Nikolaos Chatzarakis reviews some of the key economic platforms of New York City Mayor-elect Zohran Mamdani. He argues that Mamdani’s platform is ambitious but not unrealistic, and that criticisms of it often rely on simplistic models and theory. Still, there remain areas for improvement.
The New York City mayoral race attracted international attention as self-described democratic socialist Zohran Mamdani won the Democratic primary in June and the general election on November 4. Mamdani appealed to voters with a platform of ambitious policies to address NYC’s problems with affordable housing, high inflation, rising inequality, and poverty.
Specifically, the core tenets of Mamdani’s economic platform are as follows: 1) Freeze rent for two million rent-stabilized apartments and construct 200,000 new affordable units over ten years at a budgeted cost of $100 billion. 2) Eliminate bus fares (expected to cost between $700-800 million per year) and invest in bus lanes and signal upgrades. 3) Provide free universal childcare for all children between six weeks and five years old (expected to cost $12 billion per year). 4) Create city-owned grocery stores selling at wholesale cost (budgeted at $60 million per year). 5) Create a “Department of Community Safety” that will invest in public safety and crime reduction by building out public mental health services rather than relying solely on police enforcement (budgeted at $1.1 billion per year). 6) Raise the minimum wage in NYC to $30 per hour by 2030 (from its current level at $16.50 per hour). 7) Raise corporate taxes from 7.5% to 11.5%, raising approximately $5 billion per year, and impose a 2% city income tax on New Yorkers earning more than $1 million a year, raising approximately $4 billion per year. Also, crack down on waste and unpaid fines (expected to raise a further $1 billion).
Mamdani’s critics have warned that his proposed policies are irresponsible, inefficient, or outright impossible. Yet, the dire situation for NYC’s low- and middle-income classes seems to press for radical measures—hence, his popularity among voters. In this article, I will review some of Mamdani’s flagship policies and assess why Mamdani’s critics are overly pessimistic.
Housing
Critics of Mamdani’s housing policy argue that it will decrease the supply of apartments in the long run as incentives to build new construction are reduced. Further to their point, demand for housing in NYC, as indicated by a rental vacancy rate currently at its lowest in more than 50 years (1.4%), is so unresponsive to prices that a rise in rents due to lower supply will only exacerbate the current housing crisis. Studies of similar rent-control initiatives in places such as Cambridge, Massachusetts, do support the claim that rent control can harm tenants in the long run as landlords withdraw properties from the market. Small landlords renting rooms in their homes or a second home may no longer find it profitable and withdraw those rooms from the market or sell their second homes altogether. Meanwhile, rather than rent out their units, corporate landlords may prefer to write off the lost revenue of an empty unit to reduce their tax obligations or rely on other revenue streams until rents can be raised. The vast majority of rental apartments in NYC (up to 89%, according to the housing nonprofit JustFix) are owned by rental management companies, and research has found that these landlords are more sensitive to rent restrictions.
However, similar initiatives in cities in Canada and Australia have had more success in reducing homelessness and preventing a massive increase in rents (as a percentage of net income). In Helsinki, Finland, public housing programs reduced homelessness by 35% between 2008 and 2019. Singapore is a leading example, with the government owning 90% of homes, which house up to 78.8% of the population. Rents in Singapore are constant between 30% and 40% of households’ net income. Even London has a rich history of social and council housing, with current quotas of affordable housing at 35%.
Just because public housing programs worked elsewhere does not assure that NYC’s program will work. NYC has its own unique economy, which Mamdani will have to take into account. Indeed, some of these idiosyncratic characteristics of NYC lend reason to believe Mamdani’s plan may succeed. The NYC housing market is far from competitive, and there is strong evidence of monopolistic behavior. Therefore, the current rents and vacancy rate are likely not “competitive” as is. Recent research has found the existence of markups (revenue above costs but before taxes) of at least 9% for all apartments in NYC. According to the Rent Guideline Board, landlords made on average a $142-$657 pre-tax profit on rent-stabilized units, depending on the borough. The average stabilized rent is between $1,039 and $2,167, which similarly suggests a profit margin of at least 10%, if not much more. Therefore, any attempt from city hall to freeze rents for rent-stabilized housing does not necessarily entail that the continued provision of rent-stabilized units will be unprofitable, pushing landlords to withdraw supply hitherto rent-stabilized apartments. The question is more so about the opportunity cost for landlords to withdraw rent-stabilized units and new corporate landlords to bring new rent-stabilized units to market through new construction. Mamdani’s administration will have to determine the minimum profit margins at which landlords will be willing to keep units on the market and stabilize rents accordingly. Also, as the New York Times reported last June, landlords are not a homogeneous group, and Mamdani’s plan will also have to account for disparities in wealth and debt, the latter of which do not always factor into headline calculations of rent-stabilized profit margins.
