How an NYC Suburb Is Keeping Rents Down

0:04The rising cost of housing is crushing many Americans, and for renters in big metro areas, it's been getting worse. Like in New York City, where the median rent has reached almost$3 ,500 a month. But just north of the city, beyond its expensive brownstones and six-floor walk-ups, there's a suburb of about$85 ,000 that's found a way to keep rent steady. New Rochelle. The New Rochelle rental market is one of the kind of bastions of relative affordability in the notoriously expensive New York City metro area. That's our colleague Rebecca Pichotto. She covers real estate. She says that rents in New York City are up 26 % since 2020.

0:49But in New Rochelle, rents have climbed just 1.6 % in the same period. So Rebecca went to New Rochelle to try to understand why. When you get off the train in New Rochelle, you see construction sites sort of everywhere. You can see kind of the new supply coming on, you know, before your very eyes. these empty lots with cranes and the emerging skyline of New Rochelle is very visible. So what does that tell you about why the rents are the way they are in New Rochelle? It's not a super magic secret formula. They built more housing. And as a result, as that new supply came online, rents fell. It sounds simple, but as it's become a little bit easier said than done in many cities across the country, but New Rochelle prioritized development, and as a result, you know, they made it faster, cheaper, and easier for developers to build, and that brought a lot of new supply to the city.

1:53Welcome to The Journal, our show about money, business, and power. I'm Jessica Mendoza. It's Wednesday, August 20th.

2:06Coming up on the show, how the city of New Rochelle reinvented itself and kept rents down.

2:29Decades before New Rochelle went on a building spree, its population was falling, businesses were closing, and the city was in desperate need of a revamp. In 2014, city officials set out to attract more residents, and they thought they could take advantage of New Rochelle's proximity to New York City. The suburb is just a 40-minute train ride away from midtown Manhattan and had long been a spot for commuters. And with New York rents on the rise, renters seemed willing to look beyond the city for places they could afford. If someone can't find an affordable place in the five boroughs, maybe consider New Rochelle.

3:03And so that, in some ways, was the thesis of how to, you know, get population growth back on its feet, hopefully revive downtown. They wanted New Rochelle to offer an affordable option for the people who want everything that New York City has to offer. But, you know, given the affordability issues there, need to find something else. So New Rochelle set out to build more apartments. But again, building is easier said than done. Yeah, I mean, I think historically the big roadblock has been things just take too long. You know, when a developer submits a proposal for a new project, they have to go through a lengthy environmental review.

3:44They have to, you know, get the right permitting approvals. That often takes a while. Sometimes it's left to the discretion of a city council that might debate it for a year or, you know, bring in, you know, these long public hearing periods where, you know, residents will push back. that adds even more years. And there are these complex zoning regulations that they have to navigate. So it's just this kind of complex web of red tape that has dragged things out for developers. Typically, one of the biggest roadblocks to development is community pushback, often from NIMBY residents, as in not in my backyard.

4:23I think over the past several decades, NIMBYs have been given a lot of kind of political leverage in local town councils. You know, these are the people who might show up to the town council meeting when a new affordable housing project is on the slate and they might protest it because it might impact their property values or they don't want to deal with the construction noise while it's going on. I mean, these are all fair growing pains of redevelopment. It's not an easy process, but city officials have granted these concerns a lot of credence over the past several decades. And, you know, whatever you think of those concerns, the outcome has been just dragging out development to the point where sometimes it just doesn't get done.

5:07And so how did New Rochelle decide it was going to approach development? Yeah, I think New Rochelle said it was going to try to speed things up. It took a pro-development policy framework and it put that first. So whereas, you know, other cities might spend years weighing all the different concerns, New Rochelle took a very clear focus and said, we are going to want to get this building done. To come up with that framework, New Rochelle partnered with a developer called RxR. Its job was to put together a master development plan for the city. The city approved RxR's plan within a year. In the New York area, the firm says it usually waits a lot longer than that, sometimes 10 to 15 years.

