Ryan Avent argues that there's enormous unmet demand for New York real estate that ought to be exploited--but can't be, because of opposition from locals:
I always find it remarkable that people who live in a city that is perhaps the country's best example of the value of density are so skeptical of the value of density. Yes, increasing the number of people who live in an area will generate some downsides. It will also generate benefits, to local residents and society as a whole. At some point the marginal downsides entirely offset the marginal benefits and it no longer makes sense to build in a given place, but there is no indication that New York is anywhere close to this level. Prices in the city are substantially above construction costs, which suggests an enormous amount of unmet demand. If builders move to meet that demand and the result is a surprisingly large increase in local disamenities, then the demand for new housing in the area will ebb and builders will quickly stop building. We're not talking about a situation in which efforts are made to double Manhattan densities and then everyone suddenly realizes that an enormous mistake has been made. And of course, New York City's population has been growing steadily, and we have every indication that this growth has made the city more desirable, not less.Sort of. New York hasn't actually been growing steadily; it's been rebounding to the population of roughly 8 million that it enjoyed in 1950-70 before the population plunged in the 1970s. It's really only in the last ten years that the population has grown much beyond where it was in the 1970.
This matters because I think you can argue pretty plausibly that New York's infrastructure has put some limits on the city's growth--that by 1970 the city had about grown up to those limits, and that we can push beyond them only slowly. The rail and bus lines that sustain the business district are pretty much saturated, and the roads and bridges can't really carry many more cars at peak times. Adding busses could conceivably help you handle some of the overflow, but unless those busses actually replace cars, they'll also make traffic slower.
Unless you plan to fill the city entirely with retirees who don't need to go to work, there's actually not that much more room to build up New York--you could put the people there, but they wouldn't be able to move. And even the retirees would require goods and services that choke already very congested entry and exit points. There has been peripatetic talk about switching all deliveries to night, but that would disturb the sleep of low-floor apartment dwellers, and be fantastically expensive, forcing every business to add a night shift.
At the very least, the current city dwellers are right that adding more people would add a lot more costs to them--crammed train cars, more expensive goods. In New York, much more than in other places, the competition for scarce resources like commuting space is extremely stark.
That doesn't mean it is impossible to add a lot more people to New York. But doing so requires not just changing zoning rules--as far as I know, there's already quite a lot of real estate in the outer boroughs that could accommodate more people, but it's not close to transportation, so it's not economically viable. If you want to add a lot more housing units, you also need to add considerable complimentary infrastructure, starting with upgrading the rest of the subway's Depression-era switching systems (complicated and VERY expensive because unlike other systems, New York's trains run 24/7). And ultimately, it's going to mean adding more subway lines, because short of building double-decker streets, there's no other way for enough people to move.
Those lines don't have to go to the central business district; there's already been some success developing alternate hubs in Queens and Brooklyn. But they do have to go from residential neighborhoods to somewhere that people work, and they have to add actual extra carrying capacity to the system--line extensions do no good if the trains are already packed to bursting over the high-traffic areas of the route.