Teachings from Tokyo

New York City faces a well-documented housing crisis: Rents have soared, supply lags far behind demand, and an acute unit shortage looms. A 2022 report from the urban economics consulting firm AKRF found that the city would need roughly 560,000 additional housing units by 2030 just to keep up with population and job growth; the city is nowhere near on pace to meet that goal. For tenants, this shortfall translates into sky-high costs and low vacancy rates. Every major candidate to be the next mayor of New York this cycle has run a campaign focused on promises to fix the runaway cost of housing, and whoever is ultimately elected will face the daunting task of transforming those campaign promises into workable, concrete policies.

New York City’s housing shortfall stands in stark contrast to the housing situation in Tokyo, a global metropolis that is comparable in many respects — a coastal national center of culture and industry with a robust public transportation network and a metropolitan area that is home to tens of millions — but has overwhelmingly avoided any housing affordability crisis, with modest rent increases over the past decade and an incredible variety of livable neighborhoods on offer. All this while Tokyo’s population, now at 14 million in the city proper and 37 million in the broader metro area, continues to grow — the result of Japan’s younger generations moving to cities — despite the nation’s population falling overall. Tokyo and New York are two of the world’s largest and most dynamic cities, but Tokyo offers its residents housing and livability at a fraction of New York’s cost.

What is Tokyo doing differently, and what can New York’s next mayor learn from its example? Thankfully, the short answer is simple enough: Japan has long embraced housing abundance through prodevelopment policies (both intentional and unintentional) and as a result continuously builds a large quantity of urban housing — 130,000 new units began construction in the most recent recorded year and averaged roughly 150,000 new units per year for the two decades from 1995 to 2015 (and that’s before counting the railway commuter suburbs that house the majority of the Tokyo metro area’s population, which would bring those numbers even higher). This strong development pipeline allows Tokyo to maintain a degree of “slack” in the market, where buyers and renters alike have options and prices remain relatively stable. And even though New York can’t simply copy-and-paste Tokyo’s policies, there are indeed ways to reach the same result in New York’s context. A better, more Tokyo-esque future for New York is possible.

Tokyo’s housing abundance is a credit to policies in three key categories — zoning laws, building regulations and land division patterns — that all interlock with one another. In each case, there is a path for the next mayor of New York to follow Tokyo’s lead, but New York City will need to recreate the preconditions for Tokyo’s abundance in a way that reflects its own unique history and context. Tokyo accomplishes this impressive amount of construction despite providing tenants with fairly strong rent stabilization protections, which have less of a distortional effect on the market in an environment where housing is abundant.

The most obvious lessons for New York from Tokyo relate to how land use and development are governed by zoning. Tokyo’s zoning system is fundamentally additive and housing-permissive. Land uses are divided into roughly a dozen tiers of land-use intensity, with the lowest tier mainly limited to residences, small shops and restaurants and schools, all the way up to heavy industrial zones. But unlike in the United States, land that is zoned for a given “tier” can also be used by right for any use covered by lower tiers as well. This means that, with the exception of heavy industrial zones, residential housing can be built on nearly any parcel in the city entirely by right, even in more heavily commercial areas.

In today’s New York, by contrast, opportunities for as-of-right residential construction are relatively scarce. At first glance, much of New York City is already residentially zoned, and 80% of the housing units constructed in the city since 2010 have been built as of right, which sounds positive. Upon deeper inspection, however, these numbers paint a darker picture due to the City zoning code’s layers of restrictions on how these residential zones can be used in practice. Tightened floor-area ratio requirements (zoning regulations that determine the maximum size of a building relative to the size of its plot of land) and other building restrictions mean that only 20% of the residentially zoned lots in New York are actually suitable to have additional by-right housing units built on them; they are functionally “full” under the zoning code. Mayor Adams’ signature City of Yes initiative has marginally improved that outlook, but is only expected to produce roughly 5,500 additional housing units per year, or a total of 82,000 units over 15 years. As for that promising-looking ratio of 80% of new housing being built by right? Looking at the anemic amount of overall new construction, the real origin becomes clear: The process for obtaining a site-specific discretionary rezoning (done through New York’s Uniform Land Use Review Procedure, or ULURP) is generally so onerous that developers usually abandon any plan that would require one. It is not enough for an area to be zoned for housing in theory; the devil is in the details, and the City’s zoning must actually allow ample housing to be built in practice.

In the past, there have been numerous proposals to reform New York’s byzantine process for granting discretionary rezonings, but since the process reflects the entrenched power of key city interest groups, major changes are unlikely even in the present crisis. The practice of “member deference,” for example, which grants City Council members incredible power to block discretionary rezonings in their district according to their personal whims, has been discussed repeatedly for years but is unlikely to end — those with power are loath to surrender it.

