Well, that didn’t take long. New York’s democratic socialist mayor, Zohran Mamdani, has managed to make the city’s already counterproductive rent regulations even worse, and the results are coming in. Mamdani tried for months to steer 38 largely rent-stabilized properties to an affordable-housing buyer. Instead, on Tuesday, the first of the buildings headed to foreclosure auctions.
The troubled portfolio, formerly owned by Emerald Equities, contains about 850 mostly rent-stabilized apartments and carries roughly $250 million in mortgage debt. A prospective buyer offered $110 million last month, and creditors rejected the bid. Risk like that will inevitably show up in underwriting standards.
Roughly 1,600 buildings in New York with rent-stabilized apartments now have expenses exceeding rental revenue, according to the city’s Rent Guidelines Board. Meanwhile, the financing that keeps such properties functioning is becoming harder to obtain. Mortgage originations for buildings in which at least half the apartments have regulated rents fell from $27.6 billion in 2019 to $11.3 billion in 2025. Signature Bank collapsed during that period, and other lenders retreated as interest rates rose and government policies made owning regulated housing less attractive.
A 2019 state housing law sharply restricted landlords’ ability to deregulate apartments and raise rents through renovations or tenant turnover. Mamdani’s rent freeze, a signature campaign promise, compounds the problem. Freezing rents does not freeze the growing costs of a new boiler, insurance, property taxes, repairs or labor.
Fannie Mae and Freddie Mac seem to be responding to Mamdani’s freeze. Fannie is assuming in some underwriting that rents will remain flat for four to eight years while expenses rise at least 5 percent annually, and Freddie paused some lending while assessing the freeze, according to the City Reporter. Federal Housing Finance Agency Director Bill Pulte disputed those reports, saying Freddie continues to lend on rent-stabilized properties and Fannie remains active in the market. But even Pulte acknowledges that their underwriting considers “local rules” affecting any property’s “income and operating costs.”
A pullback in lending puts owners of rent-stabilized properties in even more of a jam. A building with a maturing mortgage might no longer generate enough income to support a refinancing large enough to repay the existing loan. The owner would then have to inject more cash, find more-expensive financing or default. Buildings with too little revenue also have less money for maintenance, which leads to worse living conditions for residents.
Inevitably, taxpayers will be expected to subsidize the preservation of properties that private capital will no longer finance. Rent stabilization certainly helps some current tenants, but discouraging investment in tomorrow’s housing stock won’t do anything to improve affordability in the Big Apple.
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