On February 17, Mayor Zohran Mamdani unveiled his administration’s $127 billion preliminary budget proposal for the 2027 fiscal year. According to Mamdani, the city is facing a $5.4 billion budget shortfall over the next two years. To close this gap, Mamdani is continuing his pressure campaign on Governor Kathy Hochul to raise personal income taxes on earners making more than $1 million annually as well as to raise the top corporate tax bracket, which he described as the “most sustainable and fairest” path. Yet, despite their agreement on numerous other issues, Hochul has maintained her position that she will not sign any bill that raises taxes on New Yorkers.
Since Hochul has pledged not to budge on the issue, Mamdani has announced a “second, more harmful path,” which most notably consists of a 9.5 percent across-the-board property tax increase, along with other cost-saving measures. Property taxes are the only category of taxes that the New York City government has complete jurisdiction over, not requiring authorization from the state government in Albany to alter.
Any sort of property tax hike would affect three million homeowners and 100,000 commercial properties. While these property owners would certainly feel the impact of any such tax increase, the burden would specifically have a detrimental effect on the owners of the city’s approximately one million rent-stabilized apartments — those which Mamdani consistently pledged to freeze rent increases for during his mayoral campaign.
The body responsible for setting rent adjustments for these apartments is the Rent Guidelines Board (RGB). One day after the initial budget proposal, February 18, Mamdani announced six new appointments to the nine-member Board, including a new Chair. Mamdani has openly expressed his plan to appoint individuals that were aligned with his four-year rent-freeze aspirations, and since only a simple majority (five members) is needed to do just that, it is highly likely that the RGB will vote to freeze rents when they convene in June.
Before delving into the negative impact the proposed property tax increase would have on rent-stabilized apartments, it is essential to highlight the flaws of rent-stabilization as an economic concept first.
Typically, for rental housing, landlords set the monthly rent based on a host of factors including operating costs (taxes, insurance, maintenance), property value, and local market competition, and are able to increase the rent as they deem appropriate. However, for housing brought under rent-stabilization laws, landlords do not control the rate at which rent increases. For that, the RGB exists to set the rate, if any, by which rents can increase.
The major economic flaw in this practice is that it frequently leads to major market distortions. Rents naturally change based on evolving supply and demand, changes to input costs, and inflation. But when a singular body determines rent increases for a million apartments, as is the case in New York City, it fails to account for these nuances.
Additionally, the 2019 state-level Housing Stability and Tenant Protection Act prohibits rents from adjusting to market rates upon vacancy, keeping units rent-stabilized even after a tenant moves out. When an apartment requires necessary yet costly repairs to bring the unit up to code, but the rent is and remains capped lower than the renovation costs, landlords cannot rationally justify the investment. What results from this is what is seen widely throughout the city: nearly 50,000 rent-stabilized “ghost apartments” sitting vacant as of 2024 according to the RGB.
This problem applies equally to necessary repairs that arise while a tenant is actively living in the unit. Many landlords of rent-stabilized apartments find themselves financially strained when it comes to making maintenance repairs, especially in older buildings. Leaks, paint chips, broken utilities, and many other damages take much more time to repair since the rent is not high enough to justify a landlord swiftly addressing these issues. Now layer on new regulations, such as one requiring landlords to provide window air conditioners to tenants upon request taking effect in 2030, and it is becoming increasingly difficult to generate a consistent cash flow from these properties.
Zooming back out, the proposed 9.5 percent property tax increase would be an immediate expense which landlords would have no choice but to absorb due to the inability to adjust rents to cover the burden — certainly spelling disaster for the financial stability of rent-stabilized units. While a four-year rent freeze sounds appealing in theory, in practice, it is economically irrational. The input costs needed to maintain the quality of these apartments will absolutely not stay stagnant, so why should rents?
Mayor Mamdani, your rent-freeze aspirations mixed with this tax proposal is undoubtedly a disaster in the making.
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