5:49And to get shovels in the ground faster, New Rochelle found ways to speed up development projects. City officials took the environmental reviews that often prolonged projects and streamlined them. The city also boosted developer tax breaks to incentivize them to build. And the city came up with a new way to approve projects. It broke the city down into zones and set standardized criteria that developers had to meet for each zone. Criteria like a certain number of apartments and parking spots, building height limits, affordable housing requirements, and more. So developers could look at a place where they wanted to build.

6:24They could look at the standard guidelines that the city provided, and the city came up with these guidelines, you know, engaging with the community. And now developers can look at those criteria, meet them, and the city assures them a 90-day approval process. And that's significantly faster than the 10 to 15 years that some developers say they're waiting elsewhere. So this form-based approach, does it just mean that they were able to, they spent a bunch of time on the front end developing these criteria, and then they were like, this is standard now, so just meet all of this and we can speed you through the process, basically.

7:00Exactly. You know, every project does still get a public hearing period. There are still, you know, bespoke environmental reviews for each project. But having this standard set of guidelines gives developers predictability and a level of assurance that a NIMBY lawsuit won't necessarily derail their project the way it might in another city because, oh, they've met these criteria. There was concern from the community about the development push. Some residents worried that the city couldn't keep up with the growing population and that it could lead to crowded schools and more traffic. And they told Rebecca that the new housing skewed towards luxury apartments and that it didn't address the need for retail development downtown.

7:43City officials and RXR executives did try to win public support. The development firm built a 10 ,000-square-foot theater and started holding competitions for local artists to live in one of its new buildings, rent-free for a year. Overall, the city says the push to prioritize development worked. Thousands of new housing units were built. Over the past 10 years, 4 ,500 new units have been completed in New Rochelle. There's 6 ,500 more either in the pipeline or in early planning stages. And that's pretty significant, especially for a place like New Rochelle. If all of it gets built, it would be a 37 % increase in the number of housing units compared to a decade ago.

8:25So how have those thousands of new units transformed New Rochelle? That's after the break.

8:46You've been to New Rochelle and you've seen some of these new developments. What are they like? Can you talk about that? Yeah, I mean, they're nice, I will say. They are highly amenitized, you know, fitness centers, office, lounge areas. These are really nice buildings, many of them. Who's moving in? You know, what's so attractive about these developments for new residents? Yeah, so about a third of the new residents who are filling up these apartments are coming from New York City, according to municipal data, and that's the highest rate of anywhere else. So I think as much as these apartments are skewing higher end, they are considered, I guess, more bang for your buck among, you know, Manhattanites.

9:30You know, getting a fitness center and all of these amenities for a two-bedroom and then having that be$3 ,600 instead of$5 ,000 or$8 ,000, that's a steal, even if it's considered, you know, definitely, you know, not a steal for a local New Rochellian. Still a lot of money. Yeah, still a lot of money. But I think if it shows you anything, it's that New York City's, you know, rental market has just kind of skewed everyone's expectations a little bit higher. And so$3 ,600 for a two-bedroom, it feels affordable at this point. Right. So relative is kind of the operative word here. Correct. Relatively affordable.

10:05Correct. So would you call this a great success? In terms of the goal that they had, it was to build more housing. It was to boost the population and bring more people in. They've done that. You know, 7 ,000 new residents have moved into New Rochelle. As we said, like 4 ,500 new housing units have been built and, you know, thousands more in the pipeline. But all that new development hasn't been easy for longtime residents. What has really come to the surface in terms of tension is this local tension between the existing residents and the newcomers. speaking to some of the longtime residents. They say that they can spot the newcomers just walking on the street.

10:46They have a different, you know, step or something like that. And I think there is a sense that the new development, the revitalization of New Rochelle, it was aimed at bringing new people in. And, you know, as existing residents have watched their community change, it's possible that they feel, you know, left behind, that the change wasn't really targeted at them. Some longtime residents worry that newcomers aren't as invested in the community. One longtime resident described these new buildings as sleeper dorms. Basically, you know, the New Yorkers or the Manhattanites come in. They sleep in the nice high rise.

