The High Cost of Bad Policy

I used to think that politics only mattered for real estate developers. They’re the ones who need to convince cities to change zoning, grant exceptions, or provide subsidies. A run-of-the-mill apartment owner, I thought, didn’t need to worry much about politics. Boy, was I wrong.

It’s one thing to buy in a city like San Francisco, which has had rent control for years and a reputation for being unfriendly to landlords. It’s another to have rent control enacted (or constantly threatened) in a city that doesn’t need it. Or to live through a pandemic-caused eviction moratorium for three years when the rest of the country moved on after one. Or to deal with city leadership that wants to defund the police, takes a softer stance on crime, and views business as the enemy.

We’ve faced all of these issues. Some are survivable. Others are value killers. It takes a strong stomach—and capital—to pursue deals in politically unstable environments. On the ballot this past week were candidates promising to shake up the status quo. Affordability and the growing class divide were key issues. It worked for Zohran Mamdani in New York City, but in Minneapolis and Seattle, cooler heads prevailed.

Affordability

Affordability is a real concern across the country. Everything costs more. Groceries, basic goods, and housing costs have all risen. In cities like New York, it’s increasingly difficult just to get by. I would argue that many of Mamdani’s supporters don’t fully agree with his politics or his past associations, but he was the only one talking about what matters to a renter class that feels left behind. Rent freezes, city-owned grocery stores, free public transit, and higher taxes on the rich. They’re all great talking points, but they don’t solve the root problem.

Since I focus on multifamily housing, let’s examine two cities. Austin, Texas is not New York City, but the contrast is instructive. Austin added 98,000 new apartment units since 2022, according to Yardi Matrix. That’s 27% of the total apartment inventory today. New York, by comparison, added 13,000 new apartments units, a mere 4% of the total inventory. One city saw rent declines. The other saw rents continually increase.

In Austin, monthly rents rose 28% from $1,417 in January 2020 to a peak of $1,809 in October 2022. Since then, they’ve fallen 11% to $1,618 as of October 2025. Austin has become more affordable.

In New York City (Manhattan), monthly rents fell 14% during the pandemic from $4,229 in January 2020 to $3,623 in February 2021. Since this low, rents have surged 55% to $5,607 as of October 2025. Overall, rents are up 33% since 2020. New York City has become even less affordable (not that it ever really was).

Nationwide, the average weekly wage grew from $1,236 in Q1 2020 to $1,613 in Q1 2025, according to the Bureau of Labor Statistics. That’s a 30.5% increase, or cumulative annual growth rate of 5.5%. Rents are relatively affordable if you’re in Austin as wages have grown faster than rents. That’s not the case in New York City.

Why is this happening in New York?

Simply put, New York doesn’t build enough housing. It also keeps adding roadblocks for developers and landlords. The first rent laws were enacted in the 1920s. Nearly every decade since has brought new restrictions or tenant protections that further limit supply.

In 2019, vacancy control was re-implemented. This prevents landlords from raising rents above a certain limit even when a unit becomes vacant. A unit can remain permanently below market, whether it’s occupied or not.

When landlords can’t raise rents, but operating expenses keep rising, properties fall into distress. Owners then face hard choices about which repairs to make to just stay afloat. That’s why some would rather keep apartment units empty, hoping for a change in the law rather than subject themselves to another money-losing occupancy.

The cost of construction in New York City is so high that only luxury units make sense. High-rises are inherently expensive, but city fees, taxes, prevailing wages, and long approval times make it worse. Despite this, apartment units still get built, but not enough. Rent freeze advocates will argue that only luxury apartments get built. That’s true, but if enough of them get built, their rents will fall. Then, mid-tier properties will be forced to reduce their rents. And on, and on. Through supply, not restriction, apartments across the spectrum become more affordable.

Leadership is the Solution

If I asked you to name the most progressive, liberal, left-leaning big city in America, you’d probably say San Francisco. And you’d be right. Yet, after years of self-flagellation resulting in numerous articles about its demise, San Francisco is finally getting its act together. The city elected a moderate (still left-leaning) mayor who is taking a commonsense approach to fixing the city’s issues. He’s cleaning up streets, addressing homelessness and drug-related activities, working with businesses to come back downtown, and looking for ways to encourage more housing. San Francisco is on the rise because of this approach. Apartment rents are rising because the city is desirable again, and demand is growing. Unfortunately, though, there’s still minimal new apartment supply.

It takes years for new apartments to materialize. But when they do, they help balance the rental market. It takes real leadership to want to reduce bureaucracy, take on NIMBYs (not-in-my-backyard), and encourage significant new development. This is not a politically popular stance in left-leaning cities. I’m hopeful that mayors like Daniel Lurie in San Francisco succeed in building more housing of every kind, and improve the desirability of their cities.

Common sense leadership is the only path to making cities more affordable and attractive again. Platitudes and promises, like those in New York mayoral race, have been proven wrong time and again and only make the situation worse.