses to their own individual needs.  Thus, the end result could attain a higher quality, and more value, because it would yield a physical town that was at once richer in variety and more reflective of its people than any large, one-shot deal.  In short, an artful zoning approach to new towns could re-create the actual process by which towns and cities were traditionally built, but with the protective elements conferred by the legal authority of comprehensive zoning.

For the time being, it’s good that AvalonBay and other developers are moving projects like Wesmont Station.  It’s progress.  It’s just that I’d also like to see the organic town-building process rediscovered.  It could yield much more than its inevitably boring imitations.  Right now, most local zoning laws could still be described as Exhibit A, while exceptions are made for Exhibit-B proposals when the right political muscle is exercised.  What we need, though, is for more communities to embrace a more visionary and democratic approach to town planning, and to move toward the artful zoning approach of Exhibit C.

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NYC Zoning Specs Web Site

An example from the site. Source: NYC.gov

The NYC Planning Department has a web site with a very thorough presentation of the city’s zoning specifications.  I like how its drop-down menu allows you to select any of the city’s 53 zoning categories, or any of its special use districts, and get its basic information.  The layout is clean and straightforward, and the specs tables are concise, illustrated with form-based graphics (to the extent possible), and supplemented with neighborhood photos.

NYC zoning is still deeply, unrepentantly Euclidean.  But this method of presenting separated uses helps to cut through some of the legalistic cobwebs that often accompany an empirical approach to urban land use law.  (Think: a lawyer or planner burning the midnight oil; an unfurled map on a library table; and a heavy binder of obtuse statutory language.)  Proper respect to the NYC Planning Department for using its resources to shed light on what is often an arcane and inaccessible area of the law.