New York Mayor Zohran Mamdani unveiled his solution to Gotham’s housing crisis, invoking the free-market housing renaissance in Austin, Texas. Weeks later, his Rent Guidelines Board installed historic price controls.
The Rent Guidelines Board, six of whose nine members were appointed by Mamdani, voted 7-1 Thursday to pause rent increases for up to two years. A two-year rent freeze is the first in city history. The freeze will affect more than 40% of all apartments starting Oct. 1.
Christina Smyth, a board member representing owners, resigned just hours before. She says the board ceased “being a fact-finding body” and “everything” since Mamdani’s tenure “has been theater.” Smyth believes the freeze will encounter legal scrutiny.
“It ignores the quantifiable economics of what it takes to provide quality housing,” commercial real estate executive Ronald Cohen said. “A rent freeze is a very myopic option that just adds insult to injury. Everyone loses.”
A Stanford University study found that price controls reduced rental stock by 15% in San Francisco. Since New York’s 2019 Housing Stability and Tenant Protections Act, owners have abandoned tens of thousands of rent-stabilized apartments because it’s cheaper than bringing them to code. By contrast, Texas banned rent control. So much for Mamdani’s hurrah to supply-side economics.
Eric Kober, a senior fellow at the Manhattan Institute, said developers may pass on the building incentives in Mamdani’s Block by Block plan.
His housing plan continues mandatory inclusionary housing. Developers must offer below-market units, typically 25% of a zoned development, in exchange for long-term tax exemptions. City of Yes zoning amendments under former Mayor Eric Adams provide additional floor space for the same Section 485-x tax exemptions.
“All below-market units under 485-x are rent-stabilized,” Kober told the Washington Examiner. “The consequences of the rent freeze is that developers, in their pro formas, must now assume that these rents will not rise, even in nominal terms.”
To alleviate costs, builders will raise rents on market-rate units in their development. They may also abandon their projects.
On Monday, Google co-founder Sergey Brin sold his stake of almost 6,000 multifamily units for six cents on the dollar.
As discussed earlier, tenants who live in rent-stabilized buildings built before 1974 will be the first to suffer deteriorating homes, long after Mamdani leaves Gracie Mansion.
How about the market-rate neighbors of rent-stabilized tenants in mixed-income buildings? They’ll bear the brunt of maintenance costs, embracing “the warmth of collectivism.”
The city suffers from a 1.4% vacancy rate, compared to the nation’s 7.3%. The state classifies a 5% vacancy rate as an emergency. Now, even fewer households will move out of rent-stabilized housing for the next two years, putting upward pressure on the shrinking supply of both rent-stabilized and market-rate units. Gen Z newcomers are already opting for Austin, Baltimore, and Raleigh, North Carolina, and for lower costs.
Mamdani told the New York Times he changed his mind on the private market’s role in housing construction on the campaign trail. Of course, Mamdani meant he’d like the private sector to develop more rent-stabilized units. His platform devoted four sentences to the free market.
MAMDANI’S SOCIALIST HOUSING EXPERIMENT BEGINS
Still, owners bought dilapidating rent-stabilized buildings, waiting for the capital of capitalism to change its course. But many, including Brin, have come to their senses after Mamdani walked back on his “changing opinion.”
New York wanted Austin’s supply boom. Instead, it will feel the effects of Mamdani’s rent-freeze politics for years to come.