New York’s housing supply has long struggled to match demand, but especially since 2008, when the recession and the freezing of mortgage markets caused the number of permits issued for new residential units to fall. Fewer permits have been issued since 2010 than in 2008, even as the number of households has grown by roughly 85,000.
Activity has started to recover, but supply is still constrained by a lack of land and Byzantine rules about what can be built. New York seems like a tall city, but building height is heavily restricted. On average, developers may erect six square feet of floor space per square foot of land, says Richard Green, an economist at the University of Southern California; in Hong Kong, another dense coastal city, it’s closer to 20. Nearly 5% of units are designated for historic preservation, mostly in Manhattan.
Mr de Blasio sensibly wants to boost supply through increased density, but the mechanism he has chosen is problematic. “Mandatory inclusionary zoning” would raise permissible density in some areas, but developers would have to ensure that a minimum proportion of units meets the city’s definition of affordable. Forcing developers to build less profitable units acts as a tax, which could discourage, rather than encourage, supply. Jenny Schuetz, also at USC, says similar schemes in San Francisco and Boston’s suburbs have produced fewer affordable units than hoped, either because developers chose to build elsewhere or because they struck deals that weakened the requirements.
It would be more effective to hack back the regulations that discourage supply and raise costs. These include rent controls and the indiscriminate award of historic designations—which preserve the view for those who live in pretty, low-rise neighbourhoods like Greenwich Village, but put them out of bounds for everyone else.