How the MTA Can Solve New York’s Housing Crisis
Leaning into land development could radically transform New York City.
New York City faces two major problems: a limited supply of housing and a basic inability to expand its subways. What if there were a way to address both at once?
For an answer, look to Japan, where transit authorities have become “city shaping companies,” recognizing that transit and housing development can go hand-in-hand. Transforming the Metropolitan Transportation Authority (MTA) in this vein would give it an incentive to develop the land around its stations for current New Yorkers and future residents alike. That would in turn enable the creation of many new housing units, restore the MTA’s profitability, and pave the way toward both transportation and housing abundance.
The New York City subway’s opening in 1904 was marked both by awe and a sense of inevitability—“the next step in the evolution of a Modern City,” wrote Ray Stannard Baker. By 1940, 86 percent of the existing network had been completed, bringing rapid accessibility to what were once open vistas of farmland in the outer boroughs.
The trains in turn brought new construction. The Bronx offers the clearest example. As the lines now known as the 1/2 and 4/5/6 expanded northward, the borough’s population grew dramatically. The same occurred in Queens and Brooklyn when the first lines arrived, continuing as the subway expanded further, then leveling off as it ceased to do so.
Since 1940, however, expansion has come only in fits and bursts: the 63rd Street “tunnel to nowhere” in 1989, Hudson Yards 7 train connection in 2015, and Second Avenue Q in 2017. Meanwhile, rents have soared.
The two problems are related. Earlier expansions brought more neighborhoods within a reasonable commute of Manhattan’s job centers. When the subway stopped expanding, so did the supply of land that could plausibly support dense, transit-accessible housing.
The city hasn’t run out of room to build new housing. My analysis revealed that the average residential Floor to Area Ratio, or FAR—a measure of how large buildings are relative to the land they sit on—is just 1.69. In other words, if a lot were completely built up, the building would average less than two stories. Notably, areas around the subway being much denser than those farther away.
As transit construction has slowed, land prices within the commuter boundary—that is, areas within a reasonable commuting distance—have increased. New York’s post-1961 zoning framework worsened the issue by preventing much of the city’s land from being used more intensely. But while zoning reform is needed, it would be more effective if paired with transit expansion that increased both the speed and reach of the system.
That’s where the MTA comes in. The MTA’s is mostly tax funded: fares and tolls now account for just 39 percent of revenue, with most of the rest coming from tax revenue and federal and state grants. Unlike its fare revenue, the MTA must compete with other government functions for those tax dollars. Combined with labor disputes, high construction costs, and operating pressures, this helps explain why expansion has slowed.
But there are other ways to fund transit. The most famous is Hong Kong’s “Rail+Property” model. There, the publicly traded MTR Corporation holds the exclusive right to develop land around future stations. It acquires the land at pre-transit values, constructs new lines and stations, then capitalizes on the increase in value. That revenue, in turn, helps finance additional lines and projects.
Japan offers a similar example. As Works in Progress recently noted, Japanese railway-holding companies also own hotels, malls, and resorts. “We create cities and then, as a utility facility, we add the stations and the railways to connect them one with another,” the president of the Tokyu Corporation has said.
This model has historical precedent in New York. The private companies that once ran the subway also speculated in land, indirectly subsidizing the cost of the subway as the incentive became one of making trips as fast and efficient as possible.
The MTA could repeat this approach today. It would create a subsidiary to acquire land, at market prices, around future and existing routes. It would acquire parcels gradually—likely through intermediaries, to avoid speculation that would drive up acquisition costs—along corridors where it intends to build or improve service. Existing tools, including eminent domain, could then be used to secure rights of way for tracks and stations.
The state could also exempt MTA-owned properties from local zoning and placing them under a state-level framework. That framework could allow a much denser FAR than is currently allowed in the city. These properties, and adjacent ones, should also be exempt from minimum parking requirements and lengthy state environmental reviews, provided they meet federal standards. Building codes should be streamlined and aligned with national safety standards.
Because the MTA has little experience as a direct land developer—and because New York’s construction and labor costs remain high—it could sell ground leases to private developers. Developers would then build, maintain, and operate the properties on those sites, while the MTA would pocket the revenue.
Profitability will only be achieved by improving and expanding the network, thereby increasing land values. Better transit would lift land values; higher land values would produce more revenue; and more revenue would finance further transit improvements. Over time, a greater share of MTA revenue could come from real estate, allowing New York to reduce some of the taxes now used to support the agency. (Some tax revenue may still be needed to fund court-mandated accessibility improvements.)
The result would be to make feasible many of the projects outlined in the NYU Marron Institute’s recent report “A Better Billion”—including a rail link to LaGuardia Airport, rehabilitation of the abandoned LIRR tracks to extend the M branch to Rockaway Park Beach (QueensLink), and a cross-Bronx light-rail project. Rail+Property could also support even more ambitious projects, such as a tunnel to Staten Island. Such a connection could make large portions of the “Forgotten Borough” newly viable for dense housing by bringing even its southern end within a reasonable commute of Manhattan.
The projects outlined in “A Better Billion” alone would conservatively add 167,000 additional units under current zoning. State preemption of local zoning could add hundreds of thousands more, particularly if areas not currently close to the subway were allowed to reach the levels of density already common near existing stations.
What’s worked for Japan and Hong Kong could work for New York. Letting the MTA develop could create thousands of additional homes, expand commercial and retail space, improve access to jobs, and strengthen the agglomeration effects that make New York the most important city in the world.