Housing Villains

Happy Tuesday, and welcome to another edition of Rent Free. 

Last week, I was off on a vacation that unfortunately yielded few insights into housing policy, besides the errant shower thought that all-inclusive seaside resorts offer one a taste of the post-scarcity mixed-use walkable urbanism we all might one day enjoy, if we only fix our zoning laws.

Unfortunately, this past week of housing news provided ample examples of people who are standing in the way of that bright automated luxury capitalist future.

This week’s newsletter thus focuses on two of these housing villains.

The first is President Donald Trump, who is once again proving to be an obstacle to the final enactment of a long-in-the-works bipartisan housing bill that includes a number of positive supply-side reforms.

The second is New York City Mayor Zohran Mamdani, who at last made good on his campaign trail promise to “freeze the rent”—much to the detriment of the physical and financial health of rent-stabilized housing in the Big Apple.

Lastly, I wanted to include a brief item explaining why the mayor’s rent freeze is not likely to be the final straw that convinces the U.S. Supreme Court to end rent control once and for all.

Last week, Congress at last approved the 21st Century ROAD to Housing Act by wide bipartisan margins in both chambers.

The final bill passed with 85 yeas to five nays in the Senate and was approved in the House on a 358–32 margin.

It now faces its final boss: Trump.

This past Wednesday, the president canceled a signing ceremony for the bill and said that he would not sign the legislation until Congress passed the SAVE America Act, a piece of partisan election legislation.

“It’s a yawn,” he said in the Oval Office on Monday in reference to the bill while reupping his demand that Republicans end the filibuster to pass the SAVE America Act.

That same day, House Speaker Mike Johnson (R–La.) transmitted the housing bill to Trump. He has 10 days to sign it or veto it. If he doesn’t sign the bill within 10 days, it becomes law anyway.

The bill passed with enough support that even if Trump vetoed it, Congress would have the votes to override that veto. Whether the Republican-controlled Congress would defy a Republican president by overturning his veto is another question entirely.

All that is to say that Trump is once again playing spoiler to a bill with wide bipartisan support that includes one of his major second-term priorities: a ban on large investor purchases of single-family homes.

The housing bill, readers might recall, began life last year in the Senate Banking Committee. It was there that Banking Chairman Tim Scott (R–S.C.) and Ranking Member Elizabeth Warren (D–Mass.) agreed to put together a bipartisan bill that advanced each of their housing policy priorities without spending a ginormous amount of new money.

The initial bill included supply-side proposals from Scott to pare back some federal building code regulations of manufactured homes and expand private investment in federally subsidized housing, as well as Warren’s longtime idea for a federal grant program that rewards states and localities for liberalizing their zoning codes.

The then–ROAD to Housing Act quickly became a vehicle for a lot of other wonky supply-side reforms that had been introduced as stand-alone bills over the years.

Other supply-side policies lumped into that initial bill included a bill exempting federally subsidized housing developments from environmental review requirements, a bill that directs more Community Development Block Grant (CDBG) funds to jurisdictions that are building more housing, a bill prioritizing federal transit grants to projects being built in areas with looser zoning rules, and a bill that would direct the Department of Housing and Urban Development to publish model zoning codes.

The ROAD to Housing Act passed the Senate that year but was not ultimately taken up by the House.

This February, the House passed its own bipartisan Housing for the 21st Century Act that included its own list of similar supply-side reforms, while excluding many of the Senate’s provisions, plus some Republican priorities such as deregulation of community banking and a ban on central bank digital currencies.

Hopes were high that lawmakers could agree to some sort of compromise bill that included supply-side proposals from each chamber.

Then came the fight over the inclusion of a ban on corporate home purchases.

For years now, the growing consensus that home prices are high because of overregulation has had to contend with another bipartisan story that high housing costs are the result of large institutional investors outbidding individual families for single-family homes.

Trump himself proved particularly enthusiastic about cracking down on large investor ownership of single-family homes in his second term. He used his State of the Union address to call for Congress to ban corporate single-family home purchases and issued an executive order directing agencies to block these purchases where possible.

In March, the president’s demand for an investor ban was included in the Senate’s amendments to the House’s housing bill, now called the 21st Century ROAD to Housing Act.

Slapping on an investor ban favored by the Republican president and many Democrats was intended to ensure the bill’s quick passage when it went back to the House.

But that initial version of the investor ban was so breathtakingly broad that it almost killed the entire bill.

