Austerity Socialism

Zohran Kwame Mamdani’s budget blues: New York City Mayor Zohran Kwame Mamdani was elected on a promise of massively increasing city spending on affordable housing, fare-free transit, child care, and more.

With less than two months into the job, he’s now scrambling to figure out how exactly he’ll pay for existing city services.

Yesterday afternoon, Mamdani unveiled a US$127 billion budget plan that includes a 9.5 percent property tax increase, which, along with a $1 billion withdrawal from the city’s reserve funds, will be needed to close a $5.4 billion budget gap.

State law requires New York City to run a balanced budget. It’s a requirement that the city has only been able to comply with over the past several years by underbudgeting programs and pre-paying for city services with higher-than-expected COVID-era tax revenues and generous federal aid.

With both those sources of funds running dry, Mamdani now needs to finally close a structural budget gap that’s persisted for years.

The limits of city hall socialism: On the campaign trail, Mamdani called for raising city taxes on corporations and wealthy New Yorkers to fund his proposed expansions of city services. That’s the same well he’d prefer to draw from to balance the budget.

It’s not something he, or the city, can do on its own, however. The state Legislature and Gov. Kathy Hochul would have to sign off on any corporate or income tax increases. Hochul, who is currently running for reelection in a state with budget problems of its own, has consistently opposed a city income tax hike.

Mamdani explicitly intends to use his proposed property tax hike, which is something the city can do on its own and which would fall heavily on middle-class New Yorkers, as a means of pressuring Hochul and state officials to acquiesce to more taxes on the wealthy.

“There are two paths that we can walk: One that offers long-term stability [i.e., higher income taxes] and a second one with significant pain [i.e., higher property taxes] that we deeply hope to avoid,” Mamdani told reporters at City Hall.

Weakening this bluff is the fact that the local politicians, whom Mamdani needs to vote for a property tax hike, are dead-set against the idea.

“At a time when New Yorkers are already grappling with an affordability crisis, dipping into rainy day reserves and proposing significant property tax increases should not be on the table whatsoever,” said City Council Speaker Julie Menin and Councilmember Julie Lee, who chairs the finance committee, in a joint statement.

Andrew Rein, president of the Citizens Budget Commission, a nonpartisan watchdog group, criticized Mamdani for offering a “false choice” between a property tax hike and an income tax hike.

“The best choice is to eliminate spending that does not improve New Yorkers’ lives and make government more efficient and effective. The Mayor should ensure that every one of the people’s $127 billion is used well, before asking them to dig into their pockets,” said Rein in a statement.

Indeed, this year’s budget proposal is $5 billion more than last year’s. Almost the entirety of the budget gap that Mamdani has to fix could be solved by holding spending at constant levels.

Clearly, massive tax increases are still where his heart is.

Balance the budget, bankrupt landlords: Should Mamdani’s property tax hike come to pass, it’ll exacerbate the negative effects of the signature “rent freeze” he’s been gunning for since his mayoral campaign started.

New York’s rent-stabilized housing stock is increasingly in financial and physical distress, thanks to a 2019 law that closed off almost all avenues for landlords to raise rents, aside from the small percentage increases approved each year by the city’s Rent Guidelines Board.

Today, some 25,000 apartment units sit vacant because their owners can’t raise rents to finance necessary repairs. At least 10 percent of rent-stabilized buildings are running an operational loss. Once debt costs are factored in, many more are likely in the red.

Mamdani’s proposal to “freeze the rent” would quicken the pace at which rent-stabilized units go bankrupt. In an occasional nod to reality, the mayor has said he’s open to property tax relief as a means of making the numbers work for rent-stabilized landlords.

Now, Mamdani’s policy is proposing to hit rent-stabilized owners with a rent freeze and a massive property tax hike. The results would likely be devastating.

“Roughly one-third of rent-regulated housing is already struggling due to rising costs, with property taxes the biggest expense,” said New York Apartment Association CEO Kenny Burgos in an emailed statement. “This proposal, coupled with Mamdani’s pledge to freeze rents for four years, virtually guarantees the physical destruction of tens of thousands of units of housing.”

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