Photo: Eduardo Munoz/Reuters

It’s not often that you hear socialist politicians talk about cutting taxes, but Zohran Mamdani, the Democratic front-runner, is already acknowledging that serious solutions to the city’s affordability crisis need to go well beyond the “Freeze the rent” slogan that rocketed him to first place in the polls. With New York trapped in a housing emergency, Mamdani is considering some of the strategies proposed by the city’s business and real-estate elites.

“The time has come for a change to our property-tax system,” Mamdani told me as we walked down Steinway Street in his Astoria district. “I say that as someone who serves on the Real Property Taxation Committee in the State Assembly, as someone who has looked at this system, sought to introduce legislation to augment this system, and yet been told that the scale of this is one where the Assembly, the Senate, Albany in general, is waiting for the vision of the mayor.”

Representatives of the real-estate industry have been screaming for lower taxes for years, mostly without success. “The housing crisis is a crisis of our generation. I just believe we have to arrive there in a different direction than most candidates are proposing right now,” Kenny Burgos, CEO of the New York Apartment Association, which represents the landlords of rent-stabilized units, told me. “All of my advocacy is centered around that same affordability we all want to get to. And property taxes is the beginning and the end of this conversation.”

“There are a number of things that Kenny and I disagree on. This is one of the things that we agree on,” Mamdani said. (Burgos and Mamdani attended the Bronx High School of Science around the same time; both got elected to the Assembly in 2020 and sat a few seats away from each other in the legislative chamber.)

The math behind New York’s affordability crisis is simple, unforgiving, and nonpartisan. Property taxes make up, on average, about 30 percent of the cost of running an apartment building with rent-stabilized tenants, and those fixed expenses, along with sky-high insurance, plus fuel and utility bills, have left thousands of buildings functionally bankrupt with landlords unable to pay for needed repairs and hesitant about renting out apartments at a loss. Vital City recently published a breakdown of the expenses of a 75-unit building in Washington Heights that is losing more than $450,000 a year because its legally capped rents are outstripped by the combined cost of property, insurance, and payments on an $11 million bank loan that comes due in 2030.

Freezing rents on buildings that already can’t pay their bills is a formula for disaster, said Burgos, who estimated that a staggering 200,000 rent-stabilized apartments are in buildings at risk of going belly-up. “Right now, the NYU Furman Center and the Citizens Budget Commission say about 5,000 buildings are in financial distress. We think it’s much higher than that,” he told me. “When you’re charging 1974 rent with 2025 expenses, the math is never going to check out. This is why this housing stock is falling apart very quickly. And it has a complete domino effect on the remainder of housing throughout the City of New York.”

This wasn’t supposed to happen. Eric Adams is the sixth consecutive New York mayor to vow that he’d fix New York’s convoluted property-tax system only to end up kicking the can down the road like his predecessors.

“Mayor after mayor has promised to tackle property tax reform, but struggling homeowners continue to wait and pay unfair bills under a fundamentally unfair and overly complicated system. I’m going to immediately put in place a committee to look at these tax laws,” reads a pledge from Adams’s 2021 campaign. “This will be fairly examined within our first year, with a robust outreach effort that gets maximum input from impacted New Yorkers.”

That never happened. New York’s tax schedule continues to greatly favor single-family homes, including luxury mansions, and hits rental apartments hard.

“Mike Bloomberg used to say his home on 79th Street has far lower taxes than a rental apartment down the block. And that’s because of our crazy tax system,” Kathy Wylde, president of the Partnership for New York City, told me recently. “I live in a co-op in Bay Ridge. My apartment is probably valued at close to a million dollars. My property taxes, pro rata for my apartment, are $2,700 a year.” Wylde’s organization, which includes the city’s largest employers, such as Pfizer, Hearst, Google, and JPMorgan Chase, has long advocated for lowering the cost of insurance, another big driver of apartment costs.

“We just issued a report on the cost of insurance in New York, which is multiples of anyplace else. The cost of the insurance in New York is driven by the fact that the trial lawyers who bring lawsuits and court cases and do big settlements have managed to create the most expensive litigation system in the country,” Wylde told me. “Car insurance in New York is 49 percent higher than the average in the country. Health insurance is 12 percent higher. Property and casualty similarly. All that is passed along in the cost of living. And this has happened in the last dozen years.”

Mamdani has been looking at the same numbers. “What we need is a multipronged approach,” he said. “Yes, we need to freeze rents for rent-stabilized tenants for four years. We also need to take action on the doubling of insurance costs for affordable-housing providers over the last few years, and I’m quite interested in looking at the prospect of something like Milford Street,” a collective of affordable-housing groups that recently launched a so-called captive-insurance company to self-insure 80,000 apartments.

The fact that Mamdani is looking into insurance programs and tax schedules is a sign of how dire New York’s housing crunch has become and a preview of the drastic measures the next mayor — whether it’s Mamdani, Andrew Cuomo, Curtis Sliwa, or Adams — will need to consider upon taking office.

“I think he is understanding that life is more complicated than just doing one-liners, that you’ve got to figure out, Okay, what are the factors contributing to high rents, and how do we deal with them?” Wylde said. “There are experts in the private and nonprofit sector, and hopefully some of them will be going into his administration in government if he’s elected. There are answers. There are things we can do.”

From Intelligencer - Daily News, Politics, Business, and Tech via this RSS feed