Great article as always. It takes bravery to vote as the lone dissent against a popular politician. You make me proud as both an economist and a New Yorker.
“The rent-freeze vote may provide immediate relief to some tenants. It does nothing to address the housing shortage that made rents so high in the first place.”
Very good piece.
But the last sentence is false.
The rent freeze does NOT do “nothing to address the housing shortage that made rents so high in the first place.”
The author makes a lot of good points, but ignores some fixes to get more housing on the market without making current units unaffordable to most of the people living in them now - and where would they go if they had to move out?
1. A Land Value Tax would make vacant or underused land pay the same tax on land as highly functional buildings just next door. It would force that land into production or so burden the idle holder of that land to sell to someone who could develop it. Tried and proven in NYC in the 1920s and early 30s by then Gov. Al Smith by untaxing building values above $5,000 (a much bigger sum back then).
Unfortunately, just untaxing properties won't distinguish between land taxes and improvement taxes, and it's taxes on the former but not the latter which will drive un/under-used land into production. The Manhattan Institute knows this, having had their origins in the Georgist movement it now disavows.
2. Zoning changes to allow more building on vacant lots or extending existing buildings by several stories in exchange for making them more affordable. Actually, this is already being done from City of Yes reforms in the last administration.
Land Value Taxes won't be passed down, because housing costs are inelastic; people can't pay more than they are already. Instead, land prices will go down as the taxes go up. This will upset some existing landowners, but new buyers will come in at cheaper prices to make up the difference and build more housing on cheaper land. Tried and proven 100s of times. I wish I could post my land tax reforms group's 233-example meta-study here.
Each of the Australian states has had a land tax for many decades. In essence it applies to the umimproved value of land that is not exempt. Exempt land includes a person's family home. The land tax is thus payable on rented apartments, by the land lord. The landlord passes te tax onto the tenant through taking it into account when setting the rent.
such a dearth of dialectical thinking in this piece, how do you expect to enact 'yimby' / 'abundance' without popular backlash if you do not make efforts to slow displacement through targeted freezes ? can you think of a more targeted measure ? its a blunt tool sure but i can think of people in my own life from low SES parts of NYC that directly benefit. my bourgeoise college educated friends are moving to the outer boroughs regardless may as well blunt the displacement.
All of the following are already happening with zero targeting scrutiny: inflation, exclusionary zoning, mortgage interest deduction, 1031 exchanges, regressive property tax assessment, and NIMBY permitting.... And upstream of all of it is the most un-targeted intervention of all; the complete absence of any industrial or regional policy, which by default concentrates capital, jobs and opportunity in a handful of cities.
Hahaha happy for my family out there that Texas has grown but DFW sprawl and the San Antonio-Austin corridor are grim advertisements for market urbanism, and even 'market' is generous when it runs on subsidized highways, tax abatements etc. Miami IMO is honestly even worse: financial relocation theater, crypto money, Latin American capital flight parking in condos on a sinking limestone shelf below sea level. Very little productive capital formation, largely wealth relocating. Texan population growth without new industry is the same story, mostly retirees and displaced workers following lower costs. Also Austin's tech scene = exception that proves rule given dependence on university infrastructure and federal defense spending etc etc. Im all for removing 'regulation' (buzzwords !!) but there is literally nowhere in recorded human history that its done anything for housing without active government 'interference' its pure cope
I wonder if people realise that the true aim Mandami and his mates is to take as much rent-stablised property into public ownership as possible.
I should have thought that the landlords should get together and challenge this law as a taking of property, for which the government has to pay compensation. AFter al, the government's actions here have reduced the value of the rental properties. That is government confiscation
The attention is all on what helps leftists get elected.
It is the opposite of relief for lower-income folks who aren’t lucky enough to have rent-controlled apartments and so cannot afford to live in the city because of the lack of supply that is in large part because of rent control and other restrictive government regulations.
Idk prof. You are smart, informed, but you sorta narrow “what works” to a bunch of things not everyone cares about, you act like that’s objectively more valuable instead of a preference on what matters. Democracy worked. Sry if that’s unclear. You seem to think it’s an objective fact that the costs outweigh the human suffering they prevent. This freeze is specific and temporary and not everyone who voted for it is stupid. We care about different things.
The clearest way I can ask this is; why? Why should government freeze your already stabilized rent? Why not freeze all rents? Or maybe only market rate rent?
