Housing, Zoning, and the Frozen City: Why Building Scarcity is a Spatial Problem, Not Just an Arithmetic One

On the ground floor, an old candy shop sells sugar and nostalgia at a markup. Above it, three floors of apartments sit in varying states of disrepair: one protected by rent stabilisation, one at an eye-watering "market" rent, one mysteriously "under renovation" for years.

For the owner, the math is simple. The ground-floor retail pays eight times as much per square foot as the flats above. The land under the building might be worth $1,300 per square foot. If you bought at the right time, you can cover your debt and taxes from that single shop lease and treat the apartments as optional. You can wait. Wait for a rezoning. Wait for tenants to leave. Wait for interest rates to fall. Wait for the block to become valuable enough to assemble.

From the city's point of view, that same building is something else: underused urban land in the middle of a brutal housing shortage.

Understanding how we got here – and how to get out – requires treating zoning, regulation and real-estate markets not as separate technical systems but as one spatial regime.

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1. A shortage that is not an illusion

Start with the obvious question: is there really a housing shortage, or just a lot of complaining?

At the national level, economists at Brookings recently put a number on the gap. By comparing today's ratio of households to housing units with the more balanced conditions of the mid-2000s, they estimate that the United States was short about 4.9 million housing units in 2023. Other analyses (for example, from Freddie Mac) land in the same ballpark, in the 3–5 million range.

Zoom into New York City and the numbers get sharper – and uglier.

According to the 2023 New York City Housing and Vacancy Survey (NYCHVS), the net rental vacancy rate was just 1.41% in 2023 – the lowest since 1968. That meant only about 33,000 vacant units were available for rent out of almost 2.4 million rentals citywide. This is not a healthy, competitive market. It is a game of musical chairs with almost no empty chairs.

The pressure is strongest exactly where people are poorest. The Rent Guidelines Board's 2024 Income & Affordability Study shows that vacancy for rent-stabilized apartments was just 0.98%, even lower than the overall rate. Overcrowding is higher in stabilized housing (13.1%) than in market rentals (6.7%). A separate analysis by the city comptroller finds that vacancy in the stabilized stock has "plunged to its lowest rate ever."

At the same time, rents have reached historic highs. Manhattan's median asking rent passed $4,500 a month in 2025, with Brooklyn and Queens not far behind. Roughly two-thirds of New Yorkers rent, and about 44% of rental units are rent-regulated. A majority of tenants are "rent-burdened," spending more than 30% of income on housing; many spend more than half.

So yes, there is a crisis. But it is not just an arithmetic problem of "too few units." It is a spatial and legal problem: too little land where decent housing is allowed and financially viable; too many rules that lock in low density in some places and fragile, under-maintained housing in others.

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2. Zoning as a machine for producing scarcity

Zoning is often described in neutral language: a way to keep heavy industry away from homes, to separate noisy uses from quiet ones, to ensure "orderly growth." On the ground, it does something more explosive: it decides who gets to live where, in how much space, at what price.

In high-demand cities, tight zoning translates directly into higher prices. A classic study of Manhattan condominiums found that zoning restrictions added about 50% to prices, relative to a world where the same land could be developed more freely. Hsieh and Moretti's "Housing Constraints and Spatial Misallocation" pushes this further: they show that restrictive land-use rules in a small set of high-productivity metros – including New York – greatly reduce national output by preventing workers from moving to where they'd be most productive.

In New York specifically, for more than half a century the state's Multiple Dwelling Law imposed a hard cap of 12 FAR (floor-area ratio) on residential buildings. No matter how close you were to a subway hub or how strong demand was, you could not build more than twelve square metres of housing per square metre of land. That cap dates from the early 1960s, when planners were trying to stop a wave of supertall residential towers in Manhattan.

In May 2024, Albany finally amended the law. The City of Yes for Housing Opportunity plan introduces new R11 and R12 districts, allowing residential FAR of 15 and 18 respectively – but only where the city maps them and only with mandatory permanently affordable units.

