A Billion-Dollar Blueprint

History

Even though New York City, New York State, and the tristate region all lag behind when it comes to the ability to own a home, this is not to say there has not been some narrowing of the rental/homeownership gap over time. Prior to World War II, the city’s homeownership rate was barely above 15%. Many of the city’s outer-borough one- two- and three-family homes were constructed in the 1950s and 60s (a time when homeownership in the country as a whole rose significantly), which increased the homeownership rate to 23.5% by 1970. This rate stayed at a similar level in 1980.

While the homeownership rate in the United States is almost exactly the same as it was in 1980, New York City’s homeownership rate has risen nearly 10% over the same period, with most of this increase coming between 1980 and 1990. This is mainly due to two factors: first, New York City’s co-operative conversion boom, which started in the late 1970s and continued throughout the 1980s. These co-operative conversions were at the time the easiest and most-used path for buildings to exit rent stabilization, and were especially utilized in the early 1980s when rapid increases in operation costs, in particular oil prices, led to decreasing returns for rental buildings. And second, because despite a robust economy and good financing environment in general, many neighborhoods in New York City were still effectively redlined - viewed by developers and lenders as too risky for long-term investment, even for subsidized housing. This led to abandoned rental buildings, which had been tax-foreclosed on by the city, to be converted to limited equity HDFC co-operatives owned by residents as opposed to rental housing owned by developer/managers.

In the 1990s, several trends converged to limit this relative growth in homeownership. First, rent regulations were greatly loosened, providing more lucrative decontrol options for building owners. Second, the amount of in rem tax-foreclosed housing - which peaked at over 120,000 units in 1984 - declined dramatically, with fewer tax-foreclosed buildings being converted to HDFC co-operatives as a result. And third, the Low-Income Housing Tax Credit (LIHTC) program, created as part of the Tax Reform Act of 1986, began providing a relatively safe investment pathway for the creation of low-income rental housing, as well as a way for lenders to meet their Community Reinvestment Act (CRA) requirements in historically redlined areas.

GROWING UNAFFORDABILITY

Today, homeownership is increasingly out of reach. While the supply crisis in our rental housing is well known, what is less well known is that this crisis also extends to homes for sale. As of the last Housing and Vacancy Survey, the vacancy rate of for-sale homes is 0.77%, the lowest rate since at least 1975. It is no surprise that as this inventory declines, prices rise. This is especially noteworthy because these price increases have happened simultaneously with interest rate increases, which, by making monthly housing costs higher for the same home price, usually have the effect of softening rising sales prices.

Income growth has also not kept pace with housing costs. Based on Zillow’s Affordability Metrics, while both buying and renting have been increasingly out of reach for New Yorkers making the median income, homeownership has become exponentially more unaffordable, with now even those making double the median income unable to afford to buy a typical home in the city.

The interest rate environment also plays a significant role in this trend. The dramatic spike in income needed to buy starting in 2022 is partly due to the spike in interest rates. And the extremely low available inventory of homes - putting further upward pressure on prices - is likely at least partially due to the interest rate ​“lock-in” effect, as homeowners are unlikely to move out of their homes when their mortgage rate is below the current market rate.

GROWING INEQUALITY

Since the end of the 2008 Global Financial Crisis, the most affordable tier of homes have seen the largest percentage increase in property value. In fact, more expensive homes, those in the 35th percentile of home value and above, have actually been outpaced by median income growth over that period. The result is an inability for people to afford starter homes or apartments in New York, with homeownership - of any type, in any neighborhood - becoming reserved for people with higher and higher incomes.

While long-term homeownership has always been a path to building wealth, it is increasingly this ability to buy a home that has become the main divider of households that are able to build wealth and those that are not.

According to a recent analysis of the 2022 Survey of Consumer Finances by Jung Hyun Choi and Amalie Zinn at the Urban Institute, the average wealth gap between homeowners and renters in the United States has reached a historic high of $1,370,000. This is a 250% increase from 33 years before. That acceleration was driven in large part by home equity, which accounts for the largest share of the wealth gap between homeowners and renters among sources of wealth. This is exacerbated by our tightened rental market as well - when rent growth outpaces income growth, people are not able to save and invest money, and aspiring homeowners are not able to gather potential down payments. As a result, we are entering a paradoxical situation - you need wealth to buy a home, you need a home to build wealth. If current trends continue, the housing wealth gap will continue to push inequality in the US to astronomic heights.

