Breaking NYC’s Housing Gridlock

Federal Solutions to Spur Growth and Affordability

Nowhere is America’s housing crisis more acute than in New York City, where decades of underproduction have collided with rising demand, leaving the city short at least 227,000 housing units. This staggering backlog leads to overcrowding, it stifles mobility, and drives families and jobs out of the city.

Between July 2022 and July 2023 alone, New York City led the nation in population loss, shedding over 78,000 people.While direct source of what is pushing this exodus remains unclear, decades of housing scarcity—exacerbated by outdated policies and sluggish development—continue to challenge the city's ability to retain residents and attract new ones. Some local efforts like the City of Yes reform package are steps in the right direction, but they are insufficient to address the scale of the housing crisis.

Some local efforts like the City of Yes reform package are steps in the right direction, but they are insufficient to address the scale of the crisis.

The Federal Disconnect: Talking Housing While Cutting Support

The Trump administration has repeatedly pledged to "drastically lower the cost of housing" and expand supply. In a recent executive order, the White House signaled housing affordability as a priority. Yet, while early in the presidency, recent remarks and policies tell a different story.

The Department of Housing and Urban Development (HUD) is facing dramatic workforce reductions—up to 50% of staff according to internal documents. These cuts would gut critical offices that oversee disaster recovery, rental assistance, first-time homebuyer support, and housing discrimination investigations. The Office of Fair Housing and Equal Opportunity alone could see its staff slashed by nearly 77%, from 572 employees to just 134.

Recently, HUD Secretary Scott Turner formally scrapped the Biden-era Affirmatively Furthering Fair Housing (AFFH) rule, declaring that "local and state governments understand the needs of their communities much better than bureaucrats in Washington DC." The move effectively eliminates federal oversight of housing discrimination patterns, requiring only self-certification from localities that they are complying with fair housing laws.This rollback undermines affordability efforts by removing federal pressure on localities to address exclusionary zoning practices.

Research from the Urban Institute demonstrates that strong, mandatory inclusionary zoning policies covering entire jurisdictions produce significantly more affordable housing units than voluntary approaches. Without federal oversight through the AFFH rule, communities are less likely to implement these proven affordability mechanisms, instead maintaining exclusionary practices that limit housing supply and drive up costs.

One of the most damaging moves is the administration's plan to impose a 25% tariff on lumber and forest products beginning in April—this on top of existing 14.5% tariffs on Canadian lumber that doubled just last year. Homebuilder sentiment has already fallen sharply in February over these tariff concerns, and industry experts warn that the combined impact of staffing cuts and material cost increases will severely hinder new housing production.

Meanwhile, Vice President JD Vance recently addressed the National League of Cities blaming immigration for the housing crisis, ignoring the fact that immigrants play a crucial role in keeping construction costs down. As housing expert Aziz Sunderji points out, undocumented workers make up nearly half of Texas’ construction workforce, and 63% of construction workers in New York City are immigrants. Deporting these workers would only worsen the existing labor shortage and further raise housing costs.

At this point, real federal intervention is needed—not dismantling of existing infrastructure. Here are several federal policies that could genuinely help accelerate urban housing production in New York City and beyond.

Leveraging Transportation Funding for Housing Reform

The federal government’s most powerful tool for encouraging housing production is, surprisingly, transportation funding. Rather than introducing small-scale grant programs, Congress should tie housing requirements to major existing funding streams, such as the Surface Transportation Block Grant (STBG) program—a $12 billion annual program that provides flexible funding to states and localities for roads, bridges, transit projects, and pedestrian infrastructure. New York City’s reliance on federal transit dollars makes this an effective pressure point for more ambitious zoning reform.

As Jerusalem Demsas explained back in 2021:
"Rather than just offering extra money as an incentive, the federal government should make access to critical transportation funds contingent on housing reforms—forcing states and cities to act if they don’t want to miss out."

Key policy shifts should include:

• Making STBG grants contingent on eliminating exclusionary zoning within half a mile of transit stations to promote high-density housing and reduce car dependency.

• Removing parking minimums near transit. This would free up valuable land and lower construction costs.

• Tying infrastructure funding to housing production targets, ensuring that cities receiving federal dollars actually build the homes they need.

By linking transportation funding to zoning reform, the federal government can push NYC and other cities to expand housing supply while fostering sustainable, transit-oriented communities.

