New York City has long been a magnet for talent, but high housing costs risk driving it away. The tech firm Smart Asset recently found that Gotham lost young professionals at a higher rate than any other U.S. city in 2020. A major culprit is a housing market beset by rent regulations and insufficient new construction.
The Big Apple has more price-regulated housing than do other American cities. A 2017 survey found that 1.24 million renters enjoy below-market rents, while 986,000 renters live in non-regulated apartments. According to the NYU Furman Center, the beneficiaries of rent regulation remain in their units twice as long. About 23 percent of households in stabilized units have lived in their units for 20 years, compared with only 7 percent of households in market-rate units. In 2020, according to the Census Bureau Housing and Vacancy Survey, more recent movers rented unregulated apartments (131,400) than regulated ones (88,930), though far more regulated units exist. This is what Manhattan Institute senior fellow Edward Glaeser refers to as the protection of “incumbents,” and it stands as a barrier to those who want to make it in New York City.
Rent regulation could be overcome with new housing construction to meet demand, but that hasn’t happened. In 2021, the city’s Rent Stabilization Guidelines Board found that building permits for new units were down 26 percent and approvals for new units in condos or co-ops were down 32 percent. The only number up was preservation of “affordable” units—city subsidies for existing units to keep their rents low.
This should be no surprise. The 2019 state Housing Stability and Tenant Protection Act of 2019 made rent regulation permanent and extended it to high-rent units (starting at $2,800 a month) that were previously eligible for decontrol. The Census Bureau report estimates that, without the new law, some 15,000 units would have escaped regulation. Builders quickly got the message that any housing could be the target of Albany progressives.
Smart Asset reports that many young professionals leaving New York are choosing Florida and Texas, two states with lower taxes and whose cities tend to have easier building environments. Firms that can attract people with valuable skills help not only themselves but their cities. Conversely, any policy that deters well-educated newcomers harms the city practicing it.
New York City’s future prosperity depends on smart housing policy. New York State already has far more subsidized housing than anywhere else in the country—and the city’s 490,000 such units, HUD reports, represents 10 percent of that total. No other state comes anywhere close to New York’s numbers. As Manhattan Institute senior fellow Eric Kober has observed, simple regulatory changes could unleash development in several city neighborhoods. Removing barriers to new housing construction is a better path forward.
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