What can be done about Rochester’s housing crisis?

This post is the latest in a recurring Beacon feature, Counterpoint, a dialogue between liberal Rick Dollinger and conservative Geoff Rosenberger.

Rick: Geoff, America faces a housing crisis. Not enough residences to meet demand, incredible pricing hurdles virtually everywhere and other obstacles. And Rochester’s real estate market has been listed as one of the most challenging in the nation in recent years, near the top of the “hottest real estate markets” lists—with only few hundred homes on the market, many selling well above asking price and an average of only eight days on the market.

I know you may think the private sector can solve this problem. But, if they can solve it, why haven’t they, when it appears demand for housing may be at an all-time high and new units could be very profitable?

Grab your “private sector” armor, jump on your “free market” steed—I’ll jump on my “high horse”—and let’s see where this debate goes.

Geoff: Well, the answers—because there isn’t just one answer—differ locally versus nationally. In places like Atlanta, Austin, Phoenix and Nashville, among others, apartment rents are falling because the private sector has responded to elevated demand and rents with substantial supply increases. But obtaining zoning approvals, designing structures and then building them all take time. It isn’t like a factory where you can simply add a third shift and immediately start cranking out apartments or houses.

But zoning restrictions and local approvals are a big deal. Look at the torture the village of Pittsford put Mark IV Enterprises through with its Westport Crossing development on Monroe Avenue adjacent to the Erie Canal. The village delayed that project for years.

Rick: Geoff, you hit the problem on the head.

Housing, of any type, is a government problem. Local governments control the siting of housing through zoning and other restrictions. Higher levels of government control the startup funding. The federal government controls—through tax credits and government-backed mortgages—the longer-term financing.

Getting these three levels of government to work together requires a Harry Potter-like magic wand.

Scarce housing has a benefit to current homeowners: the value of their home—in many cases, their most valuable asset—increases when housing is scarce. The more available buyers, the higher the potential value of the home. If there are more options for buyers, presumably the value of any specific homeowner’s property declines?

You are a “supply and demand” guy, Geoff. Isn’t that how it works?

How do we get homeowners, local government, the financing agencies and developers on the same page to quickly—three-to five-year timeframe—increase the housing stock here in Rochester?

Geoff: Well, for starters, Albany could repeal New York’s Scaffold Law, the only one of its kind in the nation. In New York, if an employee is injured on the job and his employer is found to be just 1% responsible for the accident, the employer bears 100% of the financial responsibility. So, a roofer intentionally, and in violation of his employer’s work rules, unhooks his safety harness. He subsequently falls off the roof and sues his employer for compensation. If a court finds that the employer should have been constantly watching him to ensure he didn’t unhook his safety harness, 100% of the liability is determined to be on the employer. You can imagine what that sort of liability imbalance has done to New York’s contractor insurance rates. One local homebuilder told me that insurance costs alone average between $6,000 and $7,000 for every new house he builds. He had an intoxicated siding contractor get hurt on one of his job sites. The fact that the worker was intoxicated was deemed to be irrelevant from a defense standpoint.

Rick: Geoff, I get the insurance angle and the Scaffold Law challenge. But the Scaffold Law has been a huge incentive for all contractors to improve workplace safety at construction sites and reduce injuries, based on what I know.

Even so, the extra cost for insurance in construction does not address the bigger problems facing Rochester and Monroe County.

Start with apartments: the apartment issue seems to be easier to solve but it is by no means simple. There are multifamily projects both in development and in the ground in Rochester. The development of the Chase Tower and the Xerox Building for downtown housing are examples of newer market-rate housing. The old Gannett Building and others in the old Four Corners area may be next. There is new multifamily housing at the corner of Plymouth Avenue and Broad Street.

There is an innovative project at the remodeled Rochester Club on East Avenue that will include some “affordable condominiums” under a special state-funded program that may be a model for the future and worthy of more discussion.

These developments are promising, but the real challenge: How do we get people out of apartments and into “starter homes,” where they can begin to build equity that can later translate into downpayment on a second residence?

In short: How do people with barely subsistence incomes in our region—family incomes of less than $50,000—save enough to fund a down payment, while paying the financing, taxes and other costs of owning a home?

Geoff: Rick, if you make less than $50,000 a year, you aren’t going to purchase a single-family home today. That’s the cold, hard reality. Let’s do some 3rd grade arithmetic: $50,000 per year yields $46,175 after FICA payroll tax. A $50,000/year person probably pays little or no income tax. Allocating 30% of that $46,175 to housing costs translates to $13,852 of available housing dollars. According to the Greater Rochester Association of Realtors, the average Monroe County home sold for $219,000 in February. In the city of Rochester, Redfin reports the median February sale price was $160,000. So, let’s stick with the city. Say that a decent house in a reasonably safe neighborhood will cost a minimum of $150,000.