Given the steep political barriers to reforming the site-specific discretionary rezoning process, the best path forward for the next mayor will be instead to push early and hard for the council to adopt a dramatic shift of the residential zoning code, allowing significantly more housing to be built on residentially zoned lots, thus limiting the need for one-off discretionary rezonings in the first place. The new mayor will enter office with considerable political momentum, and in the past, the council has shown a degree of willingness to work with each new mayor on their signature initiatives. Allowing for more housing construction is politically popular; while nothing is certain in municipal politics, rezoning stands a decent shot at becoming law if the next mayor makes it an early priority.

It’s worth noting that, in certain contexts, Tokyo faces a similar situation to New York’s discretionary approval stagnation. Projects that require the buy-in of local stakeholders to proceed, such as the Roppongi Hills megadevelopment completed in the 2000s, have often taken decades to move forward as change-averse neighbors fight to maintain the status quo. The fundamental difference between the two cities is that Tokyo’s zoning (which in Japan is largely controlled at the national level) allows for such a high number of as-of-right projects that seeking a project-specific variance is a rare exception rather than the rule, so the onerousness of the process is not a major drag on housing construction.

Relaxed zoning isn’t the only lesson from Tokyo for boosting New York’s housing production; New York could also ease the burdensome restrictions it places on both the smallest- and largest-scale new housing construction. On the one hand, regulatory compliance in New York creates major disincentives to microunit developments. Across the United States, minimum unit sizes were widely adopted a century ago over largely unsubstantiated health and safety concerns. Whatever their merits at the time, in today’s New York City, they represent a costly anachronism that prevents building affordable units for young urbanites. Although the law notionally allows microunits as small as 150 square feet, compliance with various accessibility regulations in practice means that 270 square feet is the minimum possible, and the City’s structural bias against single-room occupancy (SRO) buildings (where sleeping quarters are private but common amenities such as kitchens are shared) generally prevents developers from reducing housing costs by moving shared resources out of personal quarters and into communal areas.

Making matters worse, large housing developments of over 100 units are also now disfavored by statute. In April 2024, the City enacted a new version of the Real Property Tax Law under Section 485-x, which replaced the previous tax exemption 421-a for new construction projects. 485-x features a number of well-meaning provisions, such as an affordable unit mandate and a “prevailing wage” requirement for labor, that both kick in for projects that involve building 100 units or more. The logic here was that bigger projects were making enough money to shoulder additional, socially valuable costs. While well-intended, these requirements are onerous even for developers benefiting from economies of scale. As a result, new developments seeking 485-x tax abatements now artificially restrict themselves to 99 units to avoid triggering these provisions, and the city loses out on housing as a result. This particular case of regulatory malpractice is new, but at the same time emblematic of a pattern of well-intentioned City regulations that, by misaligning developer incentives, ultimately backfire and fail to produce the housing New Yorkers need.

In Tokyo, by contrast, there is generally no minimum unit quantity or lot size for housing, nor are large by-right developments saddled with the same onerous requirements as found in New York. A range of historical factors from informal postwar rebuilding processes to strict inheritance tax laws, which have at times required up to a 50% tax on inherited estates, payable immediately upon the owner’s death (and thus required division of any inherited land, as part of it could then be sold off to pay the tax), have all contributed to the subdivision of what were once larger plots into smaller parcels, which in turn play host to smaller housing. The proliferation of smaller housing not only adds density and unit quantity to areas of Tokyo where buildings have comparable floor-area ratios to New York City by fitting more residents into the same space but also allows for a greater diversity of housing options and richer neighborhood fabrics.

U.S. urbanists increasingly recognize the benefits of smaller-scale, fine-grained urban design even within our megacities, based on a body of evidence now demonstrating that smaller, unconsolidated lots can promote vibrant neighborhood life while maintaining the same development profitability and number of units found in consolidated, formulaic podium-style developments. A walk through Tokyo’s backstreets into its wonderfully alive, dense low-rise neighborhoods, many of which feature small living quarters even by Tokyo standards, will ease any apprehensions that the scale of microunits inevitably leads to unlivable urban squalor. And in Tokyo, large-scale housing developments by right are not hampered by the excessive step functions — like the 485-x obligations imposed on 100+ unit projects — that sometimes disincentivize scale in New York City. Instead, most projects are governed by consistent formulas linking building size to road width. Unlike the step functions in the New York code, they scale smoothly and easily allow for large-scale developments around commuter transit hubs, particularly in the suburban districts that house the majority of metropolitan Tokyo’s actual population.

If New York’s next mayor wants to take bold action to restore the city’s housing affordability, Tokyo offers meaningful lessons, all of which are variations on a single theme: Make housing easy to build by right in as much of the city as possible. If the next mayor can push a zoning code update through the City Council that dramatically expands as-of-right residential construction, removes onerous provisions against microunits and SROs, and rethinks poorly designed regulatory step functions, New York City can indeed achieve results akin to Tokyo-style housing abundance. The alternative — continued stagnation and tinkering around the edges of the ULURP process as the city becomes ever more unaffordable to working New Yorkers — is no alternative at all. Subsequent mayors, no matter their politics, will be faced with the same housing crisis until bold action is taken to fix it.