The existence of R11/R12 is important symbolically: for the first time in sixty years, the city can legally zone for much denser residential buildings in transit-rich areas. But that change reaches only the tip of the iceberg. Across most of the five boroughs, a quieter set of rules continues to ration floor space:

• Low FAR limits in "contextual" districts designed to preserve existing character.
• Height caps and sky-exposure planes that make it hard to add more storeys.
• Minimum lot sizes and yard requirements that favor large parcels and low density.
• Parking minimums (now being removed in some places, but still influential) that force each new unit to drag an expensive parking space along with it.

In many neighbourhoods, the result is not picturesque charm but frozen under-use. Our candy-shop tenement sits in a district where zoning may only allow an extra floor or two. To tear it down and rebuild, a developer must:

• Buy the land (priced as if a big project were possible).
• Buy out tenants or relocate them.
• Pay for soft costs, financing, and construction.

If the zoning only lets you add a handful of apartments, the numbers may never pencil out. The rational choice becomes: sit tight, milk the ground-floor commercial rent, do the bare minimum upstairs, and wait for a bigger opportunity.

Zoning is not the only framework at work. Rent regulation and tenant protections overlay their own geography of incentives and paralysis.

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3. Rent regulation, tenure, and the frozen parcel problem

New York's rent regulation system is one of the most extensive in the world. Roughly 1.02 million apartments in the city are rent-regulated, about 44% of the rental stock. For the households inside these units, the benefits are huge: predictable rents, protection from arbitrary eviction, and insulation from sudden market spikes.

From the standpoint of space, though, the system has side effects.

The 2019 Housing Stability and Tenant Protection Act (HSTPA) sharply restricted the ability of landlords to raise rents after renovations or vacancy. That closed notorious loopholes that had been used to harass tenants out and de-regulate units. But it also made it much harder to finance deep renovations of older stabilized buildings.

In public debate this has produced the grim phrase "zombie apartments" – rent-stabilized units sitting vacant because they need major work and the allowed rent increase after that work would not cover the cost. Tenant advocates have cited figures as high as 60,000 such units; landlord groups point to them as Exhibit A that "pro-tenant" reforms are killing reinvestment.

The comptroller's office, doing a careful pass through the data, finds something more nuanced: the number of rent-stabilized units that are vacant and unavailable has fallen in the last two years, and only a small fraction – perhaps under 2,000 – of low-rent units (under $1,500/month) are offline solely because owners say they cannot afford repairs. The "60,000 zombies" are not all locked doors; many are normal turnover, pied-à-terres, or units heading for deregulation.

Still, at the level of a single building, the incentives are clear enough. In our tenement:

• Long-tenured stabilized tenants pay substantially below market.
• If they move out, bringing the unit up to modern code (lead abatement, electrical, plumbing, energy standards) might cost six figures.
• The regulated rent after renovation may not justify that outlay, especially with higher interest rates.

The owner is therefore tempted to delay major work; to do just enough to avoid fines; to keep some units off the market in the hope of a future law change; or to sell the entire building once a developer can assemble enough parcels to justify a large, deregulated project.

You end up with a paradox:

• Rent regulation successfully protects individual tenants.
• But it can lock whole parcels into configurations that no longer match what the city needs: too few units, poor quality, uncertain future.

That paradox becomes more acute when we turn to the fashionable idea that will supposedly fix everything: converting empty offices into homes.

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4. The office-to-residential mirage

"Can't we just convert all these half-empty office blocks into apartments?" has become a standard line in every panel discussion about downtowns.

In theory, the opportunity is huge. Office vacancy rates in many U.S. downtowns hover around 20%. A widely cited estimate suggests that around 14,000 office buildings nationally could be candidates for conversion, with the potential to yield hundreds of thousands of units.

In practice, most office buildings are terrible raw material for housing:

• Their floor plates are too deep: large stretches of floor sit far from any window, fine for cubicles, unusable for bedrooms.
• Plumbing and HVAC risers are set up for a few large washrooms and mechanical rooms, not dozens of kitchens and bathrooms per floor.
• Many towers have limited operable windows and ventilation, designed for sealed mechanical systems, not domestic comfort.
• Structural grids and loading assumptions reflect office layouts, not the heavier, more compartmentalised residential floor plans.

A U.S. Department of Housing and Urban Development brief sums it up bluntly: office-to-residential conversions are both logistically and financially challenging, and often require public subsidies or regulatory relief to work at all.

