Supply Skepticism Revisited: What New Research Shows About the Impact of Supply on Affordability
New research shows building more homes can slow regional rent growth and free up units for residents across the spectrum of incomes, according to a new paper from the NYU Furman Center.
Furman Center faculty directors Vicki Been, Ingrid Gould Ellen, and Kathy O’Regan recently released “Supply Skepticism Revisited”, highlighting the latest rigorous research that draws out the nuanced effects housing supply has on housing affordability. The paper delves into arguments made by “supply skeptics” and counters them with evidence from recent studies that show the positive impact additional housing supply has on the affordability of a local housing market.
“We have lots of evidence about the importance of housing and the way that new supply can help us move ourselves out of this crisis,” said Been, who moderated a panel discussion at the Furman Center’s Policy Breakfast on Nov. 16 hosted at the NYU School of Law.
The paper’s overview of the latest rigorous evidence shows that increases in housing supply lead to modest decreases in city-wide rents. New housing supply also moderates rents or slows rent growth in the surrounding area, though evidence is more mixed at the neighborhood level. Loosening land use restrictions has generally led to modest increases in housing production, but in some cases, loosened land use restrictions are bound by requirements that can damper efforts to add supply. And while displacement can be difficult to measure, the evidence has shown that new supply does not cause elevated rates of displacement of lower-income households from their neighborhoods.
Watch a Recording of Our Nov. 16 Policy Breakfast
'Take the Politics Out of Housing Supply'
Yet resistance to new housing construction remains both highly vocal and deeply felt in New York and elsewhere. Suburban homeowners have long opposed new supply in their areas, expressing fears that more supply would decrease home values and change their neighborhood character. But as concerns about gentrification and displacement in urban areas have become more widespread, supply skepticism has expanded from the traditional anti-development constituencies to renters and social advocates fighting for equitable neighborhood planning.
The increasing political resistance has left decision-makers at an impasse regarding the addition of new supply, panelists said. Meanwhile, building community trust, advocating for policies that facilitate construction, and implementing bold, forward-thinking strategies despite short-term political considerations remains essential.
"We have to take the politics out of housing supply,” said Democratic Brooklyn Borough President Antonio Reynoso, who recently released the Brooklyn Comprehensive Plan to guide decisions around housing growth in the borough. “We have to have a conversation in which the city assumes the responsibility, and the political will, in building housing supply for a growing city.”
New York City is in the midst of a long-standing housing shortage and affordability crisis. Furman Center analysis of census data shows that 54.1 percent of New York renters paid more than 30 percent of their income toward housing expenses—the threshold of being cost-burdened—in 2021. Meanwhile, the city’s permitting rate is lagging neighboring New Jersey and other peer cities, with vacancy rates hovering around 4 percent for the past decade—well below what is considered the healthy standard of between 7 and 8 percent.
"When you have such a city of renters, supply is going to be constrained,” said panelist Lisa Gomez, CEO of L+M Development, a real estate development company that focuses on affordable housing. “We need all hands on deck producing all housing.”
New Measures to Lift Housing Production
Like Reynoso, many New York policymakers—including Democratic Mayor Eric Adams—are discussing various measures to increase housing production across the city. Historically, the development of new housing in the city has been unevenly spread across neighborhoods, with the lowest-density community districts adding housing at only half the rate of the city overall between 2010 and 2020.
During the same period, close to one third of all new units were located in areas upzoned during the Bloomberg and de Blasio administrations, even though these areas only included about three percent of the city’s parcels, according to Furman Center data.
Meanwhile, new income-restricted units targeted to low-income households built between 2010 and 2020 were in neighborhoods with higher shares of Black and Hispanic populations, higher poverty rates, and lower sales prices and rents than the neighborhoods where market-rate units were constructed.
To address these inequities, Adams introduced his “City of Yes” housing plan in September 2023, which includes a series of proposed zoning code changes to make room for an additional 100,000 new homes, on top of typical production, over the next 15 years. The proposed changes include easing regulations around mixed-use corridors and underutilized spaces, loosening restrictions on office conversions into residential space, removing parking mandates, adding a universal affordability preference, and allowing the addition of accessory dwelling units.
New York Democratic Gov. Kathy Hochul is also expected to try to pass housing legislation again in 2024 after her Housing Compact did not make headway in Albany last year.
Housing supply-oriented legislation has been difficult to pass in New York’s current political environment. Suburban legislators strongly opposed Hochul’s statewide plan last year. Even policies that affected only New York City, such as property tax reform, replacement of a tax abatement program, and lifting the floor to area ratio did not win traction in Albany.
Panelists urged the city’s decision-makers to expend more political capital to get pro-supply housing policies across the finish line faster.
"At the very least, it has to be treated like a campaign,” said Michelle de la Uz, the executive director of the Fifth Avenue Committee, a Brooklyn-based community development corporation that develops and manages affordable housing, referring to building new development. “You have to have clear targets and you have to have a strategy.”
'Disappointed' With Past Promises
Part of the challenge facing decision-makers is to meaningfully engage people in the community who understand the neighborhood’s dynamics. A lack of community trust often has the spillover effect of politicizing housing development and making long term planning difficult, panelists said.
Blondel A. Pinnock, the newly appointed President and CEO of Bedford Stuyvesant Restoration Corporation, the nation’s first and oldest community development corporation, stressed the importance of community buy-in. She praised Brooklyn’s Democratic Councilmember Charles Barron’s all-affordable real estate project in East New York, which would include 11 residential buildings with more than 2,000 apartments, as a model for engagement.
"We have communities, particularly communities like Bedford Stuyvesant and Crown Heights, that have been disappointed in the past with promises that have been made by government,” said Pinnock. “The skepticism that exists has been well-earned in many instances.”
Trust takes time to build given the city’s history of exclusion in housing. By one common measure of residential segregation, the New York region has the second-highest level of Black-white segregation in the country, after only Milwaukee.
In Gowanus, a major 2021 zoning change allowed for 8,500 new units, but took nearly seven years of organizing to win approval. De la Uz described the intensive process complete with weekly calls with stakeholders from diverse backgrounds and industries, who at different points wanted to walk away because they doubted that the rezoning was going to benefit public housing residents in particular.
"It takes people seeing that there's something in it for them,” said de la Uz. “And I think it also takes someone who can counter the narrative around rezonings—that rezonings equals gentrification and equals displacement.”
Reynoso said Black and brown neighborhoods want to see rezonings and added density in white neighborhoods, to ensure that everyone feels the changes from this growth equally.
“If you want to help me pitch this, show me some white districts that have taken this on and been successful,” he said. “That would really help me make the pitch to the Black and brown communities.”
The Need For Housing is 'Endless'
Moving forward, city policymakers will need to be able to communicate more efficiently as the crisis continues to worsen, panelists said.
“We have to move fast,” said Gomez. “We can’t grow. We can’t innovate. We can’t house the next generation of young people who want to come here and create and the families who have raised generations here who can’t stay any longer.”
What’s more, the current levels of government subsidy available to developers make it difficult for affordable housing construction to pencil out. According to Gomez, New York offers as much housing construction subsidy as any place in the country, but given federal funding caps, it still is not enough to meet the need. Developers also remain concerned about the 2022 repeal of the 421-a real estate tax exemption, a multifamily housing construction incentive, which Albany has not yet replaced.
“The fact of the matter is the resources aren't there, at the city, state, or federal level,” said Gomez. “The need is endless and the supply is limited.”