If you want RS buildings to go bankrupt and be taken over by NYC government or federal government, I encourage you to take a nice long exploratory trip to NYCHA Housing, better known as the projects.
"This mismatch is a product of a two-tier housing system that privileges insiders but forces outsiders to pay exorbitant rents." -- care to expand on this? Curious how the insider market works and what portion of the market it represents.
I know politicians favoring rent control and rent freezes often call themselves socialists, but socialism is government / collective ownership of the means of production and distribution of goods. Rent control isn't that. It's simply a transfer of wealth from property owners to tenants, regardless of the economic circumstances facing individual owners and tenants. It's terrible for society as a whole, which is the opposite of what socialists want -- or should want. A rent freeze, even if it's "just" for one year, accelerates and makes the downsides of rent control even more pronounced.
The one problem with this article is that the author works for The Manhattan Institute, which may be right about rent control but is wrong about many other policies. Such policies have exacerbated income inequality which resulted in the populist backlash that got these rent-freeze / rent-control-loving politicians elected.
Socialism isn't just about public ownership of assets, but of public control of assets for the good of the workers. The rent freeze subjects landlords to government control. It is an effective government taking of the private property. The reason why it isn't really socialist in the classic sense is that many of those who benefit are not working class, but middle class lefties. I think the reason for this is that modern socialists don't care about the working class anymore. They now support the "oppressed" which can include people of great means or no means.
It should be noted that the policy is only for a year at this point, from the 1st of October 2026 to 30th of September 2027. It's only made for immediate relief of current tenants of these apartments, an appropriate use of a rent freeze, as it should not be used indefinitely.
Furthermore, the Mayor of NYC has already launched what I would say for the US, is an aggressive agenda to address the root cause of the housing shortage. His Block by Block plan outlines a path to construct 200,000 new affordable, union-built homes over the next decade. This is backed by a historic doubling of the city's budget for new construction to $5 billion, paired with transit-oriented rezonings and fast-track approval processes to cut through red tape and rapidly expand housing supply.
On that note, American conservatives really should stop citing Assar Lindbeck as an authority on this subject. He tried to change the stance of the Swedish Social Democratic Party that stood for the Tenants Unions right to bargain with Landlords over rent and rent increases. Similar to Labour Unions and Employers right to bargain that Sweden is otherwise known for.
But he famously quit the party and eventually helped the Right wing in liberalising and privatising the economy instead. The so-called Lindbeck Commission did achieve many great things that we today take for granted, such as an independent central bank. However, the market liberalizations and shifts in housing policy that followed in its wake laid the groundwork for the housing shortage Sweden currently faces by removing state support and making the construction sector highly cyclically sensitive. Paradoxically, foreign economists love to claim that Sweden's shortage is otherwise only caused by our collective bargaining model or the Public Housing sector.
There is no such thing as an *appropriate* use of a rent freeze.
Voluntary exchange makes everyone better off.
Of course there are some winners when government intervenes. Including in this case the ~30% of folks in rent-controlled apartments who earn $100K+/yr.
And the overlapping group that has multiple rent-controlled apartments.
The idea that government knows better is laughable.
But I suppose as a “mob rule” means of getting elected it is effective.
There are most definitely appropriate uses of the tools of government. Rent freeze is an emergency tool, the situation in NYC could arguebly motivate its use. Otherwise tentants in the city wouldn't have been demanding its use or complain about situation to the level they've been doing for years.
NYC has through democracy chosen this platform. In reasonable countries, democracy is respected. Especially when its such a trivial issue of just helping tenants in a affordability crisis driven primarily by housing. While they await the more structural reforms that from outsiders view seems to be on their way.
From what I can find, a majority of NYC tenants are rent burdened, at nearly 3 million households. That means they pay over 30% of their income in rent. That's incredibly alarming, and it would be unthinkable in Sweden.
“Otherwise tentants in the city wouldn't have been demanding its use or complain about situation to the level they've been doing for years.”
Sorry, this is a blatant falsehood.
Leftists will demand government take from others to give them stuff at all times.
It’s merely that the Democrats in the country in general and NYC in particular have gotten way more leftist in the last few years to where they are having socialists win elections now.
Rent control and government restrictions on development are why housing prices are so high in the first place.
The idea that those who live in rent controlled housing of all people are currently paying too much is absurd.
The people NOT living in rent controlled housing have something to complain about.
So I'm assuming you think NYC should've adopted the rent freeze on non-rent stabilized units rather than those that are already stabilized?
