Mises Wire

When President Donald Trump recently told the New York Times that he is restrained only by “my own morality” instead of by international law or treaties, people rightfully were shocked. People who feared the Trump presidency might turn authoritarian hoped (maybe against hope) that the existing constraints that came with the office of president might “moderate” his views, but so far it has been a false hope.

Likewise, when Zohran Mamdani became mayor of New York City, some had hoped that the financial constraints he was facing would limit his ambitious plans for billions of dollars of new “free” services for New Yorkers. However, Mamdani dashed that belief when he declared, “I was elected as a Democratic socialist and I will govern as a Democratic socialist. I will not abandon my principles for fear of being deemed radical.”

Indeed, he has kept that promise, especially when it comes to housing, which was the key issue that got him elected in the first place. Mamdani promised a rent freeze for starters and much more government intervention into private housing markets, and his first step was to hire Cea Weaver as his director of the Office to Protect Tenants, who wrote that home ownership was “racist” and a “weapon of white supremacy” as his front-line official in housing.

Weaver had posted many things on her now-scrubbed social media, and, while Mamdani’s office has tried to play it down, what she wrote was significant and it provides a window into how the Mamdani administration will govern, especially when it comes to housing. Among the things that Weaver wrote included the initiation of policies meant to “impoverish the white middle class,” and that rent control “a perfect solution to everything” because it is an “effective way to shrink the value of real estate.” Notes the New York Times:

That rhetoric had played a role in raising her (Weaver’s) profile within New York housing circles, even as it seemed to hobble her 2021 bid to join the city’s powerful Planning Commission. Her calls to “elect more Communists” and “seize private property” had been well documented in The New York Post.

By stating his socialist intentions early in his administration and hiring Weaver, Mamdani is declaring that his office believes that private housing is illegitimate, period, and must be ended, with the City of New York being the landlord—or at least the overseer—for all rental housing in the city. Not even his socialist forebear, Mayor Bill DiBlasio, would go that far (although it is pretty certain that DiBlasio, too, longed for an East German arrangement for the city’s renters). Writes Allysia Finley in the Wall Street Journal:

As rent restrictions drive thousands of apartment buildings across the city into disrepair and threaten a cascade of foreclosures, Mr. Mamdani has tapped Ms. Weaver to implement his goal of “decommodifying” housing. Their plan: Drive out private investors by making it impossible to turn a profit and keep properties in serviceable condition. Then the government will seize the buildings and hand them over to tenant collectives and nonprofits to manage under communal ownership.

Socialists have been using the term “commodification” as a pejorative to claim that the capitalist system takes goods that should be socialized and, instead, places prices on them which then makes them scarce. The Cambridge Dictionary defines “commodification” as: “…the fact that something is treated or considered as a commodity (= a product that can be bought and sold”). To put it another way, the definition is built upon the assumption that placing a price on a good is both arbitrary and illegitimate. Thus, housing is a “right,” not something that one should be permitted to either buy or sell.

As Finley has noted, Mamdani’s denials notwithstanding, the mayor and his underlings do have a plan to bankrupt owners of apartment buildings through strict rent controls, organizing rent strikes, and other coercive measures so the city can take the property. Mamdani and Weaver have made it absolutely clear to building owners that the city considers them to be an enemy to be vanquished—and if these owners lose everything in the process, they deserved it because they had the affrontery to buy the buildings in the first place.

Mamdani’s office likes to portray apartment owners as “ripping off” tenants, but NYC laws for years have been stacked against landlords and have made it difficult for owners to make profits, whether they be corporate owners or individuals. Between current economic conditions and Mamdani’s open declaration of war against private apartment owners, ownership of rental property will be anything but profitable in the future. Finley writes:

Ms. Weaver’s crowning achievement (as a housing activist) is a 2019 state law that restricts New York City landlords’ ability to pay for renovations by raising rent and does away with the ability to deregulate rent-stabilized units—which account for nearly half the city’s rental housing—when tenants move out. The law upended landlords’ investment models, slashed building values, and fueled runs at two regional banks.

Finley continues:

Rent-stabilized buildings have been selling at steep discounts, some for less than the cost of a NYU degree. Which is worth more? Tough call. A rent-stabilized building in East Harlem this spring sold for 3% of its 2016 sales price. A city pension fund investment in rent-stabilized housing—once projected to mint eye-watering returns—has declined by 70% since the 2019 law was enacted. Taxpayers will inevitably have to backfill the losses.