The Urban Land Institute's recent survey of conversion programs across North America highlights the same pattern: most successful projects involve older, smaller "Class B/C" buildings with relatively shallow floor plates and good window coverage; modern glass towers are usually a lost cause.

When conversions do work, it is because the city bends the rules and opens the wallet. Calgary's Downtown Development Incentive Program pays developers up to C$75 per square foot (about US$55) to turn office floors into apartments or other non-office uses, with grants capped at C$15 million per project. As of 2024, that program supports 20+ projects converting 2.6 million square feet of office into roughly 2,600 homes – a big deal for Calgary, but a rounding error compared to New York's deficit.

In downtown Manhattan, high-profile conversions like 160 Water Street and the transformation of older Financial District towers into rentals show what's possible with deep pockets and flexible zoning: cut new light courts into the core, re-run plumbing, re-skin façades, and you can produce desirable market-rate apartments. But these are capital-intensive, often luxury projects.

So "just convert the offices" is not a general solution. It is a niche tool. Useful, yes. Transformative, no.

The main battle will still be fought in the fabric of ordinary mixed-use neighbourhoods – the world of small tenements, corner lots, low-rise strips and under-built avenues.

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5. A different regime: five levers that actually move the needle

If we accept that more supply is essential, but that "just build" is meaningless without spatial detail, what does a serious pro-housing regime look like in a New York-like city?

Think of the following five levers as a package. Used together, they change the geometry of the housing system.

Lever 1: Upzone hard – and simply – where transit can carry it

There is no way around density. You cannot keep land values at $1,300 per square foot and pretend the right building height is four storeys.

The City of Yes for Housing Opportunity is a step in the right direction: it proposes new R11 and R12 districts (FAR 15 and 18) mapped around major transit hubs, with mandatory income-restricted units. But to have real bite, such high-density districts need three design principles:

1. As-of-right clarity. If a project meets clear envelope and inclusionary rules, it should not need a political battle at the City Council. Delay is death in development finance.
2. Air-rights markets at neighbourhood scale. Under-built lots like our candy-shop tenement should be able to sell unused development rights to a nearby site in the same catchment. That lets small owners monetise value without demolishing everything, while larger sites absorb more density.
3. Infrastructure-aligned mapping. High-FAR districts must sit where the transit network and utilities can actually cope: near subway interchanges, regional rail, and high-capacity bus corridors.

We know from experience that upzoning by itself does not guarantee a flood of new homes. A study of New York rezonings between 2004 and 2013 found that increased capacity did lead to more multifamily construction, but the effect varied and was strongest in already hot markets. Design matters: if the process is complicated, or if mandatory affordability requirements are so strict that projects don't pencil out, production stalls.

But without this lever, nothing else matters. You cannot build your way out of a shortage if most of the city's best-located land is capped at townhouse heights.

Lever 2: Legalise the missing middle in the quiet districts

The skyscraper districts are only part of the story. The vast majority of urban land in North American metros is zoned either for single-family homes or very low-density multifamily. That's where "missing middle" housing – duplexes, fourplexes, small apartment buildings – could quietly add thousands of units.

We have early but instructive experiments:

• Minneapolis 2040 effectively ended single-family-only zoning by allowing triplexes on every residential lot. Its impact so far, measured in dozens of extra triplexes a year, is modest but real.
• Oregon's HB 2001 goes further, banning exclusive single-family zoning statewide in many cities and requiring that duplexes – and in some cases triplexes and fourplexes – be allowed on most lots.
• California's ADU reforms have turned backyard cottages from curiosities into a mass phenomenon: ADUs now account for roughly one in five new homes in the state, with over 28,000 ADU permits issued in 2023.

The empirical literature on exclusionary zoning backs these reforms: rules that reserve large swathes of land for detached homes contribute to higher prices and racial segregation, and prevent lower- and middle-income households from accessing high-opportunity neighbourhoods.

A New York-like city cannot copy-paste Oregon, but it can do this:

• Allow two to four units by right on almost all residential lots, with form-based controls instead of strict unit caps.
• Permit ADUs everywhere with simple, predictable rules – and without off-street parking requirements that make them impossible on narrow lots.
• Remove or sharply reduce parking minimums for small infill projects near transit.