11:23And then they leave in the morning and they go work in New York City and they spend in New York City. And they boost the economy of New York City. And then they come back. And I think there is a concern that, you know, there was this initial effort to, you know, revitalize downtown New Rochelle. And while you've brought in all these new people, are they actually active contributors to the economy? Or are they just living in New Rochelle and doing everything else everywhere else? But the development push has brought some economic growth to New Rochelle. There's been$2.5 billion of new development in the city because of this kind of perceived easier regulatory environment.

12:05And as a result, it's been able to reinvest some of that revenue into making sure the city can keep up with its own growth. So they're working on kind of infrastructure rehabilitation and they've strengthened some of their food assistance programs, launched a down payment assistance program for people trying to get on the homeownership ladder. Is there a concern that, you know, locals who've been there for a long time are being priced out? We talked about sort of relative affordability. These are still high-end luxury condos. So I'm curious what that's doing for people who've lived there a long time.

12:37Right. Like New York City money or Manhattan money goes pretty far in New Rochelle. But a local resident in New Rochelle, they don't necessarily feel like this, all of this new development is for them. The city is hearing these concerns, certainly, and kind of toying with ideas on how to make sure that existing residents aren't being priced out. But this is the tension when you redevelop a place. You're hoping that the economy does well. That's the goal. But as the economy does well, values go up and you have to reckon with how that affects the people who are there. To address concerns about affordability, the city required developers to make 10 percent of new units affordable housing.

13:18Those are rentals priced below market rate. In the end, the city says nearly 17 % of the new units are in that category. But the community is still concerned about affordability, and the city is open to considering another policy, rent control. I think, I mean, that's interesting, right? It shows you that they are trying to maintain the affordability gains that they saw. As supply comes online, you see rents tick down. But this is all cyclical. So rents eventually tick back up and, you know, they want to make sure that long-term residents don't necessarily, you know, that, yes, it's serving newcomers, but it's also serving long-time residents.

13:58And rent control is potentially a way for them to do that. What's interesting and I think separates New Rochelle from these other rent control conversations that we're seeing across the country is rent control is not their knee-jerk reaction. It's very much a secondary approach to maintaining affordability. They're still development first. They still see supply as the way to bring down prices in the long term, but they also see rent control as a potential tool to balance the, you know, when you're building more luxury, like how do you balance the affordability goal? That's kind of inverted from what we see elsewhere.

14:37So just to take a step back, New Rochelle has been executing this development plan for over a decade at this point. Are there any lessons that cities from around the country can take from New Rochelle? I think the New Rochelle mindset is starting to replicate itself elsewhere already. You know, we saw California Governor Gavin Newsom earlier this summer rolled back some pieces of the landmark environmental law in the state specifically to make it easier to build more infill urban housing. And so it's not to say that Newsom was looking at New Rochelle and was saying, oh, I should do that. But this idea that, you know, New Rochelle has prioritized supplies and affordability solution, that's starting to take off elsewhere.

15:16And I think the political tides are somewhat shifting in favor of it. What are some examples of that? Like, you can see it on Capitol Hill right now. Like, one of the rare bipartisan legislative packages moving through the Senate is a housing bill. Like, Democrats and Republicans are not agreeing much these days. But I think they're starting to come to terms with the fact that housing, everyone needs it. Everyone needs a place to live and people need to be able to afford it for these economies locally to sustain themselves. So you're seeing a lot of bipartisan support for housing in a way you're not seeing elsewhere.

15:51There's this kind of reckoning moment of maybe we need to try something new because the housing shortage as is is unsustainable.

16:06that's all for today Wednesday August 20th The Journal is a co-production of Spotify and The Wall Street Journal if you like our show follow us on Spotify or wherever you get your podcasts we're out every weekday afternoon thanks for listening see you tomorrow

16:29Thank you.