Zohran Mamdani’s capitalist plan to fix the housing crisis

By Nathaniel Meyersohn, CNN

New York (CNN) — Real estate developers spent millions to stop Zohran Mamdani from becoming New York City’s mayor, claiming his policies would destroy the city.

Mamdani wants their help.

Mamdani was elected on a platform of rent freezes and government-backed housing, proposing a $100 billion plan during the campaign to create a Vienna-style social housing model. But his new $22 billion plan to get New York City out of its housing crisis relies on developers.

His strategy uses market-oriented policies — easing building regulations, loosening zoning restrictions and rescuing the city’s crumbling public housing stock through private financing — to advance his social democratic goals of 200,000 affordable homes over the next decade.

Mamdani changed his mind about the “role of the private market in housing construction” late in his campaign, and he again detailed his political evolution in an announcement speech last week. Successes in Austin, Minneapolis and Seattle proved that loosening zoning laws and other regulations are necessary to add housing and bring down rents, he said.

His evolution shows the tensions between political ideology and the challenges of building housing.

Developing new housing in the United States is devilishly complicated, lined with obstacles like zoning laws and public review processes that can vary by zip code. It’s especially difficult in high-cost New York, where land is in short supply and regulations are stringent. Mamdani is making compromises to add housing that low and middle-income New Yorkers can access.

“The meat of the plan is working with the private sector and unleashing markets,” said Alex Armlovich, a senior fellow at the Niskanen Center, a nonprofit public policy group. “It’s ruthlessly pragmatic in a way that’s triangulating across coalitions and interests.”

Mamdani has expressed his desire for a social housing system like in Vienna or Singapore. But city government lacks the funding, and the federal government has also pulled away from building public housing in recent decades. Instead, the private sector has been incentivized to build affordable housing.

That leaves private developers central to Mamdani’s plans to make up an $80 billion maintenance backlog in the city’s crumbling public housing system, too.

“He may be ideologically a socialist, but the city is very boxed in by what it can do,” said Eric Kober, a senior fellow at the public policy think tank Manhattan Institute and a former top official at New York City’s Department of City Planning.

Mamdani is a “left-YIMBY,” Kober said, referring to the pro-development YIMBY (“Yes In My Backyard”) movement. But his housing plan still contains policies like rent regulations that squeeze private developers and may undermine the city’s ability to produce as much housing as other cities.

“The private sector is not doing this for charity,” Kober said. “If you don’t let them make money, they will take it and invest it somewhere else”

Rent freeze

Austin, Minneapolis and Seattle showed Mamdani that building more housing of all types is key to easing New York City’s housing crisis.

These cities loosened their zoning laws and other restrictions in recent years to build housing, helping bring down rents. Austin, for example, increased its housing stock by 10.5% from 2021 to 2024 and rents fell 4%.

Mamdani wants New York City to follow this path. But he’s still sticking with his favorite socialist housing policies.

Mamdani is backing a rent freeze that would apply to nearly 1 million rent-stabilized New York City apartments — almost half the city’s rental stock. Mamdani’s hand-picked Rent Guidelines Board will vote this month to decide on potential rent increases for these units.

Many older buildings with only rent-regulated apartments are under serious financial strain. Surging costs for utilities, insurance and labor without rising revenues have led some to deteriorate, pushing landlords to default on loans. Freezing rents for four years would render some of these rent-regulated buildings in New York City’s outer-boroughs insolvent, one study found.

Mamdani announced an exemption allowing some distressed landlords receiving city subsidies to raise rents on vacant units, but the majority of regulated apartments in the city would not qualify. If financial conditions in these buildings continue to worsen, the city will struggle to plug the hole.

“He promises very little relief to the financial crisis in 100% rent-stabilized housing,” Kober said. “That crisis is going to get worse.”

The success of Minneapolis, one of Mamdani’s models for expanding housing supply, undercuts his support of rent control.

In 2022, neighboring St. Paul enacted strict rent-control laws, while Minneapolis shunned rent control and focused on loosening zoning laws to speed up housing construction.

Housing construction boomed in Minneapolis and stalled in St. Paul. Rents in the two cities went in opposite directions.

St. Paul is now walking back parts of its rent-control laws.

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