Predictability Begets Productivity: A Conversation with Alicia Glen

After serving as assistant commissioner for housing finance at the New York City Department of Housing Preservation and Development (HPD) — and building a successful career in municipal finance on Wall Street — Alicia Glen served from 2014 to 2019 as deputy mayor for housing and economic development under Mayor Bill de Blasio. She is now the founder and managing principal of MSquared, an affordable housing development firm she launched in 2020.

As deputy mayor, Glen oversaw a housing plan that by the end of her tenure had built or preserved more than 135,000 affordable units across New York City. She also led the creation of the Permanent Affordability Commitment Together (PACT) initiative, which brings private ownership and management into partnership with the New York City Housing Authority (NYCHA) to rehabilitate deteriorating buildings. The agencies under her leadership were responsible for a series of neighborhood upzonings, including the administration’s two signature zoning reforms: Mandatory Inclusionary Housing and Zoning for Quality and Affordability.

At MSquared, Glen and her team focus on mixed-income, mixed-use development projects in urban areas. The following conversation has been edited for length and clarity.

Vital City: You’ve had a remarkable career in both the private and public sectors. What did your time in New York City government teach you about how to get housing produced?

Alicia Glen: The most important thing I learned is that you need to know what the rules of the road are. There needs to be certainty in the system. For investors, construction companies, developers and nonprofits, and all the players in housing, it’s not helpful when people are trying to put together a deal to have too many pieces of the puzzle that are uncertain.

City government can’t control global interest rates or federal policy, but the things they can control need to be as knowable, with as little discretion, as possible. This is why what’s going on now is very worrisome. Some people say each deal should be underwritten separately, and to make sure we don’t oversubsidize this one or that one. All of which sounds like great policy, but if you really want to build housing, you need clear rules.

In 2017, we changed the rules pretty dramatically from the old 421-a to the new 421-a, rebalancing the program more in the public’s interest. Then the market responded. They react, they adjust. But everybody knew what the rules were. Same with zoning — if you want to rezone your site, this is how much affordable housing you have to do. It’s not bespoke, not subject to political whim. It is what it is. Advocating and fighting for more units is where legitimate dealmaking comes in. Administrations can and should have discretion over how they use their discretionary resources.

But at the end of the day, jurisdictions that don’t take seriously their obligation to establish clear rules of the road cannot produce housing at scale.

VC: Do you think New York City is one of those jurisdictions now?

AG: New York has historically been the poster child for having very clear rules about how you get it done. It’s had very little corruption in the housing space and has been a very knowable system for capital markets and developers. Every five years or so, the game is up for grabs, and it’s chaos, but then at least you know what’s going on.

There are two things that worry me. First, there are people who argue that every deal should be individually underwritten and then the City should figure out what it can get from the developer. That’s completely unscalable and impractical — you’ll never get a deal done that way. It sets you up for corruption, because it becomes all transactional.

Second, the City has increasingly stopped obeying its own program rules. I think only one deal this year is being done at “term sheet.” That’s outrageous. What’s the point of having term sheets if you’re not following them?

VC: Walk me through how a project goes from concept to reality.

AG: There’s a great kids’ book about this. Let me break it down simply.

For as-of-right market-rate housing: You see a piece of land and buy it for $1 million. In New York, each piece of land is zoned; let’s say this land permits a 10-story building with 100 units. You hire an architect to design the building and get a contractor to say they can build it for $10 million. You go to a bank and get a $5 million loan, then find an equity investor for the remaining $4 million. The architect files plans with the Department of Buildings, they self-certify compliance with all codes, and boom — they get a building permit. No review, nothing. Your contractor builds the building. No fuss, no muss. Virtually unheard of anywhere else in the country.

When you need or want a rezoning: You want to build 200 units instead of 100, or your site is in a mixed-use neighborhood, and you can’t do that as-of-right. Now you spend two years convincing everyone you should be able to double the size and allow residential. Under New York law, you now need affordable housing in it. It’s harder to get financing, and you have to talk to the council member and deal with people who don’t want a 20-story building. Two years of politics and predevelopment financing costs.

When you want to build affordable housing: You call the City, and they say, “Fantastic, we’ll give you $200,000 per apartment.” You fill out forms, take it to the bank, then sit in line for five years while the property costs you money. Every time you call your contractor, costs have gone up. You go back to the City asking for $250,000 per unit, then $500,000. Seven-and-a-half years later, you have 200 units of housing.

VC: How much of the high cost of affordable housing is due to the wait versus other requirements?

AG: The biggest driver is the wait. The actual requirements aren’t that complicated — New York’s Housing Department has pretty much standard plans and specs. They’ve been doing this since the Koch Housing Plan, which was the first comprehensive plan laying out how the City would finance, fund and regulate construction and preservation of housing through a series of programs. These all-affordable building requirements are generally straightforward.

Yes, the City sometimes requires passive house standards or other expensive features on public sites, but that’s a political choice. New York City’s code is already very progressive on environmental issues.

VC: What about labor costs and prevailing wage requirements?