I'm assuming the Mayor of NYC is taking the easier route, as they're controlling rents of what is already regulated, rather than expanding rent stabilization to more units which could arguably be harder politically.
Frankly, I care very little about the specifics of American politics. There are still legitimate use-cases for the various forms of policies that fall under rent control. Unilaterally dismissing them is rather uninformed.
Furthermore, blaming high prices entirely on regulation is a tired, simplistic view. Unregulated markets in major global cities don't naturally produce affordable housing. NYC lacks one fundamental element for more housing, an abundance of land. There simply isn't enough land left to build on freely.
Should the government primarily be concerned with only being a spectator when its citizens are under pressure?
I have no doubt that rent-stabilized apartments can still be expensive enough for their tenants to become rent-burdened. The median household income is only around ~60k/year among these tenants, after all.
“So I'm assuming you think NYC should've adopted the rent freeze on non-rent stabilized units rather than those that are already stabilized?”
No, I think rent control is a terrible idea always.
I’m just saying that as implemented in NYC all Mamdani has done is grant even more special favors to those lucky few who already get the favors - big government-mandated discounts in the rent they pay. Which directly drive up the rents that everyone else has to pay.
Making everyone else worse off.
But the 30% of rent controlled apartment dwellers who make over $100K/yr I’m sure appreciate the socialist largesse that you support.
It’s great that you don’t care about the specific of American politics. Perhaps you should go read Thomas Sowell’s Basic Economics and understand why rent control is always a bad idea.
Great article as always. It takes bravery to vote as the lone dissent against a popular politician. You make me proud as both an economist and a New Yorker.
“The rent-freeze vote may provide immediate relief to some tenants. It does nothing to address the housing shortage that made rents so high in the first place.”
Very good piece.
But the last sentence is false.
The rent freeze does NOT do “nothing to address the housing shortage that made rents so high in the first place.”
It will make the shortage worse.
The author makes a lot of good points, but ignores some fixes to get more housing on the market without making current units unaffordable to most of the people living in them now - and where would they go if they had to move out?
1. A Land Value Tax would make vacant or underused land pay the same tax on land as highly functional buildings just next door. It would force that land into production or so burden the idle holder of that land to sell to someone who could develop it. Tried and proven in NYC in the 1920s and early 30s by then Gov. Al Smith by untaxing building values above $5,000 (a much bigger sum back then).
Unfortunately, just untaxing properties won't distinguish between land taxes and improvement taxes, and it's taxes on the former but not the latter which will drive un/under-used land into production. The Manhattan Institute knows this, having had their origins in the Georgist movement it now disavows.
2. Zoning changes to allow more building on vacant lots or extending existing buildings by several stories in exchange for making them more affordable. Actually, this is already being done from City of Yes reforms in the last administration.
Rather than add new taxes (which are always passed down), can we just like…remove all rent control and see what happens first?
Land Value Taxes won't be passed down, because housing costs are inelastic; people can't pay more than they are already. Instead, land prices will go down as the taxes go up. This will upset some existing landowners, but new buyers will come in at cheaper prices to make up the difference and build more housing on cheaper land. Tried and proven 100s of times. I wish I could post my land tax reforms group's 233-example meta-study here.
Each of the Australian states has had a land tax for many decades. In essence it applies to the umimproved value of land that is not exempt. Exempt land includes a person's family home. The land tax is thus payable on rented apartments, by the land lord. The landlord passes te tax onto the tenant through taking it into account when setting the rent.
such a dearth of dialectical thinking in this piece, how do you expect to enact 'yimby' / 'abundance' without popular backlash if you do not make efforts to slow displacement through targeted freezes ? can you think of a more targeted measure ? its a blunt tool sure but i can think of people in my own life from low SES parts of NYC that directly benefit. my bourgeoise college educated friends are moving to the outer boroughs regardless may as well blunt the displacement.
“…can you think of a more targeted measure ?”
Can you think of a LESS targeted one?
All of the following are already happening with zero targeting scrutiny: inflation, exclusionary zoning, mortgage interest deduction, 1031 exchanges, regressive property tax assessment, and NIMBY permitting.... And upstream of all of it is the most un-targeted intervention of all; the complete absence of any industrial or regional policy, which by default concentrates capital, jobs and opportunity in a handful of cities.
“…which by default concentrates capital, jobs and opportunity in a handful of cities.”
Well, first, rent freezes push capital away from NYC, not concentrated towards it. Are you unfamiliar with the booming FL and the growth in TX?
