What Could Go Right for NYC Real Estate? Mayor-elect Mamdani
What Could Go Right is a series looking at big topics with an optimistic bias. A reminder that while we often obsess about what could go wrong, things can and often do work out for the better.
It is fair to say that NYC took a big leap of faith when voters elected Zohran Mamdani to be the next mayor of NYC over a former governor and the incumbent mayor. It could also be said that his background as a Democratic Socialist and his religion are getting more scrutiny than his young age and relative inexperience. Without a long track record in government in an executive role, there is great uncertainty about how his administration will govern. There are reasonable concerns, but for many critics and supporters the verdict is already in and he hasn’t yet taken the oath of office!
For those of us involved in the local real estate industry, particularly landlords, there is great anxiety. Mamdani centered his campaign around affordability. Even if you love New York, you’ve probably complained about how expensive it can be. Living in NYC is an exercise in managing stress, and any noticeable improvement in affordability could raise happiness across the board.
For real estate in particular, demand can be driven by specific issues like safety, schools, jobs, the local economy, and infrastructure aka transportation. Buying a home, signing a multiyear commercial lease, or even committing to a 12-month apartment rental, requires a positive outlook.
Key Policy Areas and Real Estate Impact
Here are some of Mamdani’s signature policies and how they could benefit the real estate industry:
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Safety is perhaps the most fundamental issue to the local real estate market and permeates every aspect of city living. Mamdani is a reformist which is associated with being soft on crime, and one of his key promises is to take mental health calls away from the police. Simply addressing the large numbers of homeless, mentally ill, and drug addicted on the subways and streets would have an immediate impact on the perception of safety, and would free up the police to tackle crime. Thankfully most New Yorkers do not have frequent run-ins with hardcore criminals like muggers and murderers, but encountering addicts, homeless and the mentally ill is pretty much a daily experience. The Mamdani campaign cites 180,000 mental health calls per year handled by the NYPD, while the NYPD estimates there are only about a thousand or so career criminals in NYC that commit most of the crimes.
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Schools The mayor-elect has also made headlines with statements on public schools, much of which can be summarized as increasing resources for schools and reducing inequities. When it comes to our public schools, the new mayor will benefit from low expectations. Demand for real estate in certain neighborhoods like Park Slope and Carroll Gardens has largely been correlated with the rising reputations of zoned schools. NYC already boasts some of the best public schools in the country, like Mamdani’s alma mater Bronx Science. But the testing averages citywide are subpar and the spending per student is among the highest in the nation.
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Free Child Care I helped a young family sell their Manhattan apartment and move to the suburbs despite enjoying a relatively high income. The final straw might have been the cost of private daycare, which they priced around $30,000/yr. Free child care for all families would make an immediate impact on affordability. In light of a push by the current White House to require that government benefits are tied to working hours, free child care could also help ensure that thousands of NYC families can keep their benefits.
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Government Grocery Stores plan to offer groceries at wholesale prices in food deserts, where they will not be in direct competition with mom and pop and other supermarkets. The likelihood however is that this will only provide slight discounts on goods. Private supermarkets make money on luxury items, private label goods, and by setting up in areas with higher disposable income, all to eke out small margins. It seems that there will only be a few of these stores, and they will likely be highly subsidized. In those communities, however, there could be a benefit.
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Housing is of course the largest cost for most New Yorkers, with renters spending about 54% of their income on rent, and homeowners a bit over 30% of their income on housing according to recent surveys. Mamdani has vowed to freeze rent stabilized rents over his term, and pledged to building 200,000 new affordable units over 10 years. It is difficult to see how the rent freeze would work without a pledge to freeze costs for those landlords, but as a core pledge I expect Mamdani to stack the The Rent Guidelines Board (RGB) and deliver on his promise. The RGB has issued 0% increases in the past, but generally during very low inflation periods. And this would benefit only rent stabilized tenants. Mamdani should lean into 80/20 housing that encourages private development as long as 20% of the units are permanently affordable. Make significant increases to supply at all levels of affordability, and housing costs will come down. It is difficult to see how the rent freeze would work without a pledge to freeze costs for those landlords, but as a core pledge I expect Mamdani to stack the Rent Guidelines Board (RGB) and deliver on his promise. The RGB has issued 0% increases in the past, but generally during very low inflation periods. And this would benefit only rent stabilized tenants. Mamdani should lean into 80/20 housing that encourages private development as long as 20% of the units are permanently affordable. Make significant increases to supply at all levels of affordability, and housing costs will come down.