Streamline Environmental Reviews for Housing Development

The National Environmental Policy Act (NEPA) and NYC’s City Environmental Quality Review (CEQR) process have long been significant bottlenecks for housing development. In NYC, the CEQR process alone takes an average of 23 months, adding substantial costs, delays and uncertainty to housing projects. This timeline is particularly problematic in a city facing a severe housing shortage, where every month of delay means higher construction costs, missed opportunities, and fewer homes for New Yorkers.

The federal government can play a key role in making housing more affordable by modernizing NEPA and supporting state-level reforms that reduce unnecessary delays. One critical step is refining the definition of a "major federal action" under NEPA so that common, lower-impact housing projects—such as mid-rise apartments, Accessory Dwelling Units (ADUs), and infill developments on underutilized land—are not subject to costly and time-consuming environmental reviews. This change would help lower construction costs and speed up the development process.

Additionally, setting clear thresholds for environmental significance would ensure that smaller projects, those below a certain acreage or pollution level, can move forward without excessive regulatory barriers. Public comment periods should also be streamlined, striking a balance between meaningful community input and avoiding prolonged delays. Similarly, the alternatives analysis process should be more efficient, ensuring that required reviews remain focused and practical.

To further improve efficiency, the government could standardize environmental assessments for common housing types, creating pre-approved environmental templates that simplify the approval process. Investing in the digitization and modernization of environmental review systems, such as CEQR, would also reduce administrative burdens and improve processing times.

Incentivize Zoning Reform through Federal Funding

One way the federal government can shape local housing policy is by tying federal funding to zoning reform. As my colleague Gary Winslett has noted, there are several funding federal nuggets that have been proposed that, if passed, could increase the housing supply across the nation, especially in metropolitan areas like NYC. The Yes in My Backyard (YIMBY) Act, sponsored by Rep. Derek Kilmer, is a model for this approach. It requires cities receiving federal housing funds to report on efforts to eliminate exclusionary zoning practices like single-family zoning and minimum lot sizes.

For NYC, this approach could drive:

• Legalizing duplexes, triplexes, and ADUs across all residential zones.

• Eliminating parking mandates citywide to free up land for housing.

• Expanding transit-oriented development, allowing higher-density housing within half a mile of subway and commuter rail stations.

By making federal funding contingent on these reforms, the government can encourage cities like NYC to unlock new housing supply without waiting for piecemeal local action.

Lowering Construction Costs by Eliminating Tariffs on Building Materials

High housing costs aren’t just driven by zoning constraints—construction costs have surged by over 30% since January 2021, due in part to federal tariffs on essential building materials like lumber, steel, and cement.

A 25% tariff on lumber and forest products has been proposed, potentially adding to the 14% tariff on Canadian softwood lumber that doubled last year. These tariffs, combined with a new 25% tariff on imported steel, threaten to drive up prices for homebuilders and make housing even more expensive. While these tariffs have faced many flip-flops from the administration, uncertainty alone may drive suppliers to preemptively raise prices, further inflating costs for builders and consumers.

To make construction more affordable and keep housing projects on track, the federal government must take immediate action to reduce the financial burden caused by tariffs. One crucial step is exempting critical construction materials from tariffs. By removing these extra costs on essential supplies like lumber and steel, homebuilders can lower expenses and accelerate new development.

Additionally, trade laws should be reformed to include a consumer welfare test, ensuring that tariffs don’t impose more costs on American households than they provide in domestic benefits. If a tariff is raising home prices without meaningfully supporting U.S. industry, it should be reconsidered. These policies would make homebuilding more affordable, particularly in areas where zoning restrictions are less of a barrier but construction costs remain high.

A Different Course Is Needed

New York City's housing crisis requires more than half-measures and promises of deregulation. While Trump adviser Steve Moore claims that "deregulation and the tax cuts are really pro-housing," the administration's actions tell a different story. The specific deregulatory moves being implemented—gutting HUD staffing and fair housing enforcement—actually target the very oversight mechanisms needed to ensure housing market fairness and efficiency.

Meanwhile, the administration's decision to impose or maintain tariffs on construction materials directly increases housing costs, undermining any potential benefits from tax cuts. True pro-housing policy requires both removing counterproductive regulations while maintaining essential consumer protections and avoiding trade policies that inflate construction costs.

Creating housing abundance is the only way to stabilize rents, sustain economic growth, and reverse population loss. For New York to thrive, the city and the current administration must move beyond incremental changes and embrace policies that will meaningfully scale housing production. The path forward is clear: build more housing, in more places, for more people. Anything less risks deepening the crisis and undermining the city’s future.