HOMEOWNERSHIP AND THE RACIAL WEALTH GAP

While homeownership rates are relatively even across racial groups at higher income levels, low–income white and Asian New Yorkers are far more likely to own their homes than Black and Hispanic New Yorkers with similar incomes. If we continue to see the owner-renter wealth gap grow as a result of property price inflation and income stagnation, low-income communities of color will be hit the hardest. This could lead to increasing growth in the racial wealth gap, as existing disparities are compounded by market trends.

And even among these higher-income households with relatively even rates of homeownership, racial inequities are evident. Systemic undervaluing of properties in Black and Latino neighborhoods by both state and private actors, in addition to discriminatory and predatory mortgage lending practices targeted at Black and Latino homebuyers, contribute to significant racial disparities in wealth even among those who own their homes. A 2025 report by The Robin Hood Foundation found that white homeowners had roughly twice as much home equity as Black homeowners, 1.5 times that of Latino homeowners, and 1.2 times that of Asian homeowners - and that the overall median wealth of Black and Latino New Yorkers is less than 1% of that held by white New Yorkers.

A PREFERENCE FOR HOMEOWNERSHIP

The most compelling case for providing more homeownership opportunities is simple: it is what people want. In the Federal Reserve Bank’s Second District, which encompasses New York State, Northern New Jersey and Southwestern Connecticut (as well as Puerto Rico and the U.S. Virgin Islands), households would prefer to own instead of rent by a 4-1 margin.

In New York City, which has always been a more transient place and where many households are protected by strong rent laws or live in subsidized housing, one might expect a weaker preference for homeownership. But the data here also provides a different story. In a 2025 survey, Habitat for Humanity asked New York City renters why they did not own their homes. Only 25% said they did so because they preferred renting, compared to 69% who said it was because homeownership was too expensive.

It is important to note that this preference is not just explained by a desire to live in other neighborhoods or different homes. The same survey found that 64% of aspiring homeowners would purchase in their own neighborhood, and 40% of them would even purchase the specific apartment they were currently renting. Homeownership in New York City is a demand that the market - and public policy - is simply failing to supply.

STABILITY

As mentioned earlier, in New York City, the stability that homeownership brings is somewhat mitigated in the rental market by subsidized housing and rent stabilization. And although half of renters do not enjoy these protections, they also benefit from generally stronger tenant laws and anti-eviction measures than in other parts of the country. This does not necessarily mean that stability exists, though - the tight housing market and expensive rents that follow mean that price pressures, and resulting eviction concerns, remain high. Since the COVID-era eviction moratorium, eviction filings have risen and now average almost 10,000 per month. In contrast, first-time foreclosure filings numbered 1,588 for all of 2025.

However, the main stability benefit of homeownership is financial. Mortgage payments are steady, and property tax increases are often capped - as they are in New York City for all buildings of 10 units or less. In good economic times, while wage increases are often offset by rent increases, ownership costs remain steadier. This leads to a falling cost burden among owners with a mortgage as compared to renters during these times, such as from 2011-2019.

And most importantly, home loans are eventually paid off. While housing costs are only slightly less for owners with mortgages than for renters, owners without mortgages pay significantly less per month than renters. This means lower costs and greater stability for homeowners among retirees and senior citizens than for renters.

BUILDING HOUSEHOLD WEALTH

But perhaps the biggest advantage for homeownership is the ability, over the long-term, to build wealth for oneself and one’s family. This ability to build wealth is something that is not reliant on heavy home appreciation or spikes in the market. Even in a government-sponsored limited-equity scenario, where yearly home appreciation is capped at 3%, a family earning the area median income will build over half a million dollars more in equity after 30 years than if they rented a government-sponsored rent-stabilized apartment. And importantly, the home will still be affordable to the next purchaser at the same income level.

BUILDING COMMUNITY WEALTH

Since at least the growth of the Low-Income Housing Tax Credit program in the early 1990s, rental housing has constituted the vast majority of New York City’s affordable housing production program. But over recent years, this has become virtually everything. Under the New Housing Marketplace, the affordable housing program in place from 2004 to -2013, homeownership formed fully 20% of new production. From 2014-2025, however, this had fallen to just 2%.

By returning to this standard of 20% of affordable housing being homeownership, every year we would create almost a billion dollars of wealth for low- and moderate-income households. Notably, if the geography of affordable housing investments remains the same, over half of this wealth would accumulate in majority Black and Hispanic neighborhoods.

