Turning Proximity into Prosperity

For all the things that humans get wrong, it’s remarkable how many things cities get right. For decades, leading economists like City Journal contributor and Harvard professor Edward Glaeser have praised cities as humanity’s greatest invention—engines of upward mobility and innovation, foundries of culture, and drivers of human well-being. At core, a city’s prosperity lies in the productivity boost that comes from clustering highly talented people and leading firms together—what economists call “agglomeration” economies.

But like all progress, these gains are fragile. Density alone doesn’t automatically pay off. The most successful and livable cities not only attract world-class human capital but also manage the downsides of density—crime, congestion, pollution, the demand for new housing, and more—so that the benefits of adding more residents still outweigh the costs. Whether greater density yields shared prosperity or urban dysfunction depends on whether public and private institutions can channel the concentration of humanity into productivity rather than cacophony. New York, by far the nation’s densest city, leveraged these forces to grow into the world’s leading metropolis.

But the growth-oriented mind-set that once powered New York’s dynamism has increasingly given way to a politics of incumbent protection and leftist, zero-sum economics—at the expense of the strivers who might otherwise come here to build their lives. November’s election of Democratic Socialist Zohran Mamdani signals a city increasingly willing to extend welfare-style guarantees to its upper-middle class.

It has always been hard getting ahead in New York, but what’s new is that those struggling increasingly include highly educated professionals. They occupy stable six-figure jobs but labor in fields with limited career upside that cannot compete with the city’s extraordinarily productive finance and professional services sectors. Consider a nonprofit program director with a graduate degree earning $120,000 per year—less than what first-year investment-banking analysts make, and with far less growth potential. After federal, state, and local income taxes but before other deductions, he earns about $6,800 monthly. Manhattan’s median asking rent of $4,600 means that he can’t live there without a roommate or partner. Layer on student-loan payments and the steep cost of dining, culture, and entertainment, and he discovers that he cannot fully partake of the city whose amenities supposedly justify its price. He doubts that he ever will.

This politically ascendant group of voters—what Manhattan Institute president Reihan Salam has termed “downwardly mobile elites”—gravitated toward Mamdani’s promises of security through price controls, free buses, and other protections from market competition. His platform aims to entrench incumbents in their entitlements, making the city less flexible and accommodating to newcomers or residents whose circumstances change. His message to supporters is clear: you don’t need to adapt to market pressures—government will protect you instead.

The trouble is that the new mayor’s platform offers little to manage the downsides of density—for example, by allowing private capital to build more housing to ease the city’s chronic shortage. Mamdani’s economic thinking assumes that enough of the superrich will always be around to tax and that redistribution can substitute for growth. These ideas reflect a deeper misunderstanding of how dense cities generate prosperity. As a result, New York risks ceding more of its competitive edge to less dense Sunbelt cities that don’t rely on the same level of governmental capacity to remain livable.

A right-of-center approach to urban affordability would look not only at the cost of amenities such as housing and transit but also at residents’ tax burdens and the quality of public services offered in return. Instead of insulating residents from market signals, government should help them respond to those signals by making room for abundant job opportunities and new housing options. These ideas aren’t revolutionary; but taken together, they would produce radical improvements in urban life.

For millennia, people have been drawn to cities as the hubs of civilization. The Industrial Revolution’s economies of scale—the big factory, the dense supplier networks, cheaper transport, and dramatically lower communication costs—made it possible for the first time in history for the poor to earn higher wages on a mass scale and ultimately enjoy better living standards than in rural areas. The insatiable demand for labor in the late nineteenth century created the first true urban middle class. As Canadian professor Mario Polèse explained in these pages, efficiencies in production, combined with similar economies in trade, transportation, and communication, underpinned the explosive growth of modern cities. (See “Why Big Cities Matter More than Ever,” Autumn 2010.)

