What Mayor Mamdani’s New Housing Plan Misses

For more than a decade, New York politicians have approached the housing crisis with a fundamentally flawed assumption: that affordability can be legislated into existence without regard for economics. Every election cycle produces another “housing plan,” another collection of mandates, restrictions, subsidies, and politically palatable slogans designed to sound compassionate. But compassion without economic reality does not create housing. In many cases, it destroys it.

Mayor Zohran Mamdani’s latest housing plan is no exception.

The stated goal of creating or preserving 400,000 housing units over the next decade sounds ambitious and admirable. But the uncomfortable truth is that many of the policies surrounding New York housing today are making both preservation and production materially harder, not easier. If we continue down this path, the rent-stabilized housing stock in particular will deteriorate before our eyes while new housing production continues to collapse.

The math is not complicated.

Expenses for multifamily buildings in New York City have been rising at approximately 7 percent annually over the last several years. In a typical rent-stabilized building, expenses already consume roughly 50 percent of revenue, with approximately 30 percent attributable to real estate taxes and another 20 percent attributable to operating expenses. That is before debt service. And very few buildings are debt-free.

Project that forward 10 years.

Even assuming zero mortgage debt, expenses will eventually exceed revenue growth under the current system. When that happens, what occurs when the roof leaks? What happens when the boiler breaks? What happens when elevators fail, facades crack, plumbing systems collapse, or emergency repairs become necessary?

The answer is obvious. There is no money to pay for those repairs. And when there is no money for repairs, housing deteriorates.

We have already seen this movie before.

New York City’s own housing stock provides a cautionary tale. New York City Housing Authority (NYCHA) properties reportedly suffer from approximately $80 billion of deferred maintenance. Buildings do not magically maintain themselves because politicians wish them to. Housing requires constant reinvestment. Capital expenditures are not optional. They are essential. The uncomfortable reality is that even rent-stabilized tenants must experience some level of rent growth over time because operating costs continue rising. Money does not simply appear out of thin air.

This is precisely why eliminating meaningful major capital improvement (MCI) and individual apartment improvement (IAI) incentives was such a consequential policy mistake. In fact, even some policymakers who strongly supported the state Housing Stability and Tenant Protection Act of 2019 have privately acknowledged that portions of the legislation may have gone too far in limiting reinvestment incentives.

The restoration of robust MCI and IAI programs would trigger an almost immediate wave of reinvestment into New York’s housing stock. Within weeks, tens of thousands of apartments would enter gut renovation pipelines across the city.

The economic stimulus effect would be enormous while simultaneously improving housing quality for tenants. Not to mention that the added supply would exert some much-needed downward pressure on soaring rents.

And, critically, these programs do not target or harm any individual tenant. They simply create economic incentives for owners to reinvest in buildings that desperately need capital improvements.

The historical data here is extraordinarily revealing. Before robust MCI and IAI programs existed, New York City’s housing dilapidation rate stood at approximately 14 percent. After those programs were implemented and reinvestment accelerated, the dilapidation rate reportedly fell to approximately 0.04 percent.

Why would policymakers dismantle programs that so clearly improved housing quality?

At the same time, the city should aggressively expand the redevelopment model now being utilized at Chelsea Houses, where aging NYCHA buildings are being replaced alongside substantial new construction led by private developers Related Companies and Essence Development.

This should not be an isolated project. It should become a citywide template. Few cities in the world possess the magnitude of publicly controlled land resources that New York already owns through NYCHA, yet much of that land remains dramatically underbuilt relative to modern housing needs.

The reality is that NYCHA land is massively underbuilt relative to its already poor zoning and development potential. In many locations, perhaps only 10 percent of the population density that could exist on these sites actually exists today. If New York executed 100 large-scale NYCHA redevelopment projects over the next several years, the city could likely create many hundreds of thousands of housing units far faster than the mayor’s current timeline contemplates.

And, ultimately, supply is the key to everything. There is only one long-term mechanism that exerts downward pressure on rents: increasing housing supply.

We saw this clearly during COVID. When population temporarily declined and effective housing supply increased, Manhattan rents fell dramatically, in some cases by nearly 30 percent. That was not ideology. That was economics.

Unfortunately, current state policy continues to undermine rental housing production.

The replacement of the 421a tax abatement program with 485x has proven deeply inadequate. Rather than stimulating meaningful multifamily rental development, the program largely incentivizes smaller sub-100-unit projects because labor requirements make larger developments financially unworkable. 

Attempting to simultaneously maximize labor concessions while aggressively incentivizing housing production simply does not work economically. When something becomes materially more expensive, you get less of it. And that is exactly what has happened.

The city and state should instead pursue aggressive pro-supply policies, including substantial floor area ratio bonuses for long-term rental housing creation. Imagine allowing 50 percent or even 100 percent density increases for projects containing rental housing, with requisite affordable components, combined with deed restrictions ensuring those units remain rental housing for 100 years.

That is how you create meaningful supply. That is how you preserve the existing housing stock.

And that is how you stabilize rents over the long term — not through slogans or political theater, but through policies grounded in economic reality.

Housing policy cannot be driven solely by politics. It must also be driven by economics. Because buildings do not repair themselves. Boilers do not replace themselves. Roofs do not fix themselves. Housing requires investment.

And, when governments create policies that discourage investment, deterioration is not a possibility. It is an inevitability.

Eventually, the numbers win.

Robert Knakal is founder, chairman and CEO of BK Real Estate Advisors.