New York Doesn’t Have Enough Housing. Why Is It So Expensive to Build?

The scarcity of apartments makes it easy for landlords to raise rents, but building new developments comes with high costs and regulatory hurdles.

When a lot of people compete for a small number of apartments, landlords often raise the rent — someone is almost always willing to pay more. This is the law of supply and demand in action.

That is one reason rents are so high in New York City, where just 1.4 percent of apartments were available last year. But there is another reason for the high prices: It has become quite difficult, time-consuming and expensive to build and maintain apartment buildings here. The costs are passed on to renters.

To help explain why, let’s put you in the shoes of a real estate firm. Imagine you want to build a large apartment building that has both affordable and market-rate units.

You may not have as many options as you would think. You probably want your apartment building to be close to a subway station, and it would be great if it was in or near Manhattan, where most jobs are. Prospective renters will also want to be close to parks, restaurants, grocery stores and schools.

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