As the twentieth century progressed and the information economy took root, these effects became more pronounced. A single firm innovates, competitors imitate, the new practice spreads to adjacent sectors, and productivity rises as learning diffuses. The surplus generated by these adopters shows up as higher wages and profits across the local economy. As earnings grow, workers demand new services and amenities, and the service ecosystem deepens around the productive core. For these reasons, cities are, as urban theorist Alain Bertaud has argued, labor markets at heart, where proximity lowers the cost of finding top talent and the innovations that flow from that talent.

Land near the centers of production becomes more valuable because it confers advantages on the users who occupy it. Higher prices signal that such locations should be devoted to uses that make the most of these assets. Even without zoning, the market would sort much of this out: budget motels won’t outbid office developers along Park Avenue, for example, because the economic return to being in the central business district is far greater for one than the other.

When the nation’s top talent in high-paying industries wants to live in the same place, such as New York, demand for housing rises especially quickly. In a healthy market, new supply meets the demand at the top, and older units become available to others, gradually improving the housing stock for all. But if building stagnates because of, say, burdensome inclusionary zoning requirements, veto power over new development, or restrictive zoning, this natural progression fails, and the housing market becomes more zero-sum. Rent controls worsen the situation by encouraging more households to stay put and retain their low rent, making fewer units available for others.

The forces that make density so powerful also amplify its drawbacks. In a subway car, a single menacing straphanger can unsettle hundreds. Loud parties, illicit fireworks, roving packs of dirt bikers, and mounds of trash impose far higher social costs when people live close together. Managing density inevitably relies on coercive power—whether to break up disruptive behavior, arrest suspected criminals, or require inpatient treatment for the severely mentally ill—and such power properly rests with government.

The denser the city, the more capable its government must be to address its disadvantages. Residents endure a higher tax burden to ensure that shared spaces are safe, clean, and accessible, conditions that make the city attractive to newcomers and livable for residents. In essence, effective government removes unnecessary impediments, such as crime, to how people want to live. City government necessarily makes trade-off judgments as part of this mission, including through zoning, which aims to manage the consequences of incompatible land uses while keeping the city flexible enough to accommodate growth.

If city government can manage these problems, the benefits of adding newcomers exceed the costs. If it cannot, the calculus flips, and exclusion becomes more attractive, depriving the city of further agglomeration.

As the nation’s densest city, New York operates on a “more for more” bargain: higher taxes in exchange for greater government capacity to manage density. By contrast, less dense Sunbelt competitors like Dallas and Miami don’t require the same level of governmental capacity to handle urban frictions. Their default mode of transportation is the private automobile, not transit or walking, allowing residents to shield themselves from disorder. When something goes wrong, people can often sidestep it through private means rather than rely on public systems. Their housing can sprawl, requiring fewer trade-offs to grow than in a built-up city. These cities thus ask less of taxpayers and offer a correspondingly lighter degree of public service. New York’s value proposition depends on its government justifying its tax burden, relative to these urban alternatives.

Residents in highly dense cities also pay for public services at scale: public schools, roads, sanitation, and the like. When the public-service side of the bargain falters, however, the city becomes less affordable, as residents pay first for the public option and then again to escape it. New York City’s public school system spends roughly $41,000 per pupil to produce results at or below national averages. The wealthiest residents insulate themselves through prohibitively expensive private school alternatives, while the poorest endure dysfunction. The broad middle learns to navigate the system’s byzantine placement system. Those who can’t secure a decent spot move to a neighborhood with a stronger zoned school, pay for a lower-priced religious school—or leave the city. Since the start of the 2019–20 school year, Gotham’s public education system has lost 117,800 students, or 16 percent, while its budget has grown by about $7 billion since 2019, or 19 percent.

By contrast, Sunbelt states have largely embraced school choice, giving families more options to stay put. Florida and Texas, for example, offer education savings programs that impose competitive pressure on traditional public schools and soften the impact of their underperformance by ensuring that families have alternatives within financial reach. And Texas and Florida also spend less than half per student than New York State, part of the reason that they have no state income tax.

