New York City’s YIMBY (“yes in my backyard”) housing contingent was abuzz last week as UrbanDigs, a proprietary real-estate information service, noted that Manhattan rents for April 2022 exceeded pre-pandemic levels by 20 percent, while the inventory of apartments for rent stood at a record low. While other metrics yield somewhat different results about how far rents and inventories have rebounded from their pre-pandemic lows, the data agree about the general trend: inventories of apartments for rent are plummeting, and rents are at or near record highs.

Spiking rents and low inventories are the predictable consequences of the 2019 tightening of rent controls by the New York State legislature. The media has focused on the timid—yet still highly controversial—efforts by the city’s Rent Guidelines Board to permit rent increases that compensate landlords, at least partially, for rising inflation. But few are paying attention to the looming crisis of the recovering economy running headlong into New York City’s tight regulations on both the price and quantity of housing stock. Economic theory tells us this must lead to housing shortages and sharply escalating rents—and that is exactly what is happening.

Government’s fundamental interest in housing policy is to ensure that the economy’s demand for labor is matched by the availability of decent housing in the locations where jobs are being created. In New York State, it’s no mystery where the jobs are: largely within New York City and, to a lesser extent, in the downstate suburbs. In 2019, however, the legislature decided that the goal of state housing policy would be not to ensure adequate supply but to keep households that already have housing from being forced to move because of rents rising faster than the rate of cost inflation, as defined by the Rent Guidelines Board. The need to find housing for the growing downstate labor force would count for nothing.

It wasn’t until Governor Kathy Hochul replaced Andrew Cuomo, who signed the rent bill, that the legislature even considered a package of supply-side housing reforms that might help enable the downstate region to continue growing past its pre-pandemic employment levels. But the legislature quickly dropped these reforms, and it’s not clear that it will pass any pro-housing supply legislation this year. Mayor Eric Adams, furthermore, has yet to announce any zoning reforms that the city might undertake to release its stranglehold on the housing supply.