Opinion: How Mamdani Can Keep His Principles And Still Do Good For NYC’s Housing Market

“One might think that socialism and deregulation do not go together, but Mamdani’s campaign gave hints that he might be willing to take on some heretofore untouchable interest groups.”

As an economist and city planner inclined to let markets have free rein, I didn’t view democratic socialist Zohran Mamdani as my ideal mayoral candidate. However, now that he has won, I would prefer that his upcoming mayoralty improve the city, rather than accelerate its decline. In a new report for the Manhattan Institute, I have outlined some good actions his administration could take to mitigate the city’s housing supply crisis and jump-start its stagnating economy, without repudiating his principles.  

The potential actions Mamdani might support fall into three categories: deregulatory interventions, zoning changes to take advantage of the City Charter changes approved by voters last November concurrently with Mamdani’s election, and pragmatic policy changes to mitigate the adverse consequences of past left-leaning policies. One might think that socialism and deregulation do not go together, but Mamdani’s campaign gave hints that he might be willing to take on some heretofore untouchable interest groups.

One such group is car owners, a minority of New Yorkers but an important constituency to many City Council members. Under prior Mayor Eric Adams, the Council agreed to some reforms to the city’s outdated requirements for off-street parking in new housing developments, but didn’t go far enough. The city also retains decades-old requirements for off-street parking in new nonresidential buildings, such as offices and shopping centers. Requiring parking the developer thinks unnecessary raises costs and encourages new residents, commuters and shoppers to own and use cars, rather than public transit. Recent reform in Illinois—dubbed the “People Over Parking Act,” which prohibits requiring parking in areas well-served by transit—suggests a model for changes Mamdani could push through in New York City.

The City Charter changes create a shortened process for certain types of pro-housing zoning changes, cutting out review by the City Council, which in the past gave local members a de facto veto over new housing in their districts. Mamdani will need to use these new tools carefully, since he still needs a good working relationship with a Council majority. However, he should be comfortable with utilizing new Charter provisions allowing him to push through affordable housing projects in 12 designated community districts where the least amount of such housing was permitted in the past five years.  Moreover, he can also take steps to allow two-family homes and small apartment buildings in low-density neighborhoods where the demand for housing is strong and the potential for adverse effects is limited.

Lastly, and a bigger reach for Mamdani, are changes that require ideological flexibility and in some cases a willingness to allow investors to profit while providing housing the city desperately needs. It’s recognized at this point that the state legislature’s draconian 2019 rent stabilization amendments have created a financial crisis for at least two large groups of owners: private investors whose buildings are 100 percent rent-stabilized and never benefitted from onetime rules allowing deregulation of high-rent units; and non-profits who run low-income housing on behalf of the city and are just as squeezed between rising costs and tightly regulated rents as the for-profit owners.

That problem is too big to solve with public money alone. Mamdani should ask the state legislature to allow bigger rent increases upon vacancy, provided that for-profit landlords agree to maintain affordability standards like those that already bind the non-profit landlords.

Another potential target for pragmatic flexibility is Mandatory Inclusionary Housing (MIH), a flagship achievement of former Mayor Bill de Blasio, and continued under Adams. MIH requires new apartment buildings in rezoned areas to include 25 to 30 percent permanently affordable units. Sold as seizing the windfall profits of greedy developers, MIH in fact depends on compensating developers with generous tax exemptions on the whole building, including the market-rate units. Unfortunately, that mechanism doesn’t always make construction financially feasible. This is particularly an issue with the latest version of the tax-exemption law, known as Section 485-x, to which the state legislature attached “prevailing (union) wage” requirements to buildings with more than 99 units. 

That’s asking for more than many developers can give and still make a profit. Like the rent regulation issue, that problem can’t be papered over with more public subsidies; the city needs far more housing than it can pay for. Private developers need to be permitted a decent return on investment. There is an existing MIH waiver provision, but it has never been used. Mamdani’s administration should clarify the circumstances where waivers might be granted because new housing investment is not otherwise possible.

In summary, Mamdani and his appointees should consider pragmatic actions that would help the city and do not contradict his core beliefs. If he does, the city can be better off at the end of his term than it is today.

Eric Kober is a senior fellow at the Manhattan Institute. He previously served as director of housing, economic and infrastructure planning at the NYC Department of City Planning.