Mamdani Shifts From Social Housing to Private Investment

18 minutes read

The first thing I noticed about Mayor Zohran Mamdani’s housing plan, which he cleverly released while I was on vacation, was its $22 billion price tag.

That was down from $100 billion during his mayoral campaign. Yet its goal remained 200,000 new affordable housing units, and he’d added the preservation of 200,000.

Even $100 billion was an unrealistically low cost for 200,000 union-built, affordable homes — only $500,000 apiece. Obviously the city can’t build or preserve twice as many for $78 billion less.

I set out to make sense of Mamdani’s math.

One way he made the price tag seem smaller was by using a five-year spending total (the $22 billion “commitment”) for a 10-year plan.

But the biggest change from his campaign plan was a pivot to reality.

Forget borrowing $70 billion through bonds and tapping Gary LaBarbera’s boys to build 200,000 social housing units.

Instead, Mamdani will unleash the private sector to finance and develop affordable apartments, subsidized not by taxpayers but by an even greater number of market-rate units.

The mainstream media overlooked this momentous shift. The New York Times pointed out that Mamdani “appeared to backtrack from a campaign promise to use union labor on affordable housing projects,” but it omitted that the plan relies on for-profit rental developments, which are about 70 percent market-rate, to meet his targets.

It also leans heavily on city and state reforms achieved during the Adams administration. Mamdani, to his credit, aims to exploit these changes while doing more upzoning of his own.

His plan cheers one headwind as if it were a benefit: the city’s Construction Justice Act, which would mandate construction wages and benefits worth $40 an hour on “targeted city-assisted housing projects.” The bill was passed in December, before Mamdani took office.

Mamdani’s embrace of that law was a bit of virtue signaling, because he has no choice but to abide by it.

Fortunately for him, that wage floor doesn’t apply to 485x projects of fewer than 100 units, nor to office conversions. Those private projects will have to carry the freight for the city to reach Mamdani’s magic number.

Winners and losers

The 112-page housing plan is strong on adding new homes and weak on dealing with old ones. That is, it’s good for developers and bad for rent-stabilized landlords.

Mamdani and his deputy mayor for housing, Leila Bozorg, clearly understood that the root of the city’s affordability problem is its housing shortage, and that the poor, working class, middle class and even higher earners suffer from it.

Their housing plan also recognized the importance of investors and private developers in solving it, although it made that point implicitly to avoid antagonizing New Yorkers who blame industry greed for high rents.

Mamdani’s plan puts another nail in the coffin of the pernicious myth that any development other than social housing raises rents and causes displacement.

Only paleozoic politicians like Assembly member Jo Ann Simon still perpetuate that notion, especially with the socialist star Mamdani solidly in the YIMBY camp. His plan even specifies that gentrification is caused by lack of development:

“Decades of underbuilding have produced one of the most severe housing shortages in the city’s history,” it says. “With fewer apartments available, new units that do come on the market rent for about $3,000 per month… This scarcity drives gentrification, displacement, segregation, and homelessness.”

Developers might have preferred to see that higher up than page 64, but should be grateful that it appeared at all.

To execute his supply-side strategy, Mamdani aims to attack the shortage from every angle, including:

Rezoning, especially in high-opportunity, transit-rich, low-growth areas like the Upper East Side, West Village and Park Slope. Thanks to pre-Mamdani City Charter revisions, next year the mayor-controlled City Planning Commission will be able to rezone unilaterally in the least productive 12 of the city’s 59 community districts. Private developers and city planners will be scouring these areas for sites.
Pursuing more projects like the Adams administration’s office conversions of 100 Gold Street (by GFP Real Estate) and 395 Flatbush (by Rabina and Park Tower Group). The latter will yield nearly 1,300 units, 350 of them deeply affordable, with no subsidy besides the as-of-right 485x.
Partnering with nonprofit and MWBE firms to redevelop smaller, city-owned sites using a predevelopment process that takes months, not years. Schools, libraries, clinics and other public facilities would be modernized as they add housing.
Allowing new neighborhoods on large, publicly controlled sites like the Brooklyn Marine Terminal (already in the works but being blocked by Simon), a hospital campus on Roosevelt Island and Sunnyside Yard in Queens. Redeveloping the 180-acre rail yard, however, is not feasible without a massive federal grant.
Permitting mixed-income development on public housing campuses. The first such project, initiated two mayors ago, has been stalled by litigation. Mamdani is also continuing his predecessors’ use of for-profit firms to renovate and manage public housing.
Pushing the Landmarks Preservation Commission to facilitate air-rights transfers and foster housing creation in historic districts. The latter probably won’t amount to much, given the commission’s mindset and Mamdani’s aversion to bullying his agencies. Landmarks already approved two new historic districts on his watch, permanently depressing development there.

One tool not mentioned in the document is the Board of Standards and Appeals, whose stingy chair was just replaced by a pro-development Mamdani appointee, John Mangin.

The board, which has a new fast track for affordable housing, grants variances through a much faster and cheaper process than rezoning via the City Council.

The mayor plans to pursue various other new-supply initiatives. Nearly all have been tried before, such as legalization of basements as apartments.

One new idea is modular accessory dwelling units, which are built elsewhere, delivered by truck and installed in a day. The city will also provide financing and technical assistance to people who want ADUs.

The housing plan features a slew of affordability efforts. It seeks to improve and expand programs such as HomeFix and add a Mortgage Assistance Program, among others. It reiterates Mamdani’s pledge to end property tax inequities, but doesn’t elaborate.

Shortcomings

Beneath the layers of pro-development policies is an underlying truth: The mayor is not seeking to create as much housing as possible. Like most progressives in elected office, he favors affordability and union-backed wage mandates that limit the size of some projects and make others unviable.

Those provisions, however, do endow development with political and labor support, which are also essential for most large projects in New York. It’s a tricky balance that is impossible to perfect, and Mamdani is hardly the first mayor to defer to construction unions.

Eventually, the wage floors set by the state’s 485x and the city’s Construction Justice Act will be rendered moot by inflation. But in the intervening years, countless projects will be underbuilt or unbuilt.

Grime and punishment

For all the promise Mamdani’s housing plan offers to developers, it delivers lumps of coal to owners of deteriorating, rent-stabilized buildings.

It proposes no solution for the tens of thousands of vacant rent-stabilized units whose rents, under state law, cannot be raised enough to justify renovating.

Mamdani is crafting aid plans for distressed affordable housing, but not so much for rent-stabilized buildings suffering from the same problem — expenses outstripping rent collection.

The discrepancy is easily explained. Affordable housing tends to be owned by nonprofits and underwritten by the city. Rent-stabilized buildings are not. They are on the wrong side of a political divide.

Mamdani’s plan pledges to target “landlords who speculate on buildings, persistently disregard repairs, and refuse to improve or change their business practices.”

It is unclear how his administration will distinguish them from owners who are simply being crushed by state and city laws and eviction-averse housing courts.

Salt in their wounds is pending: a Mamdani-backed bill would steer sales of distressed buildings to nonprofits. The mayor, in fact, intends to accelerate and intervene in that process.

The city will launch investigations this year of at least 10 portfolios “with the largest concentration of long-standing, egregious violations…to ensure that these buildings are transferred out of these bad actors’ hands and conveyed to responsible preservation purchasers who are supported by both tenants and the administration.”

The strategy, as landlord-side attorney Sherwin Belkin sees it, is to barrage buildings with violations and penalties, classify them as distressed and transfer ownership to nonprofits and tenant groups.

“This is a serious threat to the real estate industry,” Belkin posted on LinkedIn. “Serious minds need to derive solutions before too much damage is done.”