According to a research report released by the Citizens Budget Commission on June 27, the increasingly severe housing shortage in New York City is causing an annual loss of nearly $2 billion in tax revenue.
The report analyzes that the New York City and the surrounding metropolitan area need at least over 500,000 new housing units. Building more housing could increase the metropolitan area’s gross domestic product by approximately $651 billion over the next decade, leading to growth in tax revenue estimated at $1.9 billion annually. In other words, the current housing shortage is resulting in an annual tax revenue loss of nearly $2 billion.
The report points out three serious issues caused by the housing supply shortage in New York City – skyrocketing rents and house prices, population outflow, and adverse effects on the city and state economies. According to the latest housing survey in New York City, only 1.4% of apartments were available for rent last year, the lowest level in decades. The shortage of affordable apartments is even more severe, with less than 1% of apartments renting for less than $2,400 per month available and less than 0.4% of apartments renting for less than $1,100 per month vacant. Due to the housing shortage, a net outflow of 160,000 people was recorded in 2022, resulting in an estimated $259 million loss in income tax and $50 million loss in sales tax revenue for the city that year. Additionally, it is estimated that the shortage leads to a 2% decrease in the Gross Domestic Product (GDP) annually.
The report also highlights that the housing shortage diminishes the quality of life for residents. Due to the shortage leading to high rents, people struggle to find suitable housing elsewhere, resulting in a 41% lower moving rate than the national average. One-fourth of families are forced to squeeze into small apartments, with at least 1.5 people per room, which is twice the national average.
The author of this report, Sean Campion, the Director of Housing and Economic Development Research at the Citizens Budget Commission, wrote that building more housing not only meets the current needs of the public but also stimulates economic growth. The city government can use policy tools to increase housing supply, such as changing land use restrictions in low-density communities to allow for large-scale development, which is the goal of Mayor Adams’ “City of Yes” initiative, but it has yet to be implemented.