Good Intentions Don’t Equate to Good Policy
New York City has just unveiled a new proposal to boost affordable development. Here are more perspectives on fixing the crisis.
For decades, New Yorkers have complained that apartment rents are too high and there is never enough housing. While both statements are unquestionably true, the real cause is not landlords or developers but the accumulation of well‑intentioned but counterproductive laws that have distorted the housing market for nearly a century. New York’s housing crisis is not the product of greed but of policies that consistently ignore basic economics like supply and demand, while punishing the developers and owners capable of increasing the supply.
The last time New York effectively addressed a housing shortage was in the 1920s under Governor Al Smith, who enacted a bold tax exemption for new construction. In just a decade, New York City added 729,000 new homes. The result was falling rents and a robust, growing population. Crucially, the state did not micromanage construction, dictate profit margins or impose layers of regulation. It simply removed barriers and let builders build. Interestingly, the 729,000 new apartments built in just 10 years are more than the total built from 1970 to 2020.
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Today, profitable development has become nearly impossible, and developers have responded rationally by redirecting their investments to states like Florida and Texas that welcome new housing. The consequence is stagnation: New York’s population is shrinking, and so is its housing stock’s ability to meet demand.
A central driver of the crisis is the web of rent control and rent stabilization policies first enacted after World War II and repeatedly expanded. Instead of being temporary wartime measures, these laws became permanent fixtures, most recently tightened by the 2019 Housing Stability and Tenant Protection Act and the Good Cause Eviction Law. Together, these measures dramatically limited rent increases, removed pathways to rent decontrol, restricted evictions and eliminated incentives for renovation. For many owners, it is now financially irrational to upgrade or even maintain aging buildings.
Rent regulation functions as a massive subsidy, but one that is distributed without regard to need. More than a million apartments including rent‑controlled, rent‑stabilized, Mitchell‑Lama and others are effectively locked off from the market indefinitely. Tenants rarely move, even when they no longer need large units, because downsizing would cost them more. Apartments are passed from one generation to the next regardless of income. Many tenants use regulated apartments as pieds‑à‑terre while avoiding New York taxes. The system not only freezes supply but also shifts costs onto unsubsidized renters, who pay higher rents and higher taxes to support the shortfall created by regulated units.
Ownership gateway gone
The HSTPA worsened the situation by prohibiting landlords from recapturing renovation costs and by making co‑op and condo conversions virtually impossible. This eliminated a longstanding gateway to middle‑class homeownership and trapped hundreds of thousands of units in rental status. Meanwhile, critics who claim to support affordable ownership overlook that many of them live in buildings converted decades ago under rules they have now blocked for others.
Other policy failures compound the shortage. Programs like 421‑a, which successfully incentivized affordable housing in market‑rate developments, were eliminated because legislators wanted even more affordability, resulting in none being produced. Efforts to replace it, such as 485‑x, added costly union labor mandates that make large projects economically unviable.
Zoning, landmarking, environmental review and community‑driven obstruction have also made approval processes stretch beyond a decade. Litigation can further delay or derail a project.
The message to developers is clear: New York wants more housing but will not allow it to be built at a profit.
The result is too little supply, rapidly rising market rents and the departure of developers who could otherwise help solve the crisis. Yet politicians continue to blame landlords because it is politically expedient. Voters who benefit from subsidies want to preserve them, even if doing so worsens affordability for future generations.
Viable solutions exist
There are straightforward steps that could help. One alternative rent‑regulation model would set rents at the lesser of fair‑market value or 30 percent of the total income of all occupants, eliminating the ability to game the system and encouraging right‑sizing of apartments. Subsidies would go only to those who need them. Apartments would return to the market when they no longer meet household needs. Enforcement of tax‑residency laws would curb widespread abuses that siphon resources from the city.
To accelerate development, New York must also reduce regulatory barriers, limit local veto power, allow more conversions of commercial and hotel properties, and restore incentive programs that actually produce housing. If policymakers truly want affordability, they must treat developers as partners rather than adversaries. History proves that increasing supply is the only way to lower rents.
New York once led the nation in population, economic dynamism and housing construction. Today, it trails states that have embraced policies encouraging development rather than stifling it. Until leaders acknowledge that decades of restrictive policies—and not the landlords or developers—are the true cause of high rents, New York’s housing emergency will continue to worsen.
Stuart Saft is a partner & practice group leader of Holland & Knight‘s New York real estate practice group.
