Getting Past “Yes”: A Q&A on the Affordability Crisis (Part 1)

The persistence of ideas offers no guarantees of their soundness. Take, for instance, the recurring belief that the answer to the housing question lies in less regulation. Deregulated housing markets have had a long and colorful history, but not one typically associated with an abundance of sound affordable housing for the working poor. On the contrary, in 19th century industrial cities like Manchester, London, and New York, they came to be famously linked with overcrowding, cholera, and cohabitation with livestock (see Riis, 1890; Engels 1892; 1935). Notwithstanding such precedents, deregulation as a public policy panacea gained theoretical buttress during the 1940s and 1950s due to efforts by economists working out of Chicago and Mont Pelerin, Switzerland (Peck, 2010). This work gradually coalesced into an influential project that would condemn legions of policy-makers to perform an endless pas-de-deux between deregulation and market failure (or a menage-à-trois with privatization).

And yet, the elegance of supply and demand curves intersecting on chalkboards seems to hold an enduring appeal. As of late, simplistic economic models have been arming impressionable advocates with a toxic-alpha-male-type conviction that a coerced “yes” to market forces is all that lies between rent-burdened households and affordable housing in socially inclusive, desirable neighborhoods. This strange marriage between free-market logics and progressive goals has made a housing affordability champion out of even predacious developers. It has also, not coincidentally, provided an opening for the City’s most ambitious deregulatory proposal in decades: City of Yes.

The City has framed the far-ranging, citywide zoning text revisions in City of Yes for Housing Opportunity as an effort to address the crisis in housing affordability. The proposal, however, does little to guarantee the production of affordable housing. Its main tool for its creation, Universal Affordability Preference (UAP), offers a 20% or more increase in allowable building area in medium-to-high density zones of the city in exchange for making the units resulting from that bonus permanently affordable at 60% of the area median income. And yet, City of Yes undercuts and disincentivizes the use of UAP by providing numerous other mechanisms for obtaining density bonus of 20% and more without any associated affordable housing requirement, as well as by, in some cases, giving developers free additional bulk, previously reserved only for projects that included affordable housing set asides, to build larger luxury condo buildings.

Indeed, UAP seems like a sideshow next to the plethora of other mechanisms for boosting buildable square footage throughout the city. As the City puts it, however, these increases offer a primary means for addressing the problem of affordability by increasing the housing stock in all neighborhoods. This presumption that a de facto upzoning will alleviate the affordability problem has surprised those who have seen the consequences of upzonings in affected areas, and it has given rise to questions. Today we address some of them. 

• The City says that we need City of Yes in order to address the housing shortage behind our chronic affordability crisis. Is there a housing shortage?

There is undoubtedly a shortage of affordable housing. It is less clear, however, that there is a general housing shortage. The city’s population decreased by about 600,000 people between 2020 and 2023 (U.S. Census Bureau). Meanwhile, the number of housing units has shown consistent net growth in equal proportion across all five boroughs since 2021, adding 61,000 units during that period (Housing Vacancy Survey 2023, p.4). Plenty more are under way. 2022 saw a large spike in permits issued for new housing construction. Almost 70,000 were handed out in that year, the most issued in over two decades (U.S. Census Bureau). More recently, between January and March of this year, building permits were filed for projects that will yield almost 20,000 residential and hotel units. Taken together, those numbers suggest that the housing market should be softening. 

Claims of an across-the-board housing crisis point primarily to changes in the city’s vacancy rate, which measures the percentage of vacant and available rental units out of the total number of rental units on the market. That figure dropped from a remarkable high of 4.54% in 2021 to a remarkable low of 1.41% in 2023 (NYCHVS, p 22). This decline is hard to reconcile with the trends described above, and it certainly looks alarming in the face of it. But the citywide vacancy rate metric conceals more than it reveals. If you divide the rent range in the market into quartiles, as the City does in its NYCHVS report (p.21), you find that recent vacancy rate trends have been driven by the top of the rental market. At the bottom half, the vacancy rate has remained steadily below 1% since 2021. At the upper quartile of the rent range (in 2021, $2,300+), on the other hand, the rate rose to a pandemic-era high of 12.64% in 2021 and then dropped to 3.39% in 2023. This latest figure, while below the historical average, becomes less distressing if we examine the relative rent burden of households served by rental units at that price range.

Rent burden, an indicator used to gauge housing affordability, refers to the percentage of income paid toward rent. A household is said to be rent burdened if its rental payments exceed 30% of its income. The median rent burden for NYC households actually dropped from 34.3% to 29.5% from 2021 to 2023 (NYCHVS, p. 55). Here again, though, the overall picture obscures the location of the problem. For households earning less than $70,000, the median household income in the city, the typical rent burden was not 29.5%, but 54% in 2023. This discrepancy conforms to a long standing and ongoing trend. The share of income spent on rent decreased citywide in the 1990s and, after an increase during the 2000s, flattened after 2011, before its recent drop. For households at the bottom half of the income distribution, however, the rent burden has steadily increased throughout that entire period (NYCHVS, p. 56).

We are able to gain a better understanding of the nature of the current housing crisis by combining the distribution of vacancy rates with that of rent burden. If the lowest vacancy rates are found at the bottom of the rental market, and if the rent burden is disproportionately high among low income households, it stands to reason that the crisis stems from a shortage of deeply affordable housing. An analysis by the Association for Neighborhood & Housing Development (ANHD) brings the picture into stark relief. Sixty-four percent of available and vacant rental units are in the highest quartile (in 2023, $2,400+). A mere 7% of rent-burdened households, however, would be able relieve their rent burden with a unit in that price range. By contrast, 65% of rent-burdened households would require a unit renting in the lowest quartile (in 2023, <$1,100) to do likewise. The problem and true source of the crisis is that only 7% of vacant rental units fall with that price range. We could not improve upon ANDH’s concluding assessment of the situation: 

ANHD wholeheartedly rejects claims that a “build, build, build” approach will solve our housing crisis. The picture is clear. New York City does not need an influx of market-rate and luxury housing to solve our affordability crisis.

