It did not take long for New York City Mayor Zohran Mamdani to be proven wrong about housing. It was inevitable. Populism does not mix well with Marxist economics, no matter how broad a mayor’s smile might be.
Before getting into the details, a definition of private property is in order. This one is borrowed from John R. Puri in a recent National Review article: “the legal ability to control, profit from, and dispose of one’s property.”
By that definition, most landowners can function, doing as they wish with their property. That includes renting it to others at the market price for as long as they wish.
Rent Controlled/Stabilized
The modern era of New York City rent control began during World War II. The idea behind it was simple. Thousands were moving into the NYC area to work in defense-related industries. Rents rose rapidly. The emergency required prompt federal action that ceased soon after the war ended. However, NYC residents liked rent control and lobbied the local and state governments to pick up the baton.
An analysis by NYC-based real estate investment firm Matthews summarizes the next eighty years. “In the fifties, nearly every rental unit in the city was subject to rent regulation. Today, that percentage is closer to 45% or about one million units. In the past 40 years, hundreds of thousands of stabilized units have been reintroduced to the market. Since the fifties, NY has fallen victim to the imbalance between supply and demand, remedying it through rent regulation.” That ‘remedy’ has been woefully unsuccessful. The imbalance has grown.
National Review carried a partial list of obstacles owners of “rent-stabilized” apartments face. Landlords may charge only the rent the city allows. Moreover, the leases effectively never end as landlords must renew them for as long as the tenant wishes. The tenant can also pass the lease on to anyone who has lived in the unit for the past two years. Evicting a tenant for nonpayment takes months. If an apartment is vacated, the landlord must bring it up to the current code; renting it without repairs can trigger a city takeover of the building. If that costs more than the city allows the landlord to charge, the only choice is to leave it vacant. Currently, the city contains 57,000 such apartments.
Unstabilized Prices
While the city keeps some apartment rents absurdly low, prices on the unregulated market soar.
A recent New York Post article backs up that analysis. The average rent for an available “unit” is $6,655 per month—ten percent over last year. “Studios [single room apartments] now average $4,088 (up 8%), one-bedrooms are at $5,486 (up 7%), two-bedrooms have soared to $8,054 (up 13%) and three-bedrooms are averaging a staggering $12,228 (up 12%).”
Given the established rule of thumb that housing should consume no more than one-quarter of a family’s income, a family requiring three bedrooms would need an income of over half a million dollars to live in New York City. Remember, too, that these are not Manhattan numbers—those are considerably higher—that average figure includes Queens, Bronx, Brooklyn and Staten Island, where many neighborhoods are far from glamorous.
An Insoluble Problem
One simple economic fact dominates the whole mess. The city has more people than it has space to house.
The overall result is simple. New York City is no place for either the middle or the working classes. An erosion of the middle has been going on for decades. Those with ample means can enjoy the lifestyle and cultural assets of Midtown Manhattan. Those who are sufficiently poor can tap into the city’s massive welfare system. For those in the middle, the city is economically uninhabitable.
Enter Mayor Mamdani. His inaugural address on New Year’s Day included a quotation from his admitted mentor, Senator Bernie Sanders. “As the great Senator from Vermont once said: ‘What’s radical is a system which gives so much to so few and denies so many people the basic necessities of life.’” Then the neophyte mayor promised, “We will strive each day to ensure that no New Yorker is priced out of any one of those basic necessities.”
Since housing is one of those basic necessities, that high-flown verbiage implies a promise to make it affordable. Given the issues he faces, it is the sort of promise only an upper-class socialist with a degree in Africana Studies and no real-world experience could make.
Obstacles to Total Control
To achieve the mayor’s goal, the city will need to take near-total control of its rental market. However, that is politically and legally impossible. Certainly, the city has used regulations to seize a few buildings without paying for them. However, such a practice on a widespread scale would certainly violate the “takings clause” of the Fifth Amendment of the U.S. Constitution—“nor shall private property be taken for public use, without just compensation.” Should the city seriously attempt to use its power to consume large numbers of buildings, it is hard to imagine the Supreme Court—at least as currently constituted—not stepping in to short-circuit such a process.
Even if the legal hurdle could be cleared, one that is, perhaps, even more impenetrable remains. Who will run them? The city of New York already operates 177,565 apartment units, or 6.3 percent of the whole, according to the New York City Housing Authority (NYCHA). However, according to CBS News, complaints about the Authority’s failure to supervise and maintain them “have nearly doubled” in the last few years. If NYCHA can barely handle six percent of the units, how could it possibly deal with total control? At the very least, it would have to massively increase its staff, and, in any bureaucracy, a large staff and greater efficiency do not go together.
New York’s experience with rent control (or stabilization) should provide an important lesson. Socialism, once embraced, is very difficult to dismantle. It is this fact that makes it so dangerous. It is a monster that requires constant feeding and continual sacrifice to make it function, and even then, it never functions well.