Economists Criticize Zohran Mamdani’s Signature Housing Policy: Here’s Why

New York City’s Mayor-elect, Zohran Mamdani, has proposed a bold housing policy that aims to freeze rents on nearly two million rent-stabilized apartments. However, this approach has been met with widespread criticism from economists who argue that such measures may not effectively address the city’s ongoing housing crisis.

Economists Oppose Mamdani’s Housing Initiative

Economists have long held a skeptical view of rent control. A survey conducted in 2012 revealed that only 2% of economists believed rent-control laws positively impact the availability and quality of affordable housing. Notably, Nobel laureate Richard Thaler famously highlighted the flawed reasoning behind these policies.

The Flaws in Rent-Freezing Policies

While freezing rents may seem sensible to the public, economists argue it fails to tackle the root cause: the persistent shortage of housing. David Sims, an economist from Brigham Young University, explained that rent control merely redistributes housing, often leading to misallocation. He cited research on the rent-control laws in Cambridge, Massachusetts, where such regulations prevented effective tenant mobility.

• Tenants often remain in apartments that are larger than needed.
• Young families struggle to find adequate spaces.

When Cambridge voters ended rent control in 1994, property values surged by 45%, illustrating how deregulation encouraged investment and neighborhood revitalization.

Current Situation in New York

New York’s Housing and Vacancy Survey indicates approximately 26,000 rent-stabilized apartments are currently vacant. Landlords face significant challenges, with renovation costs often exceeding the state’s capped recoverable expenses, thus discouraging necessary repairs.

Short-Term Benefits vs. Long-Term Consequences

Supporters of rent control argue that it provides crucial stability for tenants, particularly those living paycheck-to-paycheck. However, economists warn that such policies can hinder overall market performance. They point out that deferred maintenance and slowed construction lead to a decline in the quality and quantity of available housing.

• A Stanford study from 2018 found a 15% reduction in rental housing supply in San Francisco following an expansion of rent control.
• Landlords often convert apartments to condominiums to bypass regulations, driving up citywide rents.

As Sims pointed out, rent freezes create false expectations that affordability can be legislated without addressing real economic factors. The pressing need for housing in New York calls for policies that prioritize construction and expansion of housing stock.

Looking Forward: Need for Comprehensive Solutions

Advocates of Mamdani’s approach believe that the severity of New York’s housing crisis necessitates immediate action. They argue that with median rents surpassing $4,000, there is little time to waste. However, economists stress that any temporary rent freeze must be accompanied by effective plans to increase housing supply. Without this, they argue, the solution merely postpones a more significant, inevitable reckoning.