New York City’s Housing Economics Are Broken—and It’s Squeezing Everyone

They say if you can make it here, you can make it anywhere. It’s a promise that has inspired generations of artists, immigrants, entrepreneurs, and dreamers to pack a bag and move to New York City. Today, a critical piece of that dream has gone: an affordable place to live.

For decades, the story was the same: Someone steps off a Greyhound at Port Authority with a few hundred bucks to their name and a suitcase full of all their earthly possessions. They land a dingy walk-up—maybe it has mice, maybe it’s loud—but it’s cheap, it’s theirs, and it offers a foothold in a city that promises its residents the world.

That foothold has all but disappeared. Vacancy rates have plunged to historic lows, sitting at just 1.4% citywide. For the most affordable units—those priced at $1,100 or less—that number drops to just 0.7%, according to the most recent Housing and Vacancy Survey. 

That scarcity has pushed median asking rents to $3,491 in the second quarter of 2025, or 55% of the typical household income, according to Realtor.com® data. For would-be buyers, the outlook isn’t much better: Mortgage originations have dropped across all five boroughs, falling to their lowest level since at least 2006.

The consequences are piling up. Housing affordability has become a flashpoint in the city’s highly contentious mayoral election, all while the city’s shelter population has soared well past pre-pandemic levels, with families now making up a growing share of the surge, according to data from NYU Furman Center.

“People are moving out of New York because they don't have housing options,” says Rachel Fee, executive director of the New York Housing Conference, a nonprofit devoted to advancing affordable housing for all New Yorkers. “And if this is not addressed, it will take a toll on our economy.”

What’s causing the crunch

Behind the high rent and home prices are long-standing structural barriers that make it difficult, slow, and expensive to build new housing, according to the experts we spoke to.

Supply bottlenecks

Renters are bearing the brunt of the crisis, as they make up the bulk of New York City’s residents and housing stock.

“New York’s renter affordability gap is among the widest in the country,” says Jake Krimmel, senior economist at Realtor.com. “The reason is a chronic supply shortage."

Between 2014 and 2024, the city permitted roughly 30 homes per 1,000 residents per year, about half as many as Boston and one-third as many as Washington, DC. And while some cities, such as Austin, Atlanta, and Las Vegas, are seeing rents finally pull back, New Yorkers can't expect the same relief due to a major lag in the supply of new housing units.

A major factor behind the slowdown is the expiration of the 421-a, a tax incentive program that had supported a large share of multifamily development. In 2022, developers rushed to get projects permitted before the program ended, leading to a surge in permits and, by 2024, the highest number of residential completions in over a decade.

But that surge was short-lived. Just 15,626 new units were permitted citywide in 2024—a 77% drop from the 2022 peak, according to data from the NYU Furman Center.

Even for projects that might be feasible on paper, the actual path to construction is often too uncertain or delayed to move forward. Lengthy public review processes, appeals, and site-specific complications have made the timeline for multifamily development difficult to predict or finance.

However, New York voters will have a chance to confront some of these hurdles at the ballot box on Tuesday. Three proposed charter amendments—Ballot Measures 2 through 4—aim to streamline parts of the land use and approval process for new housing, particularly for smaller rezonings and deeply affordable projects.

“Streamlining the permitting and construction process is a critical element to solving the city’s supply crisis,” says Krimmel. “New York’s ballot measures 2–4 in Tuesday's election are process-oriented reforms to new development, and represent a step in the right direction.”

Higher costs

Beyond permitting, developers are also facing a growing list of cost pressures: higher interest rates, soaring insurance premiums, and more expensive materials.

President Donald Trump’s tariffs have taken a considerable toll on residential construction, raising the cost of building materials like lumber, gypsum, steel, and cabinetry. Builders are uniquely exposed to the tariffs: Roughly 90% of the tariff-related cost increases fall on new construction, as opposed to renovations, according to research from the Brookings Institution.

These layers of constraint have slowed production across the board and especially in the affordable segment, where margins are thinnest and subsidies are often necessary to close those gaps.