For our tenement block, that means not just one big redevelopment fantasy, but many small steps: extra units carved out of large flats, new storeys added on top, back-courtyard houses built where only sheds existed before.

Individually, each move is small. In aggregate, across thousands of lots, it is how you build a second city on top of the first.

Lever 3: Make conversion programs boring and generous

Office-to-residential conversion, and similar adaptive re-uses (hotels, older institutional buildings), will never be the main source of new housing. But they are too valuable to leave to improvisation.

Calgary's program shows the elements of a mature approach: clear, per-square-foot grants (C$50–C$75), explicit priorities (residential gets the highest support), and a one-stop approval process where change-of-use is not a bureaucratic odyssey.

A large, high-cost city could:

• Publish a conversion suitability index, pre-screening office buildings for floor-plate depth, window geometry, structure, and zoning status.
• Offer time-limited incentives for projects that meet thresholds: for example, grants or tax abatements per square foot of new residential floor, scaled up if a share of units are below market.
• Standardise code interpretations for common typologies, so developers know what is physically required before they acquire the building.

Done well, this would channel private capital toward the third of the office stock that researchers think is realistically convertible, without drowning in bespoke negotiations.

Lever 4: Reform rent regulation to align building health with tenant security

Rent regulation is politically sacred for good reason: it is one of the few shields tenants have against displacement in brutally tight markets.

But the current New York model is obsessed with flows (annual increases, legal rents) and weak on stocks (the long-term condition and configuration of buildings). A more intelligent regime would keep strong protections for sitting tenants while creating a clear path for deep retrofit and redevelopment, under strict conditions:

• For significant, verifiable building-wide upgrades (structural repairs, decarbonisation, accessibility), allow modest, formula-based rent increases across units, with means-tested relief for the poorest tenants.
• In designated "reinvention corridors," where upzoning has made much taller buildings possible, allow owners to assemble parcels and redevelop – but only if all stabilized tenants are offered equivalent or better units in the new building at regulated rents, with relocation assistance in the interim.

This is essentially the logic Vienna has followed in its century-long social housing programme: protect tenants, treat housing as long-term infrastructure, and mobilise public or limited-profit capital to renew buildings when needed. In Vienna today, about 60% of residents live in some form of social or cost-controlled housing; roughly 43% of the city's stock is either municipal or limited-profit. That didn't happen by freezing parcels in time; it happened by continually rebuilding the city under a stable set of social rules.

New York is not going to become Vienna. But it can steal one lesson: tenant protection and reinvestment do not have to be enemies if you design the rules around both people and buildings, not just leases.

Lever 5: Tax underuse, not bricks

Finally, the fiscal tool that almost every housing economist loves and almost no politician touches: land-value taxation.

Right now, property taxes often punish improvement. Add new units, refurbish a building, or convert a loft into apartments, and your tax bill rises; leave a one-storey drive-through on prime land, and the system is strangely tolerant.

Shifting tax from structures to land value would:

• Make it more expensive to leave prime urban land under-built (parking lots, warehouses, tiny strip malls).
• Make it relatively cheaper to stack more homes where the land is already valuable.

Paired with a vacancy tax targeted at long-term empty homes, and with transparency tools like RentReboot (which cross-references official rent-stabilized building lists with rental listings to expose units kept off the market), this fiscal regime would nudge owners toward actually using their parcels.

For our candy-shop tenement, that means the owner pays for the privilege of sitting on an under-built site. Over time, that pressure either pushes them to add units, sell air rights, or sell the building into an assembly that will.

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6. Ground floors and social contracts

All of this may sound bloodless. But it lands in very human spaces.

On the ground floor, literally, the question is: what are streets for?

In a high-value city, ground-floor space can easily rent for several times what housing above does. That has two consequences:

• It tempts owners to ignore residential floors and treat the building as a retail-income engine with some inconvenient human ballast on top.
• It tilts the whole streetscape toward businesses that can survive those rents: chains, luxury boutiques, and tourist-oriented outlets, not everyday services.

