Mayor Mamdani ran on a promise to freeze rent increases for millions of New Yorkers. This promise was arguably his central gimmick.
The early days of Zohran Mamdani’s primary campaign were heavy with gimmicks. He ran the marathon wearing a T-shirt that read “Eric Adams Raised My Rent!” and “Zohran Will Freeze It!” on the back. He jumped into the Atlantic on New Year’s Day. “I’m freezing … your rent,” he told the camera, barefoot, in a dripping-wet suit…
The 34-year-old democratic socialist’s pledge for a four-year pause on any increases on the city’s 1 million or so stabilized units, effectively giving a reprieve to about 2 million stabilized tenants, was at the center of his campaign — it was simple and relatively within reach of the mayor’s powers.
How it actually works in New York isn’t that simple. Mamdani doesn’t have the power to do anything about rents directly, but he does get to select and appoint board members who will vote on the issue sometime this summer.
The system that governs rent stabilization is sort of byzantine, but the basics are as follows: The board is composed of five public members, two tenant members, and two landlord members, all appointed by the mayor. The last two groups usually cancel each other out when it comes to voting to raise or maintain rents, so it’s the five public members who generally matter most when setting the annual rate of increase. Right now, Mamdani is poised to appoint a majority to the board — three public members, a tenant member, and a landlord member.
You really don’t need to be a financial wizard to realize that freezing rents is going to have a serious impact on those landlords as well as potential developers who quickly realize there is no money to be made in NYC real estate. Rent freezes are popular among renters but in the long run they only lead to higher rents for everyone because there’s no incentive to build new housing. In other words, the freeze doesn’t just freeze the rent it freezes new construction that could, over time, bring rents down.
This exact dynamic is playing out in California. Like New York City, Los Angeles also has high rents and hundreds of thousands of rent controlled apartments. On top of that, the city is notoriously difficult as a place to build new housing. By contrast, San Diego has no traditional rent control and has streamlined it’s building process, making it less time consuming for developers to get projects moving. The result is that while new housing construction is up in San Diego, it’s down sharply in Los Angeles.
“It is easier to build in San Diego over Los Angeles because of its legal structure, political culture and defined processes,” said Kevin Shannon, co-head of capital markets at real estate brokerage Newmark, which is overseeing the sale of a sprawling development site in San Diego that is zoned to have thousands of apartments.
The result: As of last quarter, the number of new apartments under construction in San Diego County rose 10% from three years earlier, CoStar data show. New apartment construction in Los Angeles County tumbled 33% over the same period, hitting an 11-year low in the three months through December. San Diego is expanding its apartment pool at nearly twice the rate of L.A. and other major city clusters in the state.
L.A.’s vacancy rate is among the lowest in the country and rental rates are among the highest nationwide. Still, the supply of fresh rental units, which make up the bulk of new housing in Los Angeles, is thinning out despite robust demand…
Rent control has been at the center of the debate recently. The city of Los Angeles just tightened its rent control.
So tighter rent control and lower levels of new construction in LA, but in San Diego you have no rent control and much higher levels of new construction. Over time, San Diego should be able to increase vacancy and reduce costs while LA continues in the opposite direction. Mamdani’s rent freeze will be popular with some renters but it will also likely ensure the city makes little progress in building new apartments during his tenure.
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