New York City’s New Law Makes “Affordable” Housing Way More Expensive

The Construction Justice Act is a classic example of “everything-bagel liberalism.”

Courtesy Brett Wharton/Unsplash.

Everyone knows housing in New York City is too expensive. Over half of residents are “rent-burdened,” meaning they spend more than 30 percent of their income on rent. In spite of this, the New York City Council keeps passing laws that make it harder for Gotham to build more affordable housing.

The Construction Justice Act—enacted by the Council late last year and set to become law unless vetoed by mayor Zohran Mamdani—is just the latest example. Mamdani has set an ambitious goal of building 200,000 more affordable units. But laws like the CJA will almost certainly stand in his way.

The CJA targets the wages and hiring practices of affordable-housing developers that take public funds. Under the law, these firms must pay workers $40 per hour in combined wages and benefits, including a minimum wage of $25 per hour. Developers must also ensure that at least 30 percent of those workers are from New York City.

Starting in 2027, these mandates will affect city-funded projects with 150 or more units and that cost over $3 million to build. The law’s mandates will not be eroded by inflation, since the $40 will increase from 2028 onwards, tied to the consumer price index. To meet the 30-percent city-resident quota, developers will need to submit a “community hiring plan,” adding further bureaucratic overhead.

The Construction Justice Act is a classic example of what New York Times columnist Ezra Klein calls “Everything-Bagel Liberalism,” the progressive penchant for trying to accomplish every goal in every policy. Laws like the CJA take affordable-housing developments—meant to produce cheap homes—and make them a vehicle to address climate change, racial inequality, endangered species extinction, foreign policy, gender pay-gaps, and so on.

Inevitably, costs spiral upwards. In New York City, government-financed “affordable housing” averages an estimated $800,000 per unit. By the city’s own account, prevailing wage requirements—like the minimum $40 “floor” imposed by the CJA—increase costs by a whopping 23 percent.

In fact, the CJA’s impact is mitigated by another “everything bagel” requirement. Some New York City affordable housing is funded by the federal Low-Income Housing Tax Credit. That program already requires developers to pay prevailing wages, in many cases driving up compensation and therefore costs.

City developers construct around 1,000 units using the Low-Income Housing Tax Credit annually. But the CJA will still affect many other units. In 2025, the department of Housing Preservation and Development projected that city dollars would fund another 5,274 affordable housing units. Of these, 3,487 are not subject to prevailing wage requirements, but would fall under the scope of the Construction Justice Act.

Proponents of the CJA reject the idea that higher wages mean higher costs. In City and State New York, Justice Favor, who works for one of the unions that pushed the law, wrote that “opponents of the bill are giving us the same tired argument [that] paying fair wages … is a threat to the city’s affordable housing goals. This is a false choice.”

But it’s not. Trade-offs exist and resources are limited, no matter how florid the language politicians and interest groups use to argue otherwise. With the CJA, New York has chosen to raise wages for some workers at the expense of more affordable housing.

To meet his housing goals, Mamdani will need to change his priorities. Prioritizing housing—as his promised 200,000 new units require—means prioritizing housing, clearing away hurdles which make it harder to build.

Under the CJA, “the city will need an additional $750 million in city capital per year or affordable housing production will drop by about 3,000 units,” the New York Housing Conference has estimated. Even if the city can secure the money, Mamdani will have to decide: fund higher wages or build an additional three thousand units?

If New York City is to have any chance of getting close to that 200,000 goal, it will need to set aside “everything-bagel liberalism” and reverse this poorly thought-through piece of legislation. That might be bad politics in the short term. But it will be beneficial in the long-term, as new units are constructed and rents become more affordable.