Housing USA: Cities Should Stop Rejecting Megaprojects

6 min read

2020 has been a brutal year for urban America. New York City, since bearing the brunt of the early COVID-19 impacts, has suffered steep drops in business activity. More recently, California’s densest city, San Francisco, has reported a major drop in sales tax revenue and an increase in moving activity – factors that suggest a wounded economy and outflow of residents. And a Fortune survey found that a disproportionate share of people wishing to move were from urban areas, likely due to the perceived health risks of dense living.

Long term, the dense, job-rich cities of America will likely rebound. But, in the near term, even ones with historically-resilient economies have some real economic challenges ahead—declining property values, tax receipts and business activity—and could be harmed for years. Amid this, cities should revisit their often hostile attitude to new development, namely to large “megaprojects” that generate vast economic stimulus.

New York City has at least four such developments that are mired in controversy or have been shut down outright. The most notorious was Amazon’s HQ2. The shipping and logistics giant planned to split its East Coast headquarters between the Long Island City section of Queens and Arlington, VA. Yet the project was scrutinized by local activists, causing Amazon to abandon the split hub proposal and concentrate HQ2 in Arlington. Activists disliked the tax breaks Amazon would get, which was understandable, but also ignored the economic impacts it would bring – which included 40,000 jobs. Establishing a headquarters for a major logistics firm would have had other positive effects, like building a customer base for local businesses and generating millions in annual tax revenue. But for some opponents—notably local U.S. Rep. Alexandria Ocasio-Cortez (D-NY)—this balance between economic subsidies vs. benefits wasn’t the full argument anyway. They wanted to stop the project altogether, under the hazy notion that this would prevent gentrification in an already-gentrifying area.

New York City megaprojects that don’t get significant public funding also face resistance. In September, the $1 billion redevelopment of the historic Industry City waterfront area in Brooklyn was abandoned when the site owners couldn’t get a rezoning. The political opposition—which, again, came from U.S. Representatives, but also included prominent local politicians—cited gentrification concerns in Sunset Park. Activists accused the developers of neglecting the perceived need for manufacturing jobs; but the project was in fact slated to create 20,000 jobs, including some for manufacturing, along with a new technical high school.

A third example is back in Queens, where three companies plan to redevelop a long-abandoned 40-acre industrial parcel in Flushing. Called the Special Waterfront Flushing District, it would be a 13-tower complex that would include retail, hotels, offices and more than 1,700 apartments, some of which would be set aside as affordable.

But the developers have tried without success to rezone the property since 2015. Now they’re facing a lawsuit from several neighborhood groups—including the Greater Flushing Chamber of Commerce—who claim in the suit that the neighborhood’s residents are “under siege.”

Arguably the most absurd rejection of new development citywide is in Manhattan. The island may be defined by skyscrapers, but community and preservation activists regularly oppose allowing more to be built. One recent example was in the Two Bridges neighborhood, where a judge recently blocked an already-approved, multi-tower project that would have added nearly 3,000 residential units, 690 of which were to be affordable. The judge believed the project, also organized by a multi-developer consortium, was pushed through without proper oversight.

The ruling, like with other megaproject rejections, was driven by pressure from activists who thought the towers would gentrify nearby Chinatown. As with the anti-gentrification arguments made elsewhere, this one is spurious: if a project adds housing to a neighborhood (including units designated as affordable), it is, by definition, letting more people live in the area, and reducing pressure on existing housing stock. If anything, the construction slows gentrification – a recent Upjohn Institute study found that new housing caused rents to decrease five to seven percent in gentrifying areas. Such developments also create positive spillover effects on local businesses, which matters in Chinatown, where many businesses remain shuttered due to the pandemic (as of publication, a court had agreed to hear an appeal for the project).

These are not the only examples of development getting shot down in New York City. Rep. Ocasio-Cortez has opposed a megaproject in Sunnyside, Queens that would place a mixed-income neighborhood atop a 180-acre rail yard. And Rep. Jerry Nadler lobbied a state judge to order the developers of an Upper West Side high-rise to lop 20 stories off the building.

New York City isn’t the only city with hostility to megaprojects; this has, in fact, become a trademark of modern left-wing U.S. populism. In Boston, a local firm plans to redevelop a sprawling former race track into a mixed-use complex. It borders East Boston, a working-class, largely Hispanic area that in recent decades has seen gentrification. The property, however, would be slightly offset from the neighborhood, and 13 percent of units would be affordable. That hasn’t stopped locals, and even Bernie Sanders during his presidential campaign, from attacking the project. It was approved in September, but only after three years and hundreds of community meetings. In San Francisco, stories abound of megaprojects that get either delayed or rejected, and the same happens with smaller ones. A laundromat owner in The Mission spent years wishing to redevelop his property for housing, but eventually sold the building due to delays. And near the University of San Francisco, a small developer has spent four years seeking permission (unsuccessfully) to build four homes on an empty lot.

This pervasive hostility to economic development has never made sense – even when cities are doing well, they can still benefit from the added housing, jobs, economic stimulus and tax revenue from a megaproject. But it’s particularly senseless now, as cities recover from a prolonged pandemic shutdown and attendant recession. New York City, to name one example, has 14.1 percent unemployment and an estimated 2020-21 tax revenue shortfall of $9.7 billion. The anti-gentrification activists who oppose projects need to recognize that, even if not perfect, they still bring more community benefits than keeping key urban land underutilized. And politicians—including the many federal ones who weigh in on these projects—should recognize that cities could face huge long-term fiscal problems due to the shutdowns. If developers want to build megaprojects right now, that should be viewed as a good thing.

This article featured additional reporting from Market Urbanism Report researcher Ethan Finlan.