The pandemic steered generations old and young away from central business districts. With the promise of remote work and fewer options to access dining, entertainment, and other commercial spaces, 2 million Americans fled large urban counties between 2021 and 2022, according to a study by the Economic Innovation Group.

But some millennials and even more Gen Zers bucked that trend and have made their way back to America’s biggest cities—and it’s led to the lowest vacancy rates in New York City since 1968, according to data released by the city on Thursday. The portion of rental properties that were vacant and available plummeted to 1.4% in 2023—making it the worst housing crunch in Gotham in the past 50 years.

Between 2021 and 2022, more than 42% of people moving to New York City were Gen Zers, and 39% were millennials, according to Census Bureau data. What’s more is that major metropolitan areas overall, including NYC, are seeing population losses among all generations—with Gen Z as the big exception, a Today’s Homeowner report shows. 

“Younger generations certainly constitute a significant portion of those returning to the city for its social, cultural, and convenience appeal,” Jason Bordainick, cofounder and managing partner at NYC-based Hudson Valley Property Group, tells Fortune. “Whether working in-office or remotely, the appeal of urban living, especially in Manhattan, remains strong.”

To put things in perspective, housing experts consider a “healthy” or normal vacancy rate to be in the 5% to 10% range. Higher vacancy rates tend to benefit tenants more than landlords. When vacancy rates are higher, it’s easier for people to find apartments—but that means landlords have to woo tenants with lower rents or other incentives. 

The release of the latest vacancy figures has alarmed NYC leaders, many of which are calling for more housing—particularly affordable housing.

“The data is clear: The demand to live in our city is far outpacing our ability to build housing,” New York City Mayor Eric Adams said in a statement. “New Yorkers need our help, and they need it now.”

Lower vacancy rates mean even pricier rental costs

With a vacancy rate as low as New York City’s, it’s no surprise that rental costs are also sky-high. The average rent for a 700-square-foot apartment in New York City is more than $4,700, according to RentCafe, and only 1% of apartments are less than $2,000 per month. By comparison, the average rent for the entire U.S. is just $1,700. A lack of housing supply is only exacerbating rental costs, experts agree.

“The biggest underlying factors that NYC has always struggled with in terms of housing production is the high cost of land and our extremely long development cycle,” Danielle Ash, an NYC-based real estate lawyer with Adler & Stachenfeld, tells Fortune. “We have a complex regulatory landscape that makes it hard for developers to build quickly and efficiently, so the only way to spur development is a loosening of such restrictions, faster pace of approvals, and/or providing incentives to make the financials of each project work.”

Low vacancy rates, high rental prices, and few options for affordable housing have only exacerbated the city’s homelessness problem. There has been a “massive influx of migrants in desperate need of housing that require the city’s resources,” Ash says. In all, the city needs hundreds of thousands of additional housing units to catch up on its housing shortage. In September 2023, Adams unveiled an overhaul of NYC’s housing system that could make way for up to 100,000 new homes in the next 15 years.

But aside from city-based programs, it’s not as appealing for developers to build completely new housing in NYC because of its high costs and steep regulations.

“As for creating more housing, developers need financial incentives due to the exorbitant costs associated with building in NYC,” YuhTyng Patka, another NYC-based real estate attorney with Adler & Stachenfeld, tells Fortune. “NYC is a highly regulated market, and that comes at a high expense to owners and developers.”

Beyond building more housing, rent control is also critical for people looking for affordable options. While many units in NYC are rent-regulated based on income, it’s not enough to make city living accessible to everyone. 

“The current situation highlights the pressing need for a reassessment of recent rent controls and regulations,” Bordainick says. “Some of these measures have inadvertently discouraged investment in housing, exacerbating the shortage. It’s imperative to reevaluate policies to ensure we are fully leveraging the private market to provide more capital investment into housing.”

Even with rent as high as it is in NYC and increased competition for even finding a unit, the city remains a place of promise—even though it’s, in many ways, wildly different from living in other metropolitan areas across the country.

“NYC has been and will always be a destination city for dreamers,” Patka says. “NYC will continue having a robust demand for housing for the foreseeable future, [but] the lack of affordable housing [could] turn away the very talent that NYC attracts, which makes it such a special city.”