Many buildings have fallen into severe disrepair because rents don’t cover rising maintenance costs, property taxes, insurance premiums, debt payments and utilities. The city pays nonprofits up to $380,000 a unit to repair dilapidated rent-stabilized apartments, which can exceed the market value of the entire buildings.

Lest anyone think that Mamdani is looking to just make life better for tenants, Finley writes that the real goal is to drive down the value of private rental property to near-zero, noting:

A private real-estate firm has sought to buy Pinnacle’s rent-stabilized apartments in bankruptcy for a pittance. But a city attorney tapped by Mr. Mamdani last week sought to block their sale by arguing to the judge that—get this—rent restrictions would prevent the firm from maintaining the units. Mr. Mamdani knows full well that rent restrictions produce slums. That’s the goal.

Ms. Weaver has advocated government seizure of properties that are in distress or foreclosure so that they can become socialized housing. A majority of New York’s left-wing City Council last year signed on to legislation that would empower the mayor to do so.

In other words, the Mamdani administration admits that it has a policy of ensuring that private apartment owners cannot afford to keep up necessary maintenance of their properties, but that has not stopped NYC’s Public Advocate’s office from circulating a “worst landlords” list that the media has published with glee. However, lest anyone claim that a fully-socialized housing system the city in which either the city or non-profits and tenant cooperatives tied to the mayor own the rental property, one should remember that the worst landlord in New York City is…the New York City Housing Authority, which has more open work orders than all the vaunted Top 100 worst private landlords combined.

For all of the “commodification” talk about private ownership of rental housing, not to mention the wonder and greatness of “democratic socialism,” the new owners—should Mamdani and Weaver get their way to eliminate private apartment rentals—will even be less interested in providing decent housing than the ones vanquished by New York officials. This is nothing less than a New York City bait-and-switch, and the city has done it before.

In 1940, the city took over the subway system which from its construction in the early 1900s had been privately owned. The original fare was a nickel per ride and, in 1940, it was still five cents, thanks to New York’s price controls. Henry Hazlitt writes:

New York City’s first subway opened in 1904. The fare was 5 cents. The subways remained under private ownership until 1940. The fare was still 5 cents. But meanwhile wholesale prices had gone up 32 per cent; wage rates had tripled; the lines were granted tax exemption by the city. They petitioned for higher fares. But the 5-cent fare was sacred. The city fathers decided that the only way to keep it was to eliminate private profit and run the trains themselves.

So the subways were bought by the city in June 1940. On July 1, 1948, the fare was doubled to 10 cents. On July 25, 1953, it was tripled to 15 cents. Between 1940 and 1953 other consumer prices went up 91 per cent, but New York subway fares went up 200 per cent. The lines were still run at heavy loss. Even by its own method of accounting, the Transit Authority has lost money in seven out of the last ten fiscal years. If even one of its several subsidies from the city is deducted, it has lost money heavily in every one of those years.

Even though it was able to raise fares at will, the city and its current owner—the Metropolitan Transportation Authority—have only run huge losses while the capital stock has deteriorated. The New York subways are so poorly-capitalized that they still are using what the New York Times calls “ancient signal technology. The equipment has to be manually operated, around the clock, from a network of underground control towers.”

Housing will be no different. The city already has a record of massive failure being a landlord and it only will be worse as Mamdani and Weaver strangle what is left of the private housing stock and the city seizes it and hands it off to politically-connected non-profits and cooperatives. And, lest anyone think the city will suddenly provide “affordable” and abundant housing that is not in need of maintenance will be greatly disappointed. The waiting list for public housing is nearly a decade and even longer for subsidized Section 8 housing.

Indeed, the housing shortage—and ultra-high rents—will intensify during the Mamdani regime, as the city doubles down on the destructive rent control policies of the 1970s and 80s, as described by journalist William Tucker. The “warmth of collectivism” will not be what Mamdani has promised or what his supporters have wanted. Instead, like those who have lived in collectivist societies like the old USSR, Eastern Europe, and Mao’s China, New Yorkers will live the absurdities of socialism even if they refuse to recognize what it is.

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