A right-of-center urban affordability agenda begins by restoring the conditions under which agglomerations thrive: a government capable of managing the downsides of density and delivering reliable public services. Its animating principle is individual responsibility. Residents accept the risks and possibilities of a competitive labor market and take ownership of their lives; in return, government creates the conditions for ample opportunity, public safety, and growth. Security flows from a dynamic economy that generates new prospects—not from policies that freeze jobs or rents in place. Rather than insulating people from market signals, government facilitates adaptation. And for the disabled and the truly vulnerable, it provides intensive services that meet their needs and enable them to flourish as fully as possible.

The road to a broadly affordable, upwardly mobile, prosperous city is no mystery: build enough homes to bend rent growth down; protect shared spaces from disorder; deliver public services worthy of the taxes people pay; and keep taxes competitive to attract employers and let residents take home more of their paychecks.

The only durable way to accommodate New Yorkers across income levels is to let the private sector build far more housing across the five boroughs—exactly what New York did during its most ambitious periods. Throughout the 1920s, the city routinely saw 80,000 to over 100,000 units constructed yearly. Over the last decade, the city has built roughly 25,000 units per year. Last year, it set a six-decade record of about 34,000 units, mostly due to a construction rush to capitalize on the expiring 421-a tax abatement for new rental developments. Even with Mayor Eric Adams’s seminal City of Yes suite of pro-housing measures, annual new construction is likely to hover around 30,000—well below the mayor’s stated “moonshot” goal of 50,000. Approaching that target would help ease the city’s dire 1.4 percent housing vacancy rate.

Residents cannot go about their lives if they’re afraid to walk the streets or take the subway. In a dense city, serious crime, misdemeanors, and disorder all matter. With felony and misdemeanor rates still elevated in New York City relative to 2019, managing the downsides of crime and disorder requires a visible police presence in hot spots, consistent enforcement of public-order rules, and the incapacitation of serious violent offenders. The goal is to reestablish expectations in shared spaces and maintain them long enough for norms to reassert themselves. Former police commissioner William Bratton’s “peace dividend”—a reduction in enforcement after sustained crime declines—was possible only because those norms were already strong. New York has more work to do before it can earn that dividend again.

Government also owes residents performance commensurate with what it collects in taxes; New Yorkers pay too much in exchange for too little. Fixing this means hiring and promoting on merit, giving managers the tools to reward excellence and remove chronic underperformers, and authorizing agency leaders to focus on desirable outcomes, not processes. As good-government reformer Philip Howard argues, public employees and their leaders need the discretion to do their jobs well, subject to simple checks on the abuse of their authority, rather than to be bound by thick rule books. In practice, this is extraordinarily difficult because of the entrenched political and legal power of public-sector unions. Regardless, chief executives should negotiate collective bargaining agreements to inject more accountability for results.

When conditions change, so should the public sector. Persistently failing public schools should reopen under different leadership, including being replaced by charter schools. More educational options would translate to fewer families leaving for lack of a decent public education. Child-care centers should expand, primarily through the private sector, to meet demand, with the government being more generous toward approvals while maintaining safety standards. More flexible housing, such as through accessory dwelling units, opens opportunities for grandparents and relatives to care for children. On mobility, the priority should not be fare-free service but faster, more reliable service, achieved through investing in more buses, dedicated bus lanes, and street redesigns.

New York’s urban bargain depends on retaining enough productive firms and high-earning individuals to shoulder their disproportionate share of the local tax burden. Keeping rates stable sets clear expectations for employers and workers, reducing the uncertainty that drives relocation decisions. Holding the line on taxes gives workers confidence in what they can expect to take home. It also signals that the city intends to manage its budget through discipline, not continuous appeals to an already-burdened tax base.

Cities convert proximity into prosperity only when their leaders make the daily choices that sustain the urban bargain. As New York enters a period of increased government involvement in its economy, it stands to empower incumbency and stasis over dynamism and growth. The forces that made New York great can do so again—if only our political leaders would let them.  

This article is part of “An Affordability Agenda,” a symposium that appears in City Journal’s Winter 2026 issue.