But your claim is that the problem is that we have INSUFFICIENT amounts of regulation and industrial policy and government interference?!?
Hahaha happy for my family out there that Texas has grown but DFW sprawl and the San Antonio-Austin corridor are grim advertisements for market urbanism, and even 'market' is generous when it runs on subsidized highways, tax abatements etc. Miami IMO is honestly even worse: financial relocation theater, crypto money, Latin American capital flight parking in condos on a sinking limestone shelf below sea level. Very little productive capital formation, largely wealth relocating. Texan population growth without new industry is the same story, mostly retirees and displaced workers following lower costs. Also Austin's tech scene = exception that proves rule given dependence on university infrastructure and federal defense spending etc etc. Im all for removing 'regulation' (buzzwords !!) but there is literally nowhere in recorded human history that its done anything for housing without active government 'interference' its pure cope
😂
Yes “its pure cope” for sure.
Government is not the problem causing lack of housing supply at all.
But more regulation *is* the solution.
Got it.
I appreciate the education.
unable to respond directly, reaches for vague buzzwords. economic liberalism in a nutshell
I wonder if people realise that the true aim Mandami and his mates is to take as much rent-stablised property into public ownership as possible.
I should have thought that the landlords should get together and challenge this law as a taking of property, for which the government has to pay compensation. AFter al, the government's actions here have reduced the value of the rental properties. That is government confiscation
Among city planners & housing advocates, there's a lot of this right now:
"Free parking, bad. Free rent, good."
Like you point out, the attention is all on short-term relief without consideration of long-term trade-offs.
Free parking is bad for many of the same reasons rent control is bad.
Well much free parking is bad, I agree.
But not really for the same reasons.
The attention is all on what helps leftists get elected.
It is the opposite of relief for lower-income folks who aren’t lucky enough to have rent-controlled apartments and so cannot afford to live in the city because of the lack of supply that is in large part because of rent control and other restrictive government regulations.
Idk prof. You are smart, informed, but you sorta narrow “what works” to a bunch of things not everyone cares about, you act like that’s objectively more valuable instead of a preference on what matters. Democracy worked. Sry if that’s unclear. You seem to think it’s an objective fact that the costs outweigh the human suffering they prevent. This freeze is specific and temporary and not everyone who voted for it is stupid. We care about different things.
The clearest way I can ask this is; why? Why should government freeze your already stabilized rent? Why not freeze all rents? Or maybe only market rate rent?
If you want RS buildings to go bankrupt and be taken over by NYC government or federal government, I encourage you to take a nice long exploratory trip to NYCHA Housing, better known as the projects.
"This mismatch is a product of a two-tier housing system that privileges insiders but forces outsiders to pay exorbitant rents." -- care to expand on this? Curious how the insider market works and what portion of the market it represents.
I know politicians favoring rent control and rent freezes often call themselves socialists, but socialism is government / collective ownership of the means of production and distribution of goods. Rent control isn't that. It's simply a transfer of wealth from property owners to tenants, regardless of the economic circumstances facing individual owners and tenants. It's terrible for society as a whole, which is the opposite of what socialists want -- or should want. A rent freeze, even if it's "just" for one year, accelerates and makes the downsides of rent control even more pronounced.
The one problem with this article is that the author works for The Manhattan Institute, which may be right about rent control but is wrong about many other policies. Such policies have exacerbated income inequality which resulted in the populist backlash that got these rent-freeze / rent-control-loving politicians elected.
Socialism isn't just about public ownership of assets, but of public control of assets for the good of the workers. The rent freeze subjects landlords to government control. It is an effective government taking of the private property. The reason why it isn't really socialist in the classic sense is that many of those who benefit are not working class, but middle class lefties. I think the reason for this is that modern socialists don't care about the working class anymore. They now support the "oppressed" which can include people of great means or no means.
It should be noted that the policy is only for a year at this point, from the 1st of October 2026 to 30th of September 2027. It's only made for immediate relief of current tenants of these apartments, an appropriate use of a rent freeze, as it should not be used indefinitely.
Furthermore, the Mayor of NYC has already launched what I would say for the US, is an aggressive agenda to address the root cause of the housing shortage. His Block by Block plan outlines a path to construct 200,000 new affordable, union-built homes over the next decade. This is backed by a historic doubling of the city's budget for new construction to $5 billion, paired with transit-oriented rezonings and fast-track approval processes to cut through red tape and rapidly expand housing supply.
