'We're At The Peak Right Now': What's Next For NYC's Charter School Developers

New York City’s economy has slowed since the start of the pandemic, but even as its population dropped and unemployment spiked, charter schools have continued to grow their footprint.

Over the past two years, several charter schools have signed new leases for large spaces in the Bronx, Queens and upper Manhattan. Between Zeta Charter Schools, Seton Education Partners and Bold Charter Schools alone, more than 200K SF have been leased. For Emily Kim, founder and CEO of Zeta, facilities can’t open fast enough. 

“We receive anywhere from five to eight applications per open seat,” Kim said. “Demand for charter schools has persisted throughout the pandemic.”

Charter schools are tuition-free public schools with private management, which operate under an agreement, known as a charter, with the New York State Department of Education.

They have drawn controversy: their critics say charters can drain funding for government-run public schools, and that they often don’t deliver the better results promised to parents. But for parents in underperforming school districts, charter schools can offer them a critical alternative.

“If you look at a map of where demand is coming from for schools, in general it’s coming from across the city — but the concentration of applications are in the Bronx, upper Manhattan and parts of Brooklyn,” Kim said. “If you overlay a map of where demand is coming from with a map of the bottom 20% of NYC schools, they match almost exactly.”

There are 265 charter school sites with open schools in NYC, according to a Bisnow analysis of data from the New York State Department of Education. The lion’s share of charter school licenses have been granted to schools in The Bronx and Brooklyn, which have upward of 85 open schools each.

But the number of charter schools is unlikely to grow much more without government intervention: New York City has reached its state-imposed cap on public charter schools, which can only be lifted by the state legislature.

Last summer, Zeta signed a lease for its fourth New York City charter school, serving a school district in upper Manhattan’s Inwood neighborhood. Its three other schools are in the Bronx: one in the south Bronx’s Mott Haven neighborhood, another in East Tremont and the third in Mount Eden.

But finding real estate for school sites is not easy. They need to be close to mass transit so that students and staff can get to school easily. State law requires K-12 schools to have up to 10 acres, plus another acre for every 100 students. If a charter school wants sports facilities like a regulation basketball court, they need a large, pillar-free gymnasium in that site with a high ceiling.

Charter schools also look to add other features during construction, such as semi-soundproofed rooms for private music lessons or wider stairways to accommodate high numbers of students switching classrooms between periods.

These specific requirements often lead schools to pursue build-to-suit deals with developers, rather than converting existing buildings, said Lindsey Ornstein, the founder and CEO of nonprofit brokerage Open Impact Real Estate.

“There's nothing really readily available, so because of the lack of supply, we’re doing ground-up development for our schools,” she told Bisnow. “The benefit of that is that the schools can create a learning environment from the ground up, and build in all the specializations that they want.”

But Zeta's recently finished East Tremont school is a converted medical office building. Ornstein said that while the conversion was viable in that instance, ground-up development is generally lower-risk for charter schools.

“It’s more difficult than a ground-up development because of the unknowns,” she said. “Until you open the walls, you don’t know what structures are there.”

One solution that developer Scott Barone has found for conversions is to find former parochial school buildings. Barone, a Queens native, has developed six charter schools in recent years — three of which were in shuttered Catholic schools. As many as 26 Catholic NYC schools closed during the pandemic, according to Untapped Cities, which Barone believes could add to pressure for more charter schools in school districts where they haven’t previously been in demand.

“Catholic schools, mission-driven schools that were relatively low cost compared to private schools in New York City, the minute work from home happened, they had no choice but to close,” Barone said. “If you look at a parochial school in Astoria that was costing a parent $42K a year, that’s a big bite out of your family budget that you were paying because you wanted a different type of education for your kids. That option went away, so now your options are twofold: put them in the local DOE system, or scramble like hell to try and get them into a charter school.”

Barone’s knowledge of Queens is part of the reason his firm, Barone Management, has been able to develop five charter schools in the borough. But Queens still has less than half the number of charter school sites of either the Bronx or Brooklyn, according to DOE data.

One reason for this is that Queens has more middle-class neighborhoods than the Bronx or Brooklyn, with families who have more resources to seek alternatives to public schools, said James Merriman, CEO of nonprofit advocacy group New York City Charter School Center.

The other reason is that until 2014, charter schools had to either co-locate within an NYC DOE school — where charter schools wouldn’t have to pay rent — or use part of their funding to develop their own independent school sites privately. In 2014 New York State amended its charter school law, creating rental assistance to help approved charter schools find locations. Before that, more charter schools were appearing in the Bronx, Brooklyn and upper Manhattan because those boroughs had more public schools with underutilized spaces, where charters could co-locate.

But the same wasn’t true in Queens, with a population of more than 2 million.

“Queens is and has always been oversubscribed. Schools were crowded. There were few places in which charter schools could be co-located, even if there was demand for them,” Merriman said. “As long as the schools were full, there was no space to put a charter school. Since 2014, with rental assistance, you've seen that number grow. People recognize that there is demand for charter schools in Queens."

Merriman has two principal concerns about the future of charter schools in NYC. The first is that the NYC public school system has seen the number of students it serves shrink by 140,000 over the past six years — which is about as many students as the total number currently served by charter schools, according to the NYC DOE.

It’s unclear what is behind that reduction, but Merriman says it is resulting in uneven demand across charter schools: some, like Zeta, have to turn away hundreds, while others don’t fill all the seats available.

"We've seen for past two years that adult convenience has been put ahead of the best thing for children," Kim said. "So I think families are looking for different options, and for families, there's nothing political about it, they just want their kid to have the access to the best education. They’re going to where they think they can access that. I think we have experienced consistent demand at a time when traditional public schools have seen an exodus, and that has been in my mind very understandable."

But the number of charter licenses available to schools is capped by the state DOE, which hasn’t raised the cap or made other changes to allow for additional charter schools for several years.

“There should be public school choice for low-income families,” Merriman said. “High-income families take that choice for granted. We move to areas and districts that have supposedly good public schools.”

Charter school advocates like Merriman have been pushing for the state to raise its cap. There are 11 schools on the waiting list for new charters, the New York Post reported last month, but without a higher cap, developers could see demand in the market slow. 

“We’re kind of at the peak now,” said Stephen Powers, Ornstein’s co-founder at Open Impact Real Estate. “It should get pretty quiet for 2024.”