A pro-housing, pro-city regime needs to repoliticise the ground floor:

• Allow and encourage hybrid bases: two or three levels of flexible commercial/community use (shops, clinics, co-working, childcare, non-profit offices), with housing above.
• Use zoning bonuses and public development corporations to ensure that some of that high-rent ground-floor income cross-subsidises genuinely affordable units upstairs.
• In quieter residential streets, break the suburban reflex that "ground floor must be parking or private stoop." Let small apartment buildings with shared entries and active edges proliferate.

At that point, the candy shop is no longer an odd survivor in a half-dead tenement. It is part of a deliberate mixed-use structure in which retail supports housing, not the other way around.

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7. Markets, planning, and the politics of enough

Underneath the technicalities lies a more basic tension.

Housing markets are very good at allocating scarcity. They are bad at deciding when scarcity is a mistake.

New York, San Francisco, Toronto, London – all have, in different ways, treated their most productive land as a quasi-sacred object: to be preserved, curated, frozen in forms that made sense fifty years ago. Zoning, historic districts, view corridors, height caps, parking minimums – each rule had its own logic. Together, they have created cities in which it is perfectly legal and normal to:

• Keep vast tracts of inner-ring neighbourhoods locked into low-rise, low-density patterns.
• Concentrate new housing in a few over-contested megaproject sites.
• Protect existing homeowners' exposure to change more carefully than renters' exposure to displacement.

The result is the world we see now: rents that devour incomes, vacancy rates that scrape the floor, and land values that turn every building into a speculative instrument.

Breaking this pattern does not mean abolishing planning. It means using planning for what it is actually for: deciding how many humans a given city can reasonably hold, and then allowing the built form to adjust accordingly, while protecting those who would otherwise be shoved aside.

The five levers sketched here are not radical in isolation. Variants of all of them exist somewhere already: upzoning in Tokyo and Vancouver; missing-middle legalisation in Minneapolis and Oregon; conversion subsidies in Calgary; tenant-protective but renewal-friendly regimes in Vienna; land-value ideas floated in countless academic papers.

What would be radical is stitching them into one coherent housing regime for a New York-like city – one that stops treating the tenement with the candy shop as a natural end-state and starts treating it as raw material.

In that regime:

• The owner of that building faces steady incentives to add homes or sell to someone who will.
• Tenants upstairs can stay or move within a city that actually has options, not just waiting lists.
• The candy shop can keep selling nostalgia without being the only thing keeping the structure financially alive.

Housing policy, seen from human geography, is not about units and permits alone. It is about who is allowed to inhabit valuable space and under what terms. The current system answers: those who arrived early, those who can pay, and those lucky enough to win the rent-regulation lottery.

A better answer is possible: those who live and work in the city today, and those who will come tomorrow – if we let the city physically make room for them.

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References

Brookings Institution (2024). Make it count: Measuring our housing supply shortage.

Calgary – City of Calgary (2024). Downtown Calgary Development Incentive Program.

City of New York (2024–2025). New York City Housing and Vacancy Survey 2023: Initial Findings; 2024 & 2025 Housing Supply Reports; press releases on 1.41% vacancy.

Hsieh, C-T., & Moretti, E. (2019). Housing Constraints and Spatial Misallocation. American Economic Journal: Macroeconomics, 11(2), 1–39.

New York City Comptroller (2024). Accurately Assessing and Effectively Addressing Vacancies in NYC's Rent-Stabilized Housing Stock.

NYC Department of City Planning (2024). City of Yes for Housing Opportunity – Final Plan.

NYC Rent Guidelines Board (2024). 2024 Income & Affordability Study; 2024 Housing Supply Report.

Oregon Legislature (2019). HB 2001 – Middle Housing Reform.

Shoup, D. (2005). The High Cost of Free Parking. (Land-value and parking insights summarized in CEA and related sources).

U.S. CEA (2021). Exclusionary Zoning: Its Effect on Racial Discrimination in the Housing Market.

U.S. HUD (2023). Office-to-Residential Conversions (Evidence Matters).

Urban Land Institute (2025). Office to Anything: More Cities Offer Conversion Incentives.

Vienna Housing Data (2023–2025). Housing in Vienna (Wikipedia summary); Guardian and AEI analyses of the Vienna model.

Additional contemporary reporting on rent-stabilized stock, "zombie apartments," and tenant burden referenced from NYC media, advocacy groups, and policy commentary.