Incentivizing tenure - meaning creating public policy to encourage either ownership or rental housing - is difficult, especially with market-rate housing. Even homes built as ownership projects are often rented out - in New York City, 18.6% of single-family homes are rented. While government-sponsored programs have more tools, even in New York, they remain, overall, a minority of the housing market.

However, most private housing uses city-sponsored tax exemptions, which can be adjusted to better incentivize homeownership.

TAX EXEMPTIONS ARE KEY

Today, the 485x program provides a 100% tax exemption on the added value of a new multifamily rental building with 11 or more units for 25 to 40 years. Eligible buildings need only provide between 20% and 25% affordable housing, with the rest of the apartments able to charge full market rents.

In contrast, homeownership buildings are only granted a 14-year full exemption, and the average assessed value of all units - not just a portion - must fall under a certain affordability threshold. To make homeownership a more attractive investment for developers, this discrepancy needs to be rethought. This smaller exemption also creates problems because of the lack of a sunset provision. Instead, property taxes jump at two points - first at year 14, when the 100% exemption becomes a 25% exemption, and then six years later, when it expires completely. Unlike professional rental housing managers, individual households are less likely and able to plan for and accommodate these sharp rises in monthly costs.

A homeownership exemption that lasts for the duration of a typical mortgage and has a more gradual sunset (timed to expire after 30 years, when most mortgages will be up and monthly mortgage payments no longer due), could both better incentivize homeownership development and provide more cost stability. To ensure this valuable exemption is used to incentivize owner-occupancy, the period during which buyers are required to occupy the home as their primary residence could be increased from its current 5 years. In addition, at any point, the exemption should apply only if the home is owner-occupied - if the home is vacant or rented out at any time, full property taxes should be due.

However, the main issue with the 485x homeownership program is the difficulty of factoring it into loan underwriting, whether by a construction lender or a mortgage lender. Because assessed valuation is determined after the completion of a building, builders - and lenders - don’t know if any particular unit will have a tax exemption before its first assessment.

This assessed value cap should instead be changed to a purchase price cap. If the exemption were available to co-ops and condos under a certain sales price, both construction lenders and mortgage lenders would be able to underwrite it more easily.

We can also structure these exemptions to encourage homeownership in the ​“missing middle” buildings likely to appear in lower-rise areas of the outer boroughs due to the City of Yes and Charter Revision changes. Currently, six to ten-unit buildings - which have become much easier to build on smaller outer-borough lots with the new Expedited Land Use Review Process (ELURP) - are required to have 50% of their apartments rent stabilized, although at initial market rents. Changing this to require that these buildings be fully rent-stabilized to obtain a tax exemption could both increase the rent-stabilized stock and expand homeownership.

Another change that would help incentivize owner-occupancy is to change the structure of closing costs. Currently, upon the sale of real property, both a transfer tax and a mortgage recording tax are imposed. A transfer tax is a one-time tax on the entire purchase price of a home. For homes under $500,000 this is currently 1.4% (1% for New York City and 0.4% for New York State). A mortgage recording tax, in contrast, is only owed on the amount borrowed. This is currently 1.8% for loans under $500,000. While it is customary for the seller to pay transfer tax and the buyer to pay mortgage recording tax, both are negotiable. While mortgage recording tax is not due on loans taken out for cooperatives, almost all recent newly constructed multifamily housing for sale has been condominiums.

As an example, take the sale of a $335,000 condo, which is about the cost affordable to a low-income household at 80% of AMI. Buying this home currently costs cash buyers $4,690 in these taxes, while a first-time homebuyer putting 20% down would pay $9,514 - more than twice as much in closing costs.

By shifting the closing cost burden from the mortgage recording tax to the transfer tax, especially for more affordable units, we can incentivize first-time homeownership in a revenue-neutral way.

PROCESS REFORMS ARE NEEDED

Affordable housing - rental and ownership - needs to be able to be built in practice as well as in theory. This means reducing costs, shortening construction times, and ensuring that the process of building and leasing a building is simple and easy. Already, both the city and state have taken action. New York City’s SPEED task force has made recommendations for several improvements to the construction and tenanting process for affordable housing. New York State’s recently passed ​“Let Them Build” initiative has significantly streamlined the environmental review process, reducing the time for housing construction in New York City.

