Despite a lurking $5 billion budget gap, Mayor Michael Bloomberg keeps finding ways to do business in New York City. In taking on the city's shortage of affordable housing, he proposes to creatively invest $3 billion over five years to produce 65,000 critically needed housing units, new and rehabilitated, for low- and middle-income New Yorkers.

Mr. Bloomberg's plan will not by itself turn around the city's housing crisis, but in a time of fiscal constraints, it is ambitious. And for the first time since Edward Koch was mayor, it puts the city back into the business of driving housing development. Left to market forces under Mr. Bloomberg's predecessor, Rudolph Giuliani, the housing supply continued to deteriorate and dwindle. While the city's population grew by more than 400,000 in the 1990's, only 82,000 housing units were built. Spurred in part by the shortage, the cost of housing soared out of reach of many, compelling some households to double- or triple-up. The least fortunate joined the growing number of homeless.

Mr. Bloomberg addresses not only the financing for new housing but the obstacles that private builders of multi-family dwellings have encountered in New York. The mayor seeks to lend as much as $500 million in assets of the Housing Development Corporation to private real estate developers. Credit raters say the plan should not harm the double-A standing of the corporation, one of the nation's strongest housing agencies. Another half-billion dollars is money that would have been spent to maintain city-owned apartments, which have been sold. The bulk of the money, $2 billion, will come from the city's capital and expense budget.

The Bloomberg plan calls for rezoning to add new residential areas and would give grants to clean up polluted and neglected areas along the waterfront for development, pending approval from the City Council, which has generally welcomed the plan. To help some of those who need housing most, the mayor wants to assist qualified first-time home buyers with closing costs.

Taken together with the recently reformed electrical code and the proposed simplification of the building code, the new measures offer a comprehensive approach to the city's housing crunch.

Copyright © 2007 by The New York Times Co. Reprinted with permission.