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Transportation One of the mayor’s headline promises is to make buses free. Naturally demand for real estate is higher around subway stations, and lower in areas that are only accessible by bus. Free buses may not change that, but could enhance the appeal of outlying areas and allow more development in outlying neighborhoods. Roughly 30% of New Yorkers do not live within a half-mile of a subway station. Since most New Yorkers consider commute time a key factor in deciding where to live, a significant shortening of commute times and lower transport costs could benefit the real estate market in general.
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On Jobs and the Economy, Mamdani seems to have fewer concrete policies. He does want to raise the minimum wage to $30/hr by 2030. This will put pressure on some businesses, but most small business owners I know already pay more than the minimum wage to fill openings. In today’s economy, many jobs are now gig work or performance based (contract workers, tips and commissions). On the other hand, there is often too much emphasis in the affordability discussion placed on price controls, instead of trying to raise earning power to better afford market prices for things like rent. If a full time worker making $30/hr earns about $60,000/year, then a two-income household earning $120,000/yr might be able to manage with less government assistance. As long as employment remains high, this would be a win for real estate.
A big question is how some of these initiatives will be funded. Mamdani has proposed tax increases on the highest income New Yorkers and on corporations. Critics have pointed out that he would need the governor to support tax increases, and that modest tax increases would likely not cover the cost anyway. That would imply issuing debt to cover the difference, and there are limitations to the amount of debt the city can issue. All signs point to compromise.
Another concern is whether he will have the political support he needs in general, from DC, Albany, and the City Council. It was a pleasant surprise to see him in the oval office conversing with Trump, himself a New Yorker. Some expect Governor Hochul to be check on Mamdani, but she is facing re-election next year and appears eager to court Mamdani supporters.. Meanwhile, the next City Council speaker is expected to be Julie Menin of the upper east side, who is considered politically moderate, and is married to a prominent real estate developer. So even locally, it is not certain that he will have rubber stamp support for anything not explicitly under City Hall control.
Mamdani’s transition team has featured an interesting mix of veterans from various progressive and Democratic party administrations, from NY and DC. His transition team co-chairs have links to the de Blasio, Bloomberg, Biden, and Adams administrations. Given the uncertainty about Mamdani’s experience, it is reassuring to see that he is surrounded by experience and his appointments will be watched with great interest.
We hope that Mamdani will be thoughtful about continuing good policies by previous mayors. Mayor Adams passed an ambitious rezoning plan called City of Yes which among other things allowed for larger buildings if they include affordable housing, and will facilitate conversion of commercial buildings to residential. Adams’ push to combat rodents, specifically trash containerization, has noticeably reduced rodent populations and improved the walkability of many streets.
Mamdani also made it a point to ask NYPD commission Tisch to stay on board. She is a respected executive who has overseen reductions in crime, and could have a positive impact on his push to reform policing if they can maintain a good repoire.
Conclusion
What could go right for New York under Mamdani is important to consider, especially with regards to decision making around real estate. A knee-jerk reaction to sell, particularly into a neutral/soft market, or to not invest in a good opportunity, could prove to be regrettable if things go right. Many Mamdani critics appear to be people and business leaders who have already left NYC or were likely leaving regardless. At the very least, it is premature to suggest that it will be a failure or a success before he is even sworn into office.
I voted in the election but not for Mamdani. Nevertheless, I am optimistic about Mamdani, and I see some signals that he could prove to be a good leader. On a very high level, we need to welcome a new generation of leaders in both parties that have more energy and fresher ideas. I would like to see him surrounded by experienced advisors, which he has so far. I would like to see signs he can reach across the aisle, which he has so far by meeting Trump. I like to see signs that he is not purely ideological leader and is somewhat pragmatic, which he seems to have shown by keeping Tisch, and apparently opposing Chi Osse’s bid to primary Hakeem Jefferies. He has spoken against NIMBYism, a hopeful sign he will throw his support behind developers. But it is still very early days, and he has yet to face difficult decisions like union negotiations or compromising on campaign promises to get legislation passed. He has not really spoken on a multitude of other issues.
I would also ask that he embrace affordability as not just an issue for the poor, but also the middle class which in NYC includes households earning $250,000, perhaps even up to $500,000. Because even families in that income bracket are leaving the city due to affordability. If child care is free for all families, buses are free for everyone, if everyone has access to good public schools, and decent housing is abundant, that would benefit New Yorkers and real estate alike.
Last but not least, Mamdani is a native New Yorker. He came at a young age and grew up walking the same streets, mingling with the rich and poor, workers and business owners, attending private and public schools. He has a taste of what it is like to be an everyday New Yorker across the spectrum, and shares a desire to make the city a better place to live.
Sources: New York Times, Breitbart, NYPIRG, Zohranfornyc.com, NY Post, AMNY, TimeOutNY, NY1, Chalkbeat, The Guardian