In other words, what we have here is not a housing shortage, but an affordable housing shortage.

• Even if we don’t have a housing crisis, wouldn’t City of Yes help address the affordability crisis by increasing our overall housing stock?

The City estimates that City of Yes will result in the creation of about 100,000 units of housing. For starters, we should point out that, if track record is anything to go by, a chicken pecking at random numbers has as good a chance of making an accurate projection as the City. In recent past, it has not been exceptional for the City to overstate actual results in their projections by over 536%, as was the case in the East Village/Lower East Side Rezoning, or to project millions of square feet of commercial development in areas that would ultimately experience losses of it, as was the case in the Downtown Brooklyn and Long Island City rezonings (see Cooper Square Committee and Municipal Arts Society reports, respectively, here and here). So let us put aside the 100,000 figure and focus instead on the proposition that it is building regulations that are standing in the way of increases to the city’s housing stock.

The current regulatory arrangement allows the construction of 1.8 billion additional square feet of residential development, enough to accommodate over a million housing units. One would think that if real estate markets responded so well to equilibrium-based rules of supply and demand, development would have increased in response to the pent up need for housing. There are numerous reasons why it hasn’t. But buildable capacity is not among them. However, even if market rate residential development were to make use of some of that capacity, it’s not clear that that would solve the affordability crisis (which is assumption #2).

• Wait, what?! The City claims that there is consensus among nonprofit housing groups and academic researchers that a housing supply shortage is the cause of the lack of housing affordability and that we need housing for households of all income levels to solve this problem. They even refer to research overviews put out by two centers named after developers in support of this claim. Are you saying that there is no such consensus on this issue? But the City has been so emphatic about it!

Don’t know what to tell you. The ANHD quote from a few paragraphs ago alone shows that there is no consensus. But look, when it comes to matters of concern in the social sciences, consensus among researchers is hard to come by. If everyone agreed, the matter would be settled and everyone would move on. As it is, questions surrounding the adequacy of housing supply continue to inspire spirited debates. Schwartz and McClure (2024), for instance, find that the country and its metropolitan areas are not experiencing a housing shortage at all and argue that studies that find otherwise fail to account for the large surplus of housing produced during previous decades. Others scholars advance explanations for the affordability crisis that look beyond the issue of housing supply. Tilly (2006), for one, focuses instead on the decline of average wages, the increase of income inequality, and the underlying causes behind these trends. Ryan-Collins (2019), for his part, focuses on the deregulation and liberalization of the financial system, contending that a surge in credit—which, not being naturally limited by scarcity, is not bound by the same market constraints as commodities such as land—has allowed increases in housing prices to dramatically outpace income growth since the 1980s. 

When it comes to the relation between deregulation, housing supply, and housing prices, even casual observation can cast doubt on any neat equation between regulation and affordability. Consider, for instance, the fact that the notoriously unregulated housing markets in Texas have fewer affordable and available rental homes for its extremely low-income household population than more regulated markets like those in New York. Or look at the metro region of the zoning-less city of Houston, which has a higher percentage of rent-burdened households than the New York metro region (see analysis by the National Low Income Housing Coalition). But you don’t have to go that far. The association between local upzonings and displacement and gentrification has been widely observed and commented upon (see Angotti and Morse, 2017; Wolf-Powers, 2005).

The problem with marshaling evidence against supply-siders and proponents of deregulation more generally is that they always have a tautological rebuttal at their disposal. If more housing supply does not temper housing prices, it’s because you needed even more supply. And if prices actually increase alongside housing supply, then just think of how much more they would have increased had there been less housing supply. This sort of counterargument is evidence-proof. Nonetheless, there is no lack of peer-reviewed academic studies with findings that diverge from the supposed consensus propounded by the City. In part 2 of this series, we will look at some of those.

Angotti, T., & Morse, S. (2017). Zoned Out!: Race, Displacement, and City Planning in New York City. Terreform.

Tilly, C. (2006). The Economic environment of housing: Income inequality and insecurity. In Bratt, R. G., Stone, M. E., & Hartman, C. W. (Eds). A Right to Housing: Foundation for a New Social Agenda (pp 20-37). Temple University Press.

Engels, F. (1892). The Condition of the Working-class in England in 1844. S. Sonnenschein & Company.

Engels, F. (1935). The Housing Question. International Publishers.

McClure, K., & Schwartz, A. (2024). Where Is the Housing Shortage? Housing Policy Debate, 0(0), 1–15. 

Peck, J. (2010). Constructions of Neoliberal Reason. OUP Oxford.

Riis, J. A. (1890). How the Other Half Lives: Studies Among the Tenements of New York. Charles Scribner’s Sons.

Ryan-Collins, J. (2021). Breaking the housing–finance cycle: Macroeconomic policy reforms for more affordable homes. Environment and Planning A: Economy and Space, 53(3), 480–502. 

Wolf-Powers, L. (2005). Up-Zoning New York City’s Mixed-Use Neighborhoods: Property-Led Economic Development and the Anatomy of a Planning Dilemma. Journal of Planning Education and Research, 24(4), 379–393.