An Economic Agenda for New York City’s Next Mayor

New York City, one of the world’s great economic engines, has slowed down since the Covid-19 pandemic, allowing competitor cities to gain at its expense. Declining quality of life, exorbitant housing costs, nation-leading taxes, and lackluster public schools have created an environment that drives strivers and businesses away, stifling economic growth. Gotham’s next mayor must improve the city’s value proposition to retain residents and grow the local economy.

And it isn’t just the city’s future that’s at stake. New York State depends on Gotham to drive growth and tax revenue, collecting about 70 percent of its income taxes from city and downstate suburban residents. New York City alone accounts for about 40 percent. That means the city is ultimately on the hook for the state’s fiscal foibles.

Those problems keep growing. Between fiscal years 2022 and 2026, the critically important state-operating-funds portion of the budget (spending from state-funded sources) increased from $111 billion to $146 billion, much of it on Medicaid and public education. Governor Kathy Hochul has repeatedly promised not to raise income taxes, but she has twice hiked a hidden tax on most downstate payrolls to fund the MTA. New York’s already-high tax rates and fierce competition from the Sun Belt constrain its ability to raise taxes further.

Since January 2020, the city has grown the private workforce by 3 percent, according to a new Citizens Budget Commission dashboard. But most of that growth has been concentrated in lower-wage jobs that, while important and valuable, add relatively little to the income-tax base. Health care and social assistance—composed largely of Medicaid-funded home health aides—constitutes the fastest-growing sector of the local labor market. It grew by about 225,000 jobs, or 27 percent, in five years. In 2023, the sector employed two and a half times more workers than the finance and insurance sector but paid only 43 percent as much in total wages.

High earners, who contribute disproportionately to city and state tax revenues, are instrumental in paying for public services for the worse off. The Empire State’s failure to attract them and to grow their numbers organically should worry elected officials who have ballooned the state and city budgets. As E. J. McMahon has shown, in 2021, New York added the lowest percentage of the nation’s income millionaires of any state. The share of New York filers who are millionaires—the vast majority of whom live or work in the city—fell from 12.7 percent in 2010 to 8.7 percent in 2021, even as national income grew during that period.

Deteriorating quality of life and sky-high housing costs are also driving down local birthrates and pushing New Yorkers of all backgrounds and income levels to leave the city. Annual births have fallen from 68,000 in 2011 to 35,000 in 2024. Rising housing and childcare costs are driving out families with children, including solidly middle-class and even upper-middle-class households. Families with children under five who left the city in 2023 had a median income of $140,000.

The city’s population did tick up in 2023 and 2024, but this was mostly from the influx of hundreds of thousands of international migrants, drawn by the Biden administration’s lax border policies. These newcomers cannot work on the books unless they have a special designation like Temporary Protected Status.

The migrant crisis, paired with Gotham’s uniquely generous right to immediate shelter on demand, diverted resources from other priorities. Between 2022 and today, New York City spent over $7 billion—the vast majority from city funds—on shelter and other migrant services.

Thanks to a stricter border policy begun at the end of the Biden administration and made far more restrictive under President Donald Trump, the migrant population has declined, from a peak of nearly 70,000 in shelters to about 43,000 today. In February, Mayor Eric Adams announced that the city would close its central migrant intake center at the Roosevelt Hotel by this June.

The next mayor should further preserve local resources by terminating migrant hotel-to-shelter contracts made on an emergency basis, prioritizing cancellations for those with higher cost structures and lower occupancy. That would leave intact the $991 million contract in place with the city’s largest hotel trade association, recently awarded on a competitive basis to replace an earlier no-bid deal. To utilize shelter capacity more efficiently, the migrant and homeless shelter systems, operated separately during most of the crisis, should be merged before the current June 2026 target.

The next mayor should make the city attractive to residents and employers by making the government work better. He should instruct the city bureaucracy to boost public productivity by using AI and other automation technologies and by trimming the workforce. That would free up additional slack in the budget.

The funds saved by these efforts can then be reallocated to improve quality of life. The NYPD needs to hire more detectives to halt a precipitous decline in the gumshoes’ ranks. To curb disorder, public spaces should be cleaned of graffiti and rejuvenated, particularly those highly visible and popular with tourists. It can start with the Hell Gate Bridge, which has yet to be cleaned after graffitists rappelled down to tag its stone towers last September. Police can accompany the Sanitation Department’s anti-graffiti units and move those living on the streets to shelters or medical facilities for treatment. Restoring public order will revitalize the city’s sagging tourism industry and restore confidence in city government’s effectiveness. 

City Hall should also deposit more in the Rainy Day Fund, the state-authorized savings account meant to cushion tax-receipt declines during economic downturns. In 2022, the city comptroller’s office recommended that New York maintain reserves equal to 16 percent of tax revenues, or $12.7 billion. Today, the city holds about $8.5 billion in reserves, but only $2 billion sits in the official Rainy Day Fund. The next mayor should adopt a rule requiring City Hall to contribute sufficiently during periods of revenue growth to ensure the city can weather a downturn without cutting services.

New York City will not become a more attractive place for families and businesses unless it builds far more housing units of various sizes and configurations. Besides reducing rents through increased supply, Gotham should encourage the creation of a broader range of living arrangements to meet families’ needs, including new market-rate units. Reducing living costs would also allow employers to control the growth in payroll expenses, as companies must pay employees more in high cost-of-living areas. The city could thus compete better against Southern competitors. And more new housing would allow younger New Yorkers to aspire to something beyond spending seven figures on a century-old townhouse in need of major renovation: long-term upward mobility.

With sensible policies, New York’s next mayor could make the city a place where young strivers, families, and businesses want to stay—not flee.

Photo by Gary Hershorn/Getty Images