This One Weird Trick Could Could Cut NYC Rent by 18%
New York City could add 71% more residential floorspace by 2060, and reduce rents by 18% over the next 40 years, if it removed certain restrictions on home building.
In “Can We Rebuild a City? The Dynamics of Urban Redevelopment,” Vincent Rollet from MIT analyzed 833,000 land parcels in New York City from 2004-2022 to measure how zoning policies affect new construction and housing costs.
The average New Yorker now pays prices exceeding construction costs by factors of two to three, with floorspace selling for $700 per square foot, while costing only $160 to $600 to build. These constraints cost every household thousands of dollars in lost wages and economic opportunities, while pushing working families out.
Key Takeaways:
- Zoning restrictions significantly limit the housing supply. Removing all density restrictions could increase NYC’s total floorspace by 71% over 40 years, compared to 13% under current rules.
- Upzoning delivers larger housing gains than cost reductions through construction. Simply upzoning near transit stations would more than double housing growth rates, generating far more construction than reducing building costs by 20% or cutting property taxes in half on new buildings.
- Benefits flow to lower-income residents through market filtering: Eliminating zoning would improve New Yorkers’ overall economic well-being by an amount equivalent to a 15% income increase by 2060, with poorer households benefiting most from reduced housing costs.
Researchers tracked every building construction, demolition, sale, and zoning change across NYC’s 833,000 parcels from 2004 to 2022, documenting approximately 22,000 redevelopment events. They then combined this data with real estate prices, commuting patterns, and demographic information to build a predictive model. This approach enables them to estimate how developers respond to zoning changes by validating the model against actual rezoning outcomes, then projecting city evolution through 2060. However, the model assumes perfect foresight by developers, no infrastructure constraints, and no strategic interactions between developers
The findings reveal three key patterns about how zoning affects housing availability.
Density restrictions directly prevent new housing construction: The study finds 96% of redevelopment increases building size, with new buildings averaging 3.4 times larger than those they replace. However, redevelopment virtually stops when parcels reach zoning limits, even in expensive neighborhoods where building more would be highly profitable, suggesting regulations rather than market forces constrain supply.
Transit-oriented reforms outperform cost-reduction policies: Even just upzoning areas near subway stations (excluding landmarks, historic districts, and flood zones) would boost NYC’s floorspace growth from 13% to 28% over 40 years. By comparison, reducing construction costs by 20% would increase growth to only 15% under current zoning, while property tax incentives would increase growth to 22% but require forgoing $720,000 in property tax revenue per 1,000-square-foot unit constructed
Housing benefits concentrate in specific areas and then filter citywide. Removing zoning restrictions would generate 39% of additional floorspace on just 10% of upzoned land, concentrated in expensive neighborhoods like Western Brooklyn and Northern Queens, which currently have high prices but low density. The economic model projects this would reduce rents citywide by 18% by 2060, as wealthy residents move out of existing housing. Lower-income New Yorkers are projected to see slightly larger benefits than higher-income residents (p. 33-34).
The research supports three evidence-based policy reforms: eliminating height restrictions on parcels near subway stations, focusing rezoning efforts on expensive neighborhoods with low existing development where the model projects the largest construction responses, and prioritizing zoning reform over expensive tax incentives that deliver less housing per dollar spent.
The paper models both removing density restrictions entirely and transit-oriented reform. Even the more limited transit-oriented reform could help more working families access economic opportunity. To be clear, construction takes time, so the projected benefits would unfold over decades rather than years, with most gains flowing to future residents rather than current residents.
Photo by Brandon Nickerson