Why is housing in New York City so expensive? The answer is simple: there isnt enough of it. Though demand remains strong, the citys land-use policies make it unnecessarily difficult to build new units. Historically welcoming to newcomers, New York is in danger of becoming a boutique city, as low- and middle-income families find themselves increasingly priced out of the housing market. City government cant regulate its way out of this problem. Expanding rent control and rent stabilization will only make already overpriced market-rate units more expensive. This, in turn, will cause further stratification and make New York even less attractive to newcomers. Fortunately, the next mayoral administration can take steps to alleviate the problem.
It should start by scaling-up two Bloomberg-era initiatives. First, it should move ahead with the New York City Housing Authoritys infill plan, in which private developers would lease underutilized land in Manhattan public-housing developments. The initiative would provide revenue for much-needed repairs to the citys public-housing stock and ease demand for units in the citys more affordable neighborhoods—thus relieving upward pressure on rents and keeping lower-income families from being priced out. Second, New York should relax its restrictions on minimum-unit size, not just in Kips Bay—where developers won a city-sponsored competition to build experimental housing exempt from those requirements—but across the city. Micro-units, already plentiful in Paris and Tokyo, would provide more options for the childless couples and singles that make up roughly half of New Yorks households. Smaller units also give the non-rich a chance to live in the citys most desirable locations. People dont need to be told how much space to occupy; they can make the size-versus-location calculation for themselves.
Next, the city should legalize basement subdivisions and accessory dwelling units, small residential structures built on the same lot as an existing house. These options would help meet the demand for more affordable housing, particularly among elderly New Yorkers who want to stay put. The units are especially well suited to the outer boroughs, where one- and two-family residences are more common than in Manhattan.
To ease the way for more new housing, New York should also adopt law professors Roderick Hills and David Schleichers idea for a zoning budget. Heres how it works: the mayor proposes a targeted plan for yearly growth in housing supply, and the city council gets an up-or-down vote. This would focus the council on the citys overall housing needs, not the not-in-my-backyard demands that tend to follow specific proposals. Once the plan is approved, the city works with developers to meet housing-growth targets for the year. Until the target is met, down-zonings—reductions in permitted neighborhood densities—are prohibited. Once the city reaches the target, down-zonings can resume, but they must be offset by up-zonings elsewhere, thereby ensuring net increases in the housing supply.
New York can also make use of Schleichers idea for tax increment local transfers, or TILTs, which use tax revenue generated by new development to compensate neighbors, existing residents, or opponents of a project. If a community board approves a new project in its district, property owners get a tax rebate equal to some percentage of the projects expected future contribution to the tax base. TILTs weaken community boards incentives to derail projects that would otherwise help to make housing more affordable citywide.
New York Citys lack of affordability is a local issue with national implications. As the work of economists Peter Ganong and Daniel Shoag suggests, fewer Americans have moved from relatively poor areas to relatively rich ones since the 1980s. Tighter land-use regulations have driven up housing prices and rents in New York and other cities, dissuading many from moving in while pushing others out. New York has always been an inclusive place, but if the city wants to get serious about affordability, it must increase supply.