NYC rent freeze proposal draws expert warnings about market damage

New York City’s soaring housing costs have become a defining issue for voters in the Big Apple’s mayoral election, but politicians and economists are divided on the right long-term solutions to address it.  

In theory, a rent freeze may seem like a quick and easy answer to address the affordability crisis. However, experts say it could hinder the city’s real estate market in the long term by discouraging investment and worsening affordability for non-rent-stabilized units. 

During his campaign, Zohran Mamdani, a self-described democratic socialist who is running for mayor on a platform to lower the cost of living for working-class New Yorkers, said more than 2 million residents live in rent-stabilized apartments that “should be the bedrock of economic security.” If elected, he pledged to freeze rents for those tenants and use every available resource to expand affordable housing.

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Shannon McGahn, chief advocacy officer at the National Association of Realtors, cautioned that rent freezes have historically backfired. 

“Developers are reluctant to build in areas where their properties may become subject to rent controls,” said McGahn, who noted that there is already a nationwide shortage of about 5 million units. 

Residential apartment buildings in the Brooklyn borough of New York. (Michael Nagle/Bloomberg via / Getty Images)

“They [rent freezes] chase away the additional supply that would actually create more low- to mid-range housing units,” McGahn said. “The real solution is building more homes – not discouraging the very investment needed to create them.” 

That concern is echoed at the city level, with New York Apartment Association (NYAA) CEO Kenny Burgos warning that the policy could make developers wary of investing in New York.

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“I don’t know any investor or builder who would want to build in a city where the mayor is threatening to cap revenues and an ability to pay back the development of these projects,” Burgos said. “So you’re just going to have a lot less attraction of people to build the housing that we need, which Zohran acknowledges that we need so desperately.”

Experts say a rent freeze could hinder the city’s real estate market in the long term. (Zamek/VIEWpress)

Ed Elson, a business analyst and co-host of the “Prof G Markets” podcast, noted that rents are determined by the forces of supply and demand.

“The solution to high rents, therefore, is to increase supply and incentivize more construction. Paradoxically, rent freezes disincentivize construction, which causes rents everywhere else to go up even higher,” Elson said.

He described rent freezes as a “too good to be true” policy that would not…