On that note, American conservatives really should stop citing Assar Lindbeck as an authority on this subject. He tried to change the stance of the Swedish Social Democratic Party that stood for the Tenants Unions right to bargain with Landlords over rent and rent increases. Similar to Labour Unions and Employers right to bargain that Sweden is otherwise known for.
But he famously quit the party and eventually helped the Right wing in liberalising and privatising the economy instead. The so-called Lindbeck Commission did achieve many great things that we today take for granted, such as an independent central bank. However, the market liberalizations and shifts in housing policy that followed in its wake laid the groundwork for the housing shortage Sweden currently faces by removing state support and making the construction sector highly cyclically sensitive. Paradoxically, foreign economists love to claim that Sweden's shortage is otherwise only caused by our collective bargaining model or the Public Housing sector.
“…an appropriate use of a rent freeze”
There is no such thing as an *appropriate* use of a rent freeze.
Voluntary exchange makes everyone better off.
Of course there are some winners when government intervenes. Including in this case the ~30% of folks in rent-controlled apartments who earn $100K+/yr.
And the overlapping group that has multiple rent-controlled apartments.
The idea that government knows better is laughable.
But I suppose as a “mob rule” means of getting elected it is effective.
Be careful what you wish for.
“First they came for the trade unionists…”
There are most definitely appropriate uses of the tools of government. Rent freeze is an emergency tool, the situation in NYC could arguebly motivate its use. Otherwise tentants in the city wouldn't have been demanding its use or complain about situation to the level they've been doing for years.
NYC has through democracy chosen this platform. In reasonable countries, democracy is respected. Especially when its such a trivial issue of just helping tenants in a affordability crisis driven primarily by housing. While they await the more structural reforms that from outsiders view seems to be on their way.
From what I can find, a majority of NYC tenants are rent burdened, at nearly 3 million households. That means they pay over 30% of their income in rent. That's incredibly alarming, and it would be unthinkable in Sweden.
“Otherwise tentants in the city wouldn't have been demanding its use or complain about situation to the level they've been doing for years.”
Sorry, this is a blatant falsehood.
Leftists will demand government take from others to give them stuff at all times.
It’s merely that the Democrats in the country in general and NYC in particular have gotten way more leftist in the last few years to where they are having socialists win elections now.
Rent control and government restrictions on development are why housing prices are so high in the first place.
The idea that those who live in rent controlled housing of all people are currently paying too much is absurd.
The people NOT living in rent controlled housing have something to complain about.
So you have the argument exactly backwards.
So I'm assuming you think NYC should've adopted the rent freeze on non-rent stabilized units rather than those that are already stabilized?
I'm assuming the Mayor of NYC is taking the easier route, as they're controlling rents of what is already regulated, rather than expanding rent stabilization to more units which could arguably be harder politically.
Frankly, I care very little about the specifics of American politics. There are still legitimate use-cases for the various forms of policies that fall under rent control. Unilaterally dismissing them is rather uninformed.
Furthermore, blaming high prices entirely on regulation is a tired, simplistic view. Unregulated markets in major global cities don't naturally produce affordable housing. NYC lacks one fundamental element for more housing, an abundance of land. There simply isn't enough land left to build on freely.
Should the government primarily be concerned with only being a spectator when its citizens are under pressure?
I have no doubt that rent-stabilized apartments can still be expensive enough for their tenants to become rent-burdened. The median household income is only around ~60k/year among these tenants, after all.
“So I'm assuming you think NYC should've adopted the rent freeze on non-rent stabilized units rather than those that are already stabilized?”
No, I think rent control is a terrible idea always.
I’m just saying that as implemented in NYC all Mamdani has done is grant even more special favors to those lucky few who already get the favors - big government-mandated discounts in the rent they pay. Which directly drive up the rents that everyone else has to pay.
Making everyone else worse off.
But the 30% of rent controlled apartment dwellers who make over $100K/yr I’m sure appreciate the socialist largesse that you support.
It’s great that you don’t care about the specific of American politics. Perhaps you should go read Thomas Sowell’s Basic Economics and understand why rent control is always a bad idea.
Have a great day.
“Unregulated markets in major global cities don't naturally produce affordable housing.”
Please show me even one major global city that has unregulated markets.
I shan’t be holding my breath, because you will be unable to do it.
Houston, TX might come closest, and in fact rents there are substantially lower than in other big cities.
Oh please