In addition to banning large investors (defined as entities that own at least 350 homes) from buying more homes, it required them to sell off their inventory to owner-occupiers, including those that were acquired as part of a build-to-rent development.

That provision amounted to an effective ban on new build-to-rent developments, which comprise as much as 10 percent of new single-family home construction.

Conservative Republicans such as Sen. Rand Paul (R–Ky.) came out against the bill and cited the investor ban as the primary reason for their opposition. The coalition of housing supply advocates, who’d previously been major champions of the bill, lobbied hard to soften the investor restrictions and protect build-to-rent housing.

Yet the White House continued to urge House Republicans to pass the Senate version with the build-to-rent crackdown without changes.

That ended up not happening. While an investor ban made it into the final version of the bill that passed last week, the provisions forcing the sale of build-to-rent housing were nixed.

The final version of the 21st Century ROAD to Housing Act did not include all the housing supply provisions that had been included in past iterations of the bill.

But it does still include Scott’s deregulation of manufactured housing, reforms to the CDBG program, Warren’s $200 million “innovation fund” that provides planning grants to states and localities that have liberalized their zoning codes, and some watered-down streamlining of environmental reviews for subsidized housing projects.

The 21st Century ROAD to Housing Act is a rare animal.

It’s generally accepted that Congress does not do substantive policymaking anymore, sticking instead to passing the occasional omnibus spending bill and whatever narrow partisan priorities the party in power can squeeze through.

The housing bill sitting on Trump’s desk is a counterexample of lawmakers working across the aisle to compile a long list of modest reforms to the status quo that most everyone can live with.

Some of the better supply-side ideas did not make the final cut. The investor ban is still bad (for reasons Rent Free has previously covered). Free market wonks have raised reasonable objections that the bill improperly expands the federal government’s influence over primarily state and local housing policies.

Even so, there is something nice about seeing our system of representative government working as intended for once.

Naturally, the bipartisan, marginal nature of the bill could now see it fall apart at the last moment.

Trump’s “yawn” comment shows that he doesn’t think voters will be too upset if a bill of a million little wonky fixes goes down in flames. To the president, the effort Congress put into assembling the bill just gives him more leverage to demand that it pass an unrelated partisan priority of his.

Even the bill’s inclusion of a large investor ban isn’t enough to move the president. The bill’s wider goal of increasing housing construction, something the Trump administration is also committed to, doesn’t seem to interest him.

The whole saga is a good reminder that cynicism about federal politics is rarely misplaced.

On Thursday, New York City’s Rent Guidelines Board (RGB) voted 7–1 to freeze rents on one- and two-year leases on the city’s close to 1 million rent-stabilized housing units. 

The vote is unprecedented. While the board froze rents for one-year leases under the Bill de Blasio administration multiple times, it had never frozen rent increases for two-year leases before.

The adopted cap is a fulfillment of Mamdani’s primary campaign trail promise to “freeze the rent.”

The mayor celebrated the vote with some dessert-themed content. A short video put out by his office shows a smiling Mamdani announcing the “independent” RGB had adopted a rent freeze while reaching into a freezer to grab an ice cream. In another publicity stunt, the mayor dropped off a rent freeze cake to tenant activists in Harlem.

Sugary desserts are an apt metaphor for the mayor’s rent freeze. Everyone likes ice cream at the moment. Eaten in excess, it can cause all sorts of long-term health problems.

Such is the case with the adopted rent freeze. Tenants in existing rent-stabilized units will get a short-term benefit of flattened rents. But in the long term, the freeze will accelerate the physical and financial deterioration of the city’s rent-stabilized housing stock to the detriment of both tenants and owners.

This year’s rent freeze puts owners in a difficult position for two interconnected reasons.

The first is that the costs of operating multifamily housing have continued to skyrocket. According to the RGB’s 2026 estimates, operating costs for rent-stabilized buildings increased 5.3 percent. Everything from insurance to tax rates to water, sewer, and fuel costs continues to go up.

The RGB is technically an independent board tasked with collecting and reviewing these cost data and then approving rent increases that reflect them.

Early in his term, however, Mamdani appointed six new members to the nine-member board. The stacked board dutifully delivered a rent freeze in spite of these rising costs.

One board member, Christina Smyth, a landlord attorney appointed to the board by former Mayor Eric Adams as an owner representative, resigned from the RGB board just before the final vote. In a resignation letter, she accused it of crossing a “legal line” by ignoring the data in the service of giving the mayor his rent freeze.

Whether anyone will attempt to challenge the rent freeze in court remains to be seen.