AG: Historically, we had a bifurcated labor market with detente. The affordable housing pipeline was left alone, and labor wasn’t much of an issue. Very large rental or condo projects have almost always been built with all-union labor. More recent tax policy has caught affordable housing in union politics, which is challenging.

The wage premium is real — I just got bids both ways, and it was about 26% to 27% more for union labor. That’s enormous, especially in this environment with tariff uncertainty driving up raw materials costs. The way they’ve implemented it is also dumb — if the wage premium triggers at 100 units, people just build 98 units.

VC: If you were queen for a day, how would you attack the wait problem?

AG: The wait is a function of decisions about which projects to do. If you do projects that are very expensive and you have the same number of dollars, there’s a longer wait for other projects. You need to think about bang for your buck.

Take Site 5 at the World Trade Center. We decided bids should comply with Mandatory Inclusionary Housing — 25% affordable housing in this luxury high-rise that costs at least a million dollars per unit. Then politicians and advocates screamed that we needed more affordable housing. Everyone caved and magically came up with another $65 million to go from 25% to 31% affordable. That $65 million could have funded three deals in the pipeline that had been waiting for years.

The debate is: What’s more important — building more units or having equitable distribution of affordable housing throughout the city? We’ve increasingly leaned toward using scarce public resources to build housing in expensive neighborhoods or expensive building typologies. I find the building typologies particularly upsetting. Why use City dollars for people in an elevator going to the 80th floor when you could fund good mixed-income projects in great lower-density neighborhoods where most families want to live?

VC: Is there a policy fix?

AG: The fix is having more money, or doing what we did in the de Blasio administration — using Mandatory Inclusionary Housing and tax policy to get affordable housing in neighborhoods without costing the City anything. We attacked the economic segregation problem through Mandatory Inclusionary Housing and by requiring that rental buildings in New York built with a tax exemption require affordable housing. And almost every single rental building has a tax exemption.

If 30% affordable isn’t good enough for the Upper West Side, people are living in la-la land. Not everybody can live in every neighborhood. Land costs more. Period. I’d rather have a moderate-income family live in Queens or Brooklyn and have a place to live than have no place to live. The answer isn’t to put everybody in expensive neighborhoods — it’s to make investments in physical and social infrastructure in other neighborhoods and make them better.

VC: What about City of Yes and other zoning reforms?

AG: City of Yes is great — it’s an extension of Zoning for Quality and Affordability, which we did in the de Blasio administration. It fixes stupid stuff in the zoning resolution. Its projected impact is maybe 80,000 units over 12 years, which is part of the solution. By comparison, the first de Blasio housing plan was 400,000 to 500,000 units of market and affordable housing over 10 years.

The bigger win was lifting the floor-area ratio cap on residential. That’s potentially enormous. There used to be a State law limiting how much of a building could be residential — even if you could build a 100-story building, you couldn’t make it all residential. Removing that cap means that where I could build 700 units before and use the rest of the site for office or retail, I can now build 1,000 units.

We also need to keep doing larger-scale neighborhood-wide rezonings like the Atlantic Avenue one that was recently certified, as opposed to one-offs. Once you’re done with a neighborhood rezoning, that property is as-of-right, and you just go. No discretionary review needed.

VC: What about downzoned neighborhoods and historic districts?

AG: Pitting landmarks people against housing advocates is a fake narrative. There are buildings and neighborhoods that should be landmarked and respected — we’re not Phoenix. We have bones, terroir, neighborhoods. But the Bloomberg downzonings did result in significant loss of potential production in neighborhoods that weren’t really about preservation.

With good leadership, you could reopen some of those conversations. Life is different now from 20 years ago. But I think we should finish the more obvious ones first — neighborhoods that historically had more density or have existing infrastructure for more density.

VC: How do you get developers to build more family-size housing instead of just studios and one-bedrooms?

AG: The market won’t do it on its own, because it’s all driven by per-square-foot economics. Developers only build family housing if it’s either required or lucrative, and in New York’s rental market, it’s generally not lucrative except for very high-end condos.

You’d have to force it through regulation — then the market would react by adjusting land prices and financing. And there are some fixes that don’t need legislation — the City currently provides the same amount of subsidy for a studio or a three-bedroom, which is insane. But that means announcing 7,000 units instead of 10,000 units. So it’s a political choice.

In the next round in Albany, you could also require that, if you get a tax exemption, you have to provide family-size housing. Regulation is a toolbox, and you have to think about things from a variety of perspectives.

VC: Why can’t the housing market respond to demand faster, like other industries?

AG: The residential cycle is just different from something like making jeans. There are some examples of overbuilding — for example, Austin might have zombie buildings soon because the market overresponded.

New York is weird because we don’t build nearly enough, and we’ve generally avoided boom-bust cycles — except in luxury condos. We should get better at shaving time off construction through technology, but in a dense, old city with old infrastructure, you’re never going to cut off that much time.

The real problem is that the time before construction — the pipeline — is getting longer, not shorter. The City officially says the average time to get an HPD-financed building in the ground is at least five years. Every year they’re not moving forward, costs go up. I think there’s no sense of urgency from some public-sector actors, because if they miss this cycle, they’ll get the next one. But there’s a real cost to waiting.