New York City mayor-elect Zohran Mamdani swept to victory Tuesday evening on a platform of affordability, anchored by a plan to freeze rents across nearly two million rent-stabilized apartments.
But economists, universally, hate rent control. In a 2012 poll of top economists, just 2% agreed that rent-control laws have had “a positive impact” on the supply and quality of affordable housing. The Nobel laureate Richard Thaler even quipped in the survey that the next question should be: “Does the sun revolve around the earth?”
Why do economists revile a plan that seems to promote fairness and equity in a housing market that is clearly broken?
Seductive simplicity
To most voters, freezing rents looks like common sense: If prices are out of reach, stop them from rising. But to economists, that’s like treating a fever by breaking the thermometer: It suppresses the symptom without curing the disease, the persistent shortage of housing.
“Freezing rents doesn’t fix scarcity,” said David Sims, a Brigham Young University economist whose research on Massachusetts rent control remains a touchstone. “It just reshuffles who bears the cost.”
Sims’ work examined the rent-control regime that once governed Cambridge, Mass., where tenants could stay indefinitely at below-market rents. The policy was meant to keep housing affordable, but it led to what he calls misallocation.
“People who could do better by moving tend to stay,” he told Fortune. “Older households hang onto large units they no longer need, while young families can’t find space. Over time, you end up with the wrong people in the wrong apartments.”
When Massachusetts voters repealed rent control in 1994, property values in Cambridge rose 45%,—not only for the deregulated apartments, but for entire neighborhoods. It turned out that years of capped rents had discouraged investment and dragged down surrounding property values, meaning that when controls were finally removed, landlords were empowered to upgrade and renovate their apartments. Neighborhoods that had been frozen along with the rents suddenly seemed to revitalize.
That dynamic is already visible in New York. According to the city’s Housing and Vacancy Survey, roughly 26,000 rent-stabilized apartments are sitting empty, many uninhabitable because renovation costs far exceed what landlords can legally recover. The state’s 2019 Housing Stability and Tenant Protection Act caps recoverable renovation expenses at $50,000 spread over 15 years. Rehabilitating a century-old tenement can cost twice that, leaving owners little incentive to do anything but lock the door.
Short-term relief, long-term pain
Rent control’s immediate benefits, for current residents, are undeniable. It offers stability to tenants living paycheck-to-paycheck and reduces the risk of displacement. But over the long term, economists argue it functions the same way as throwing sand in the gears of the housing market. Landlords defer maintenance they can’t recoup, new construction slows, and the available housing stock quietly erodes.
A 2018 Stanford study led by Rebecca Diamond, one of today’s leading experts in housing markets, found that when San Francisco expanded rent control in the 1990s, the supply of rental housing fell 15% over the next decade. Many landlords converted apartments to condos or owner-occupied housing to escape regulation. The policy helped existing tenants, but ultimately raised market rents citywide and accelerated gentrification, causing the opposite of what policymakers intended.
“It’s not about pitying landlords,” Sims said. “It’s about understanding incentives. You can’t expect people to invest in something if they’ll never break even—just like you can’t expect tenants to volunteer to pay more rent.”
For economists, the deeper problem with rent freezes is conceptual: They imply that affordability can simply be decreed against the logic of supply and demand.
“It creates this belief that the problem can be solved by fiat,” Sims said. “But rents are high because people want to live in New York. The only lasting fix is to make it easier to build more housing that people actually want.”
He offers a visceral analogy of market pressures: Black Friday. People don’t wait in line for stores anymore on Black Friday, Sims said, but there was a time when, for a $1,000 TV at $200, there’d be a line around the block at 4:00AM, and only a few lucky people would get the T.V.
“But housing isn’t like a $200 TV,” Sims observed. “Everyone kind of needs a place to live, but if housing is priced like the $200 TV, then there’s a bunch of people in that line who don’t get it.”
That’s the thing about rent control, economists say: They benefit insiders at the expense of outsiders. Over time, it can deepen inequality by keeping younger, lower-income, or newly arrived residents locked out of regulated neighborhoods that become effectively closed clubs.
Band-Aid policy in a broken market
Supporters of Mamdani’s plan counter that New York’s crisis is so severe, temporary freezes are a moral necessity.
With median rents above $4,000, they argue, the city cannot wait for zoning reforms and construction projects that take years to materialize. But even sympathetic economists warn that without parallel measures to boost supply, a freeze simply defers the reckoning.
“If you don’t pair a rent freeze with a credible plan to add housing,” Sims said, “you’re not solving the problem. You’re just pushing off accountability without really solving the underlying problem.”
