The tri-state area of New York, New Jersey and Connecticut may face a housing gap of 920,000 units by 2035, a new report published by the Regional Plan Association (RPA) found. The analysis, conducted by McKinsey & Co., highlights a current shortage of 540,000 housing units in the region.
To address this looming crisis, the pace of construction will need to increase significantly, the report states. To fully close the gap between supply and demand, the region will need to build homes at the same rate it did during the decades following World War II.
“The need to scale our regional housing market is widely recognized by public and private sector leaders, but this report provides novel insight about the associated long term economic losses if we fail to act swiftly on this challenge,” Tom Wright, president & CEO of the Regional Plan Association, said in a statement.
“This report underscores the immense long-term benefits of reversing the affordable housing shortage, from improving affordability to growing our workforce and GDP. To ensure that our regional economy remains vibrant and competitive with other global centers, we must act expeditiously to organize critical investment and innovative partnerships to increase housing stock.”
According to its website, RPA is an independent nonprofit group that “develops and promotes ideas to improve the economic health, environmental resiliency, and quality of life of the New York metropolitan area.“ It conducts research on environmental and land-use policies, as well as governmental best practices, to advise municipalities and public agencies.
If the region maintains its current pace of housing production through 2035, home prices could rise by 25% and the number of cost-burdened households could increase by 7.6% (or 260,000 households), with a disproportionate effect on low-income households, the report states.
Furthermore, the study suggests that failing to address the housing shortage could result in the region missing out on $900 billion in cumulative gross domestic product (GDP) growth by 2035. It could also forgo at least $3.7 billion in incremental yearly state and local taxes, as well as another $3 billion in yearly federal taxes.
It would also create problems in terms of job creation. A failure to address the housing shortage could deprive the region of 730,000 additional jobs.
Under current projections, employers may experience difficulty attracting and retaining workers, potentially leading them to leave the region or reduce their workforce. High housing costs and limited availability may force residents to relocate to more affordable areas with better opportunities, resulting in a decline in population and quality of life.
Addressing the housing shortage in the tri-state region would require a significant annual investment of $60 billion through 2035 to achieve post-World War II production rates, the report found.