Both the city and state should continue this process of streamlining and reform, but also ensure they specifically examine which changes could enable condominium and cooperative housing to be constructed and sold more quickly and easily. One idea is for New York State to institute a statute of repose for construction, which professional organizations representing contractors, engineers, and architects have long advocated to help reduce insurance costs and mitigate risk for professionals in condominium developments. In contrast to a statute of liability, which limits liability after a certain amount of time has passed after a loss or injury has occurred, a statute of repose would limit liability after a certain amount of time - generally 10 years - has passed since the completion of a building.

THE CITY ALSO PLAYS A ROLE

While most housing in New York City is created through a combination of tax exemptions and the private market, there is also a robust purpose-built affordable housing ecosystem, which has created almost 175,000 new homes since 2004 - enough to house the population of Orlando. This is over 30% of the entire homes built in New York City over this time period. In the Bronx, this amounts to over 60% of the newly constructed homes.

We can use this purpose-built housing to counter one of the main inequities of our housing stock - the lack of homeownership opportunities in many of our neighborhoods. For instance, despite subsidizing 38,700 units of housing in the Bronx since 2014, and despite the Bronx having the lowest homeownership rate of all the boroughs, HPD has only subsidized 418 new homeownership units in that borough - 1.1% of the total amount of subsidized housing. In contrast, in the borough with the highest homeownership percentage in the City, Staten Island, 23.9% of the newly constructed subsidized housing was for homeownership.

As the Habitat survey shows, many renters would like to own in their own neighborhood. But there are entire neighborhoods where this is next to impossible, not necessarily for affordability reasons, but because the inventory simply doesn’t exist. By taking this into account while formulating our affordable housing plans we can counter this trend and provide opportunities for homeownership in all of our neighborhoods, and especially those without these opportunities today.

THE NEED FOR CREATIVITY

Creating affordable homeownership is not without significant challenges, and building this housing will require rethinking how we deliver affordable homeownership programs in New York City.

Since the end of the Mitchell-Lama program in the early 1980s, the primary way affordable cooperatives have been created in New York City has been through the conversion of distressed rental buildings. There have also been purpose-built new cooperatives, but these have been fewer and further between.

These conversions of distressed rental buildings generally offer existing tenants the choice of remaining rent-stabilized tenants or buying into the cooperative at ​“insider prices” which are usually nominal. Vacant units are then sold at prices affordable to certain AMI tiers. This is the current model of the current Affordable Neighborhood Cooperative Program.

Converting these distressed rent-stabilized buildings comes with significant challenges. These buildings can require lengthy and expensive rehabilitation. And often, tenants in these buildings earn less than 40% of AMI and cannot afford significant purchase prices or maintenance charges. As mentioned earlier, 40% AMI households do not come out appreciably ahead financially from affordable cooperative ownership, while also taking on more financial risk. These low prices for ​“insiders” then necessitate either more city subsidy, or higher sales prices for non-occupied units.

Programmatic requirements cap incomes - and the sales prices that are affordable to them - according to family size. The apartments available to different family sizes are judged by the number of bedrooms. As a result, the number of bedrooms in a unit dictates potential sale prices.

This can have two detrimental effects. First, apartments that may be less desirable for reasons such as layout, difficult access, or lack of amenities still command the same prices as more desirable units. For instance, a 500-square-foot apartment in a 6-floor walk-up would have the same sale price as a 1,500-square-foot apartment in an elevator building if both were 2-bedroom apartments. And second, it provides an incentive to create 2- and 3-bedroom apartments from very small units to increase sale prices. For instance, as part of the Affordable Neighborhood Cooperative Program (ANCP) program HPD has marketed 3-bedroom units of slightly more than 500 square feet. This can result in ​“affordable” units priced above market, leading to long sales delays or even an inability to find buyers.

Cooperative programs need to make sure that homeownership opportunities make sense from both a design perspective and a market perspective. An independent appraisal, which would take into account more than simply ​“bedrooms” would save time and money in the marketing process by ensuring that there is a sufficient pool of end buyers for the property. And family homes should be the type that families can see themselves in for the long term, with a reasonable amount of square footage and amenities for 2- and 3-bedroom units.

Purpose-built cooperatives programs aimed at 60%-120% AMI buyers should, in turn, be scaled up and design guidelines reviewed to ensure proper unit sizes and amenities. The current HPD program for these, Open DOOR, could be revised to include 60% AMI buyers, and more HPD and HDC loan and subsidy products be made available, including a permanent low-interest loan product. The implementation of a Year 15 and Year 30 homeownership conversion option for expiring LIHTC rental buildings would be another way to creatively leverage more homeownership from existing low-income housing programs.