For anyone interested in New York City real estate, keeping an eye on these zoning shifts could be … [+]
At its heart, New York is a city of reinvention. The recently passed “City of Yes” zoning changes mark one of the most significant transformations in decades. For the first time since the 1960s, major zoning reforms are poised to reshape the way the city builds, develops, and, ultimately, grows.
Whether you’re a buyer, seller, investor, developer, or simply love New York, these new policies are worth watching closely. Here are five developments to keep an eye on.
1. Potential Increase in Housing Supply
NYC’s housing shortage isn’t new. The city has been declaring a housing emergency for over 50 years. In 2017, mayoral candidate Jimmy McMillan, running on the slogan “The rent is too damn high!” garnered nearly 12% of the popular vote. Today, it’s still painfully clear why: vacancy rates reached a historic low of 1.4% in February 2024, and rents are climbing. The “City of Yes” aims to introduce up to 80,000 new housing units over the next decade. In a metropolis of millions, however, the question is: Is it too little too late?
During a recent episode of UrbanDigs’ Talking Manhattan podcast, Jason Haber, a broker at Compass and founder of the American Real Estate Association, noted that these zoning changes come at a pivotal time, saying, “Something’s going to give at 1.4% vacancy. If we don’t do anything, the city is going to crack. And if it cracks, there’s no guarantee people stay.”
An increase of 80,000 units might seem like a rounding error, but there’s more at stake than simply adding more units. Keep an eye on how buyers, developers, and neighbors react to “City of Yes” to help gauge whether the city can stay livable and competitive in the long run.
2. Removal of Outdated Zoning Restrictions
Many of New York City’s zoning laws haven’t been touched since the era of Robert Moses, the famous urban planner and public official. For example, look at the so-called “sliver law,” which prevented narrow lots from being developed above a certain height, effectively rendering many air rights useless. That law is now history. This simple change instantly freed up opportunities for vertical development. Additionally, setback requirements, which specify the minimum depth of the rear yard, have also been reduced from 30 to 20 feet on lots that are at least 40 feet wide.
While this opens doors for property owners to maximize their land value, one potential worry is that it will lead to a new wave of out-of-scale developments instead of the hoped-for thoughtful growth. “City of Yes” has opened a window of opportunity. Keep an eye out for how neighborhoods adapt.
3. Flexibility for Retail & Mixed-Use Spaces
If New York is a concrete jungle, zoning variances are vines of red tape. This is especially true for converting commercial to residential. Not only is the transformation of the physical space a tricky and costly procedure, but the administrative hurdles are difficult to clear. “City of Yes” attempts to simplify this process, hopefully making it easier to turn underused office and retail spaces into housing. Additionally, expanding town center zoning could lead to livelier, more mixed-use neighborhoods. Together, these changes could mean a win-win of more housing with a boost for struggling commercial corridors. Keep an eye on areas that were hit hard by the pandemic. Will this new flexibility help revive them or will it just shuffle the vacancy problem around?
4. Implications for Property Owners & Agents
Given the over half-century zoning status quo, many property owners might not realize their townhouse or multifamily building may now have untapped potential. Changes in the floor area ratio (FAR), which dictates how much square footage can be built on a lot, could mean some homes now have the possibility to expand. Since air rights, the unused development potential, are based on calculations of lot size and FAR, these changes could mean expansion possibilities where none existed before.
For market participants, understanding these new dynamics is crucial. For example, a property that previously seemed maxed out might now offer development upside. This could have an immediate effect on the price by broadening the buyer pool. Watch out for how buyers and sellers change their value estimates as the finer details of the zoning reforms are processed.
5. Balancing Growth with Livability
The “City of Yes” is a bet on density done right. Making the city more functional by adding housing and more adaptable by improving the use of commercial space requires freeing up physical space and loosening regulations.
Key changes include:
- Eliminating mandatory parking requirements (which specified how many parking spaces buildings had to provide) for new buildings in the “inner transit zone” and reducing them in the “outer transit zone” has the potential to make new building projects cheaper.
- Legalizing basement apartments and accessory dwelling units (ADUs) could help increase affordable housing options.
- Making mid-block development easier should allow for more housing.
The worry, of course, is that this could lead to an overdeveloped and indiscriminate concrete blob. In other words, there’s a fine line between smart urban planning and dumb overdevelopment. Watch to see whether liability scales with growth. As Jason Haber puts it: “Destiny for a city is density. Skylines change. Cities evolve. The question is: do we evolve in a way that keeps people here and moves us forward, or do we let the city become unaffordable and stagnate?”
Final Thoughts
Change is hard. There will undoubtedly be debates and growing pains as the City of Yes weaves its way into the urban fabric. Still, while it’s not a silver bullet, it does mark a clear shift in how New York City approaches growth and development. Whether these changes lead to a more affordable, livable city or simply more construction and annoyance remains to be seen. For anyone interested in New York City real estate, keeping an eye on these zoning shifts could be the difference between spotting opportunities and missing them entirely.
