The announcement by the Metropolitan Transportation Authority that it will open the West Side stadium site coveted by the Jets and Mayor Bloomberg to a competitive bidding process is a welcome development, one for which these columns have been plumping from the outset. It was clear that the MTA had a fiduciary responsibility to seek other offers for the site before letting it go to any buyer, and we’re delighted it has acknowledged the point. “Anybody that’s interested in it can put in a bid,” a spokesman for the authority, Thomas Kelly, said yesterday.

But the decision to use an open bidding process also illuminates the fact that New York is at a pivotal moment in its development debate, one that goes far beyond the battle over the West Side stadium. This is a moment that also includes the fight before the City Council’s land-use committee, which has been moving to prevent the construction of a new big-box store, BJ’s Wholesale Club, in the Bronx. It strikes us that there’s an opportunity for someone to emerge with a positive, free-market, problem-solving, unifying theme for the city.

Start with the fact that we are witnessing a remarkable boom in residential real estate, which is spreading to the outer boroughs. “In the past few years, residential construction in the outer boroughs has increased dramatically,” the president of the New York Building Congress, Richard Anderson, told us. In 2004, about 25,000 new residential units were built in all five boroughs, according to Mr. Anderson, and most of them – about 20,000 – were built outside Manhattan. By comparison, 1994 saw fewer than 4,000 units built.

The latest indication of this housing explosion is the announcement by the Muss Development Company that it plans to build a $600 million mixed-use development in Flushing, Queens, which will include six condominium and rental buildings with 1,000 residential units. The credit for real estate growth in the city goes to a combination of consumer demand, low interest rates, and the rezoning of areas of New York from manufacturing to residential. The Bloomberg administration deserves a bow, too, for encouraging housing construction. So far, the private market has responded well to these incentives.

But New York remains hampered by a burdensome regulatory environment and complex approval processes for new construction. A forthcoming article in the Journal of Law and Economics, “Why Is Manhattan So Expensive? Regulation and the Rise in House Prices,” argues that land-use restrictions continue to constrain the supply of housing in Manhattan – and, by implication, in the rest of the city as well. “We argue that the limited supply response primarily is the consequence of an increasingly restrictive regulatory environment,” write the authors of the study, economists Edward Glaeser, Joseph Gyourko, and Raven Saks.

The upshot, they say, is that increased demand results in higher prices rather than additional construction. “One half or more of the value of a condominium can be thought of as arising from some type of regulatory constraint preventing the construction of new housing,” the authors argue. Yet growing demand for housing doesn’t need to result in skyrocketing prices. Tens of thousands of new units were built in Manhattan during the 1950s, and prices remained flat. At that time, however, landowners were generally free to develop their properties free of regulations aimed at preventing new construction.

It seems that the ingredients are now in place for New York City to solve its structural financial problems by embracing a free-market boom in real estate – as the city did at mid-century. What’s more, the growth in real estate promises to extend the prosperity that a small sliver of Manhattan has enjoyed for the past 25 years to the whole city. New real estate means more jobs and an expanded tax base for the city. Also, denser residential areas often mean safer ones as well.

But to embrace such growth, New York needs to encourage market solutions – and decisions such as nixing new wholesale stores only hinder the organic growth of the city. Clearly, there is a demand for new stores such as BJ’s Wholesale Club, and the jobs and low prices they bring to the city. The big-box stores that the Giuliani administration cleared the way for in New York – Home Depot in Red Hook and Chelsea, Kmart at Astor Place and 34th Street – have proved to be popular.

It’s obviously better for the city to have New Yorkers shopping for such discounts within city limits rather than out in Westchester or New Jersey, not to mention the jobs that would be created, but this logic seems to elude the City Council. We would have thought the mayor would be out front in this fight, but he seemed to be spending his political capital on a plan for the West Side rail yards cooked up in City Hall and subsidized with taxpayer dollars. Hopefully, the MTA’s competitive bidding process will help lead the city toward a free-market approach to development and growth.

The anti-market forces in New York have gone to such absurd lengths that the courts are now ordering the city and state to spend billions of dollars more on schools with money neither the city nor the state has. How much better would it be for the city leadership to allow New York’s entrepreneurial energy to express itself? New York can continue to hinder growth and see more and more New Yorkers excluded by rising prices. Or the city can embrace its potential, expand the tax base, and overcome its structural deficits. This is a kind of pivotal moment for New York. But where is the leader to articulate the pro-growth message of “One New York”?