Let’s assume the prospective homeowner has managed to save some money and is able to cover the closing costs and make a 5% down payment. At a 6.5% interest rate, the mortgage payment will be around $900 a month or $10,800 a year. Add in property tax of around $3,000 a year and we’re essentially up that person’s $13,852 a year of available housing dollars. Where will the money for homeowners insurance, utilities and, most importantly, home maintenance costs come from? At $150,000, we’re likely talking about a pretty old house. Old houses generally have old roofs, furnaces, hot water heaters and appliances, all of which will eventually require replacement and there’s no money left for that. The home ownership math simply doesn’t work for that $50,000/year person.

Rick: Geoff, your analysis—as almost always—is right on the nose. The bottom line is that housing—of almost any sort—is beyond the reach of anyone in Rochester or the surrounding suburbs with less than $50,000 in annual family income. The Rochester median income was about $47,000 in 2024. With that income, anybody will find it nearly impossible to find housing to buy.

The same analysis applies to rental housing. A simple rent cost for most two- or three-bedroom apartments runs $1,400 to $1,800 per month, which means that the annual cost—after taxes—is close to $20,000. If you make $50,000, pay FICA, pay some state taxes, finance a car for $3,000 annually and have to pay $18,000 to $20,000 in rent, you’ll never be able to save the $25,000 down payment for even a starter home.

But enough about the problem. Now, solutions.

Acquiring land—even a single home building lot—is the start. Governments can acquire the land: make tax foreclosure easier, condemn unused houses quickly—end the “zombie home” problem.

That’s an interesting issue for Rochester; at one point, the city had enough housing for more than 300,000 people. Now, it has only 207,000 residents—what happened to all the additional housing? It is either still there—waiting for changes—or empty lots that need new homes.

Second step: give local neighborhoods the preference to select the property and the developer.

Find local, neighborhood developers to start the construction process. Give municipalities the ability to fast track approvals for home restorations or new construction in certain neighborhoods. Give local development companies—working with neighborhood leaders—the financial ability to build quickly and, if government assists in the financing, then attach some restrictions to the profits to be made from construction, sale or rental for some time.

Find flexibility in what is built: Should duplexes or Boston’s “triple deckers” be considered where possible?

Geoff, do any of these options hold any promise in Rochester or, importantly, even in its suburbs?

Geoff: Before we get to solutions, let’s first refine the income conversation. You’re right about the city of Rochester median income, but across all of Monroe County, the Census Bureau estimates the median household income to be $76,520. Let’s also keep in mind that the denominator in that calculation includes a whole bunch of people who aren’t interested in owning a house—college students, for example, or single twentysomethings who don’t want to deal with the home maintenance time commitment. For families, the Census Bureau pegs the city’s median income at $59,964 and at $103,217 across all of Monroe County. For married couples, the city median income rises to $105,722. Countywide, it’s $129,358. Those are the folks who are the prime house purchase candidates and for them, the math is much less challenging. Not necessarily easy, but doable.

There is no shortage of available vacant lots in the city, although admittedly many lie in challenged neighborhoods. The suburbs are different, with most developable land found in more rural, less convenient locations such as south of the Thruway. But, when inner-ring development opportunities do arise, the NIMBY (“not-in-my-backyard”) phenomenon inevitably rears its head. Earlier I referenced the village of Pittsford’s efforts to sabotage the Westport Crossing project. In Perinton, Bushnell’s Basin residents are aggressively fighting a small proposed residential development at the corner of Route 96 and Thornell Road. A few months ago, Basin residents managed to defeat a proposal to redevelop the old Burgundy Basin Inn site. NIMBY is real and presents a housing development impediment.

Even when local municipalities don’t fight development, they often impose development costs. “Oh, you’d like to develop that 100-acre site? Okay. We’ll approve a 70-acre development provided that you donate the remaining 30 acres to the town for a small park.” Extortion like that drives up lot costs for the developer, costs that get passed along to the home buyer. And then there’s the whole approval process. I spoke to one homebuilder who has an active housing development that required seven years to finally obtain all the necessary local government approvals. A different developer told me it took him five years to get the approvals for a project he recently completed. Those time delays add costs.

And then there’s New York State. In December, Governor Hochul signed into law legislation that shifts the cost of laying the first 100 feet of new gas lines from the local gas utility (or their ratepayers) to the property developer. The developers aren’t going to eat that cost. They’re going to build into the price they charge for the houses they build.

There are places where governments operate differently. The Southern Tier, for example. An apartment developer told me he received approval for a 300-unit apartment project in Big Flats, one that required a zoning change, in less than 12 months. In Erie, Pa., for a project that didn’t require any zoning adjustments, the approval took 10 months. A virtually identical project in Ontario County required three years. So, yes, local governments can facilitate as opposed to obstruct housing development. But not every community has the same cultural DNA.

Rick: Geoff, we’ve diagnosed the problem here, but the solution remains elusive. NIMBY makes multifamily options in the suburbs difficult to build. Boomers don’t want to move and surrender favorable mortgage rates—I got a 3.15 percentage rate the last time I borrowed. With a small supply, fewer people moving and high interest rates, I am convinced that the housing shortage—and lack of affordable housing near urban centers in Western New York—is with us for a while longer.

On to the next project!

Rick Dollinger is a retired Court of Claims judge and a former state senator who lives in Brighton. Geoff Rosenberger is retired co-founder of Clover Capital Management Inc.

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