“We don't have enough housing choice right at the price points people can afford,” Fee adds. “And it's really because we haven't been building enough housing over the past few decades.”

Wage growth slows

Rising renter incomes in New York City have provided some relief to surging prices over the past decade, but they haven’t kept pace with housing costs—especially in the years since the COVID-19 pandemic, according to the NYU Furman Center.

The median renter household made $63,698 in 2023—about 20% more than in 2013 after adjusting for inflation. But more than half of renters still spend at least 30% of their income on rent. And while rents in 2023 were 25% higher than they were in 2007, renter incomes were only 15% higher, down from their peak in 2019.

The burden is especially acute for renters earning between $30,000 and $80,000 annually. These households often fall into a policy blind spot: They earn too much to qualify for deeply subsidized housing but not enough to afford market-rate rents in most neighborhoods. As a result, many in this income band spend well above 30%—and in some cases more than 50%—of their income on housing, putting them at higher risk of housing instability, financial distress, or eviction.

The paradox of affordability and operations

The cracks in affordability, supply, and permitting are fueling a bitter mayoral election campaign. Rent freezes, new construction, and tenant protections are all on the table, but the political debate often overlooks a critical tension: Many of the city’s affordable buildings are already on unstable financial footing.

That instability stems in part from the wide variation in the city’s rent-stabilized stock. 

Older buildings—typically those built before 1974—tend to have lower debt but face high and growing maintenance needs. Newer stabilized buildings developed under programs like 421-a are often carrying large mortgages and operate with little cushion. 

“They’re not collecting the amount of rent they were underwritten to,” says Fee, noting that pandemic-era arrears, rising insurance premiums, and increased maintenance costs have tipped many of these properties into operating deficits.

This puts rent regulation at the center of a difficult balancing act. Freezing rents can provide tangible relief to tenants, nearly half of whom in stabilized units are rent-burdened. But Fee warns that freezes alone could worsen the financial health of already struggling buildings.

“A rent freeze will exacerbate the existing problems,” she says, “but rent governing board increases won’t fix them.” She argues that any rent cap must be paired with targeted policy support, especially if the goal is to keep both tenants and buildings afloat.

Who gets in—and who doesn’t

Even though the city has tipped into a buyer’s market, the door to homeownership remains shut for most New Yorkers. 

“Homeownership in New York City is far less attainable than in nearly any other major metro,” says Krimmel. “Limited inventory, high down payments, and a lack of supply have pushed ownership out of reach for all but the highest-income households.”

Data from the NYU Furman Center backs him up.

Despite a relatively stable citywide homeownership rate of 32.5% in 2023, racial and geographic disparities reveal deep fissures beneath the surface.

Asian and white households remain far more likely to own than Black and Hispanic households. And originations have plunged across all groups, with Black and Hispanic borrowers each comprising just 10% of 2023 mortgage originations. 

For those who do buy, the financial rewards of ownership vary widely by neighborhood. Some areas, like parts of Brooklyn, have seen dramatic home value appreciation over the past decade, while others, like some parts of Manhattan, have remained stagnant. 

What to watch

New York City’s housing market is approaching a critical inflection point. The next few years will determine whether the city can meaningfully course-correct, or slide deeper into crisis. 

Several key signals will shape the answer: Do building permits rebound under new state- and city-level incentives? Can the rent-to-income ratio finally ease? Will the shelter population stabilize or continue its historic climb?

The answers hinge on decisions made not just in New York City, but in Washington, DC, as well. Federal decisions about HUD, the Low Income Housing Tax Credit, and the future of Fannie Mae and Freddie Mac could dramatically change funding streams that New York has long relied on. Meanwhile, the city’s own building stock is in limbo—juggling high insurance, aging infrastructure, and shrinking reserves. 

Still, there are signs of momentum.

“Voters have this incredible opportunity,” Fee notes, pointing to renewed urgency among elected officials. “We’ve seen a shift. ... They now feel they have to act.”

Whether that urgency translates into results—more permits, more funding, more homes—remains to be seen.