The second reason that this year’s rent freeze puts rent-stabilized housing in such a tough spot is that the RGB process is effectively the only means by which owners can meaningfully raise rents.

In 2019, the state Legislature approved a sweeping update to New York’s rent stabilization law that eliminated almost all other avenues by which owners could raise rents.

That law eliminated a 20 percent rent increase that landlords could charge on vacant units. It severely limited their ability to pass on the costs of unit improvements and capital investment to tenants via higher rents. It also eliminated the law’s luxury decontrol provision, whereby units could be removed from rent stabilization altogether if their legal rents surpassed a certain threshold.

The 2019 rent law has placed heavily rent-stabilized buildings (that is, generally older buildings where most or all units are rent-stabilized) in severe financial distress.

As Arpit Gupta, an NYU professor and the sole RGB member to vote against the rent freeze, detailed in a piece for Vital City, these buildings (which total some 456,000 units) are close to breaking even or even losing money when only their net operating incomes are considered. That notably does not include the costs of financing these buildings.

The result is falling maintenance spending, a growing number of uninhabitable vacant apartments where the rents won’t cover the repair costs, and a rising number of building bankruptcies.

It’s in this context that Mamdani has chosen to freeze the rents.

Absent changes to the 2019 rent law, one can expect more buildings to go bankrupt and more units to deteriorate into uninhabitability.

Mamdani came into office talking a good game about the need to increase new home construction by cutting zoning regulations and permitting times. It was a rare acknowledgement from the socialist politician that supply and demand are real and the private market has its role to play in providing something people need.

Even as the mayor warms to capitalism for new housing, he’s still deeply committed to socialism for existing units. Therein lies a contradiction. The new units that could be created under a liberalized zoning regime have to be counted against the units lost to a disastrous rent-stabilization regime.

Mamdani’s supply-side socialism is merely trading more homes for fewer homes.

In the aftermath of New York’s rent freeze, there’s been a fair amount of speculation about how the U.S. Supreme Court might ultimately step in and save New York from itself.

This is largely premised on a short concurring statement Justice Clarence Thomas wrote the last time the court declined to take up a challenge to New York’s rent stabilization law. While Thomas agreed the court was right not to review that case, he said that rent control was a pressing issue the justices should consider should a better case present itself.

As it happens, there is currently a challenge to New York’s rent stabilization law in the works that might see the justices reconsider the court’s past permissive rulings on rent control.

Earlier this year, a handful of New York property owners and the Small Property Owners of New York (SPONY), a trade association, filed a federal lawsuit that challenges New York’s rent limits on vacant apartments. The case is being litigated by the Institute for Justice.

Past challenges to New York’s rent law have not fared well in the courts, given the exceptionally high bar courts apply to so-called regulatory takings claims. (That is when an owner argues a regulation has taken their property by reducing its economic value or the productive uses to which it can be put.)

These generally can only succeed if a regulation destroys the entire economic value of a piece of property.

Lawsuits contending that New York’s 2019 rent law is a physical taking because it allows tenants to pass their leases on to family members and prevents landlords from taking their properties off the market have also been rejected by the courts.

The SPONY lawsuit might have a better chance of success. That’s because it cleverly limits itself to arguing the unconstitutionality of New York’s limits on raising rents on vacant apartments.

The plaintiffs argue that New York’s rent law prevents property owners from raising rents enough to fix up vacant apartments and put them back on the market. The very fact that they’re vacant, and thus earning their owner no money, is solid proof that the rent regulations have completely eliminated the economic value of the property.

That could well be a compelling enough argument to a majority of Supreme Court justices. But it’s also a limited argument that would only apply to New York’s limits on raising rents for vacant apartments.

The Supreme Court might well overturn those limits on vacant apartments. But in all likelihood, they’d leave the rest of the rent law still standing and still causing all the attendant problems of deteriorating housing quality and increasingly bankrupt buildings.

In short, don’t expect Thomas to completely save New York housing policy from rent-freezing socialists.

• Proponents pull a proposed initiative to cut real estate transfer taxes from the California ballot.
• North Carolina legislators advance a bill to eliminate parking minimums statewide.
• A new RAND Corporation study finds that slashing impact fees would make a lot more housing projects financially viable.
• The Massachusetts Supreme Judicial Court has struck a rent control initiative from the state ballot, oddly on religious freedom grounds. Read Rent Free‘s past coverage of the initiative here.
• Nashville’s mayor uses eminent domain to block a data center.