Mamdani’s Rent Freeze is More Likely Than Ever. Now What?

11 minutes read

It’s no secret that landlords have not been happy about Zohran Mamdani’s promise to freeze rent in nearly half of New York City apartments.

But with the election just weeks away and a Mamdani mayoralty looking more likely than ever, some rent-stabilized players have shifted their focus. If a rent freeze is a near certainty, they ask, what else can be done to mitigate growing distress in rent-stabilized portfolios? Policies that tamp down on landlords’ expenses have the potential to ease distress and also win support from a tenant-focused administration.

“With Mamdani, it’s not in his political interests for buildings to fall apart,” said Ben Carlos Thypin, CEO of the real estate brokerage Quantierra. “The dynamics are such that the likelihood of change seems higher than it was before.”

Rafael Cestero, CEO at Community Preservation Corp, said he has been watching distress grow in even the most conservative portfolios. The nonprofit lender has seen foreclosures in rent-stabilized buildings with little debt and fixed-rate mortgages increase eightfold in the past two years.

Much of that is due to eye-popping expense increases, such as a 52 percent increase in insurance costs over five years.

Policies to address that side of the equation could help, according to Cestero. A public property insurance option, such as what the federal government offers homeowners in flood-prone areas, could bring down prices. An as-of-right tax abatement for rent-stabilized buildings could also help property owners who pay city taxes.

Policies like that could make a significant impact on curbing distress in rent-stabilized buildings, an issue some policy experts fear could slowly make buildings uninhabitable due to deferred maintenance.

“Politics and campaigns are done in poetry. And then governance is done in prose,” Cestero said. “The assemblymember, should he be the mayor, has shown over the last few weeks that he understands that governance is different from campaigning.”

Mamdani has begun talking about some of those policy adjustments. He told the audience at Crain’s mayoral forum this month that he “absolutely” supports comprehensive property tax reform. And a rent freeze does not preclude policies to lower insurance or energy costs, he said.

“The impetus here is to provide relief to a disproportionately working- and middle-class set of New Yorkers,” said Mamdani. “It is not, however, to punish the landlords of those units.”

Advocates for rent-stabilized landlords have taken note of Mamdani’s change in tone.

“Certainly conversations seem to have shifted,” said Kenny Burgos, CEO of the New York Apartment Association. “Time will tell what the results of this will be, but I’m hopeful.”

To be sure, those policies are likely expensive. Property tax reform would be a major political lift, and one that former mayors have failed to execute on. And policies often need to be carefully designed. Some of the city’s other attempts to help out rent-stabilized property owners have made no impact. For example, a program to reimburse landlords for renovations of vacant units has gone completely unused, Gothamist reported.

Even with these expense-side tweaks, costs could still overtake revenue, Cestero said. A politically viable solution on the revenue side, he said, may be to peg allowable rent increases to inflation and other indexes, as California does.

But a focus on compromise could win Mamdani some tacit support in the real estate industry.

“There’s absolutely a solution there that makes everybody happy,” said Peter Hungerford, an investor in rent-stabilized properties. “If Mamdani can deliver on that, he’s going to earn my vote for re-election.”

Hungerford and his business partners are making a bet that they can buy rent-stabilized buildings at fire sale prices and hold onto them until a change in circumstances raises their value. Other rent-stabilized investors, typically low-profile New York landlords, are making that same wager.

For those investors, a rent freeze may not make a real difference to their bottom line, but they still welcome help on the expense side.

“If things get worse in the meantime, because there is no compromise, that scenario doesn’t scare us as investors,” Hungerford said. “But it absolutely scares me as a New Yorker.”