William Lustig and Joe Spinell say they didn't always have the necessary permits to film on location in New York City. Certain scenes (including the infamous shotgun through the windshield scene) had to have been filmed quickly and afterwards the crew had to run away before the cops arrived.
The dummy used for the exploding head scene had been used extensively by Tom Savini for effects in Dawn of the Dead (1978). After its use in this film, it was so saturated in fake blood and gore that it was decided to retire the dummy (which Tom had named "Boris"). According to Savini, the dummy was locked in the trunk of the car used in the shotgun scene and sunk in the East River.
In order to keep costs down, several porn actresses, such as Abigail Clayton, were hired to play the victims and other minor female roles.
The headless corpse in the end is the Betsy Palmer corpse (Jason's mother) from Friday the 13th (1980). The helicopter shots are recycled footage from Inferno (1980).
The original budget of the movie was $48,000 in cash, $6,000 of which came from Joe Spinell's $10,000 salary from the movie Cruising (1980), which he had recently completed. $12,000 came from Andrew W. Garroni and the rest ($30,000) came from William Lustig, from their profits in the adult film business. The three of them put all that money into a stock market account and the amount grew to $135,000 as production continued. It was British producer Judd Hamilton who came up with the rest of the money (around $200,000) to complete the movie, as part of a condition that his then-wife, Caroline Munro, would be cast as the heroine.