The main problem, then, is to retain the supply of housing even if landlords, particularly corporate landlords, withdraw properties or forgo building additional, more expensive housing that is less likely to be profitable at lower rents. In which case, any expanded rent-stabilization program will only work if Mamdani fulfills his plan to create 200,000 additional units. In fact, the Mamdani administration may have to deliver even more than that. Not only do the 200,000 additional units need to enter the market as soon as possible to offset those that private landlords may remove from the market in response to rent freezes for rent-stabilized apartments. They must also, to fulfill Mamdani’s aspirations, bring enough housing to market to bring down all rents and do so to a degree such that the increase in welfare for renters of both rent-stabilized and non-rent-stabilized apartments justify the price tag of the public construction, which falls on the taxpayer and is estimated at $10 billion per year. Delays and hidden costs from construction are also a near guarantee. The transfer of wealth from landlords to renters, though a political non-consideration, does also factor into economic welfare calculations, and in theory any benefits from increased housing supply would have to account for this, too. Mamdani may have to find more ways to increase housing supply, such as the continued facilitation of empty offices into housing or the utilization of ghost houses.
Wages and Labor
Many outfits like the National Employment Law Project have pointed out that there is a huge disparity between the current minimum wage of $16.50 per hour and the required wage that a single adult needs to afford the cost of living in NYC: $36.99 per hour.
Neoclassical economics, upon which many of Mamdani’s critics rely in their criticisms of his labor policy, posits that current market wage rates reflect the balance between the supply and demand for labor. Thus, a doubling of the minimum wage will prompt employers to hire fewer people, leading to an increase in unemployment. However, this analysis, useful as it may be in many cases, is oversimplified, especially in NYC.
Similar to NYC’s housing market, there is evidence of market power, or in this case monopsonies, in NYC, meaning that employers can hold wages below competitive levels. As such, a raise in the minimum wage will not necessarily decrease the number of jobs that employers offer, as the presence of monopsonies suggests some may enjoy an uncompetitive share of profits at the expense of workers. Furthermore, NYC’s labor market is fragmented and highly skill-intensive (there are jobs for everything from Wall Street analysts to bus drivers). In this environment, 60% of New Yorkers are estimated to earn more than the proposed minimum wage of $30 per hour (with the average being around $40 per hour). Therefore, the proposed minimum wage will not directly affect most of the labor market.
A deeper analysis will still need to determine which industries currently enjoy monopsonistic power, which would reduce the number of jobs they offer, and which ones would not in response to an increase in the minimum wage. Mamdani’s policy is designed to provide more to the most vulnerable labor segments of the population. He will have to assure that a $30 minimum wage does not exceed the uncompetitive cut of any profits that firms enjoy due to monopsonistic power, which would then cost jobs for this demographic.
No city or state in the United States has a minimum wage of $30, but research suggests that there are generally zero or even positive employment effects of minimum wage increases in monopsonistic markets. Though, the results of California’s recent increase of minimum wage to $20 per hour is muddled.
However, in a skill-intensive market with high human capital investment like NYC, other positive employment effects and productivity rise are possible. Between 2013 and 2018, NYC doubled its minimum wage from $7.25 to $15 per hour. The consequences were mostly positive. Inflation-adjusted wages increased between 8.5% and 15% for workers at the bottom of the distribution in several sectors, such as hospitality, while sales of these sectors rose by up to 6.6%. At the same time, job growth is estimated to have not been negatively affected (it may even have been slightly positively affected). Evidence suggests there is a lower labor-force participation rate in NYC than other U.S. cities. Therefore, an increase in wages may even pull in more workers to the job market, providing one vector that could push up employment if jobs are not cut.
A second point against standard neoclassical models is that wages do not alone drive the number of jobs employers offer in NYC. These other factors include the network effects of industries like finance, publishing, and the arts concentrating in NYC or the city’s touristic appeal. In fact, NYC tends to generate more jobs than the average U.S. city despite the higher labor cost. Recently, the annual job growth rate peaked in NYC in 2017 at 13.9%, way above the population growth rate of 0.2%. Growth rates have slowed down since, and like the rest of the country has come to a near standstill in 2025. However, employment trends in NYC still outperforms most other large cities.
Another concern among Mamdani’s critics is that a rise in the minimum wage will increase inflation if there is no concomitant reduction in employment. However, evidence implies this is not always the case. Researchers from the California State University argued that the actual impact of minimum wage increases on output prices is relatively small, especially when implemented gradually, as Mamdani’s plan proposes. Other researchers point out that inflation can be due to more than just tighter labor markets or competitive pass-through of higher production costs to consumers, including market power.
All of this is not meant to say that negative effects of a large hike in the minimum wage do not exist, but merely that they may not come to bear as Mamdani’s critics suggest and that there can even be positive effects on employment. This discussion also left aside the improvement that higher minimum wages can have on other elements of the economy and society, such as boosting consumption (which would spur further job creation) or improving the health and well-being of workers and their families.
Taxes
Currently, NYC is one of the few cities in the U.S. to levy its own corporate income tax, which tops out at 9%. Mamdani’s proposed measure raises it to 11.50% (it’s unclear if Mamdani’s corporate tax regime will be graduated as is the current regime). Businesses in NYC, after taking into account New York state corporate income taxes (but not federal corporate income taxes) will be paying close to 20%, by far the highest in the country. On top of this, Mamdani plans to add a 2% income tax on millionaires, which is in addition to the approximately 4% income tax NYC currently levies on its top earners. Therefore, critics argue that capital will flow out of NYC, either in the form of wealthy people moving out of the city, or in the form of corporations relocating their headquarters, perhaps across the Hudson River into New Jersey, where the corporate tax is 11.5% (Mamdani’s plan is to match NYC’s corporate tax with that for New Jersey). These are two different problems with these assumptions.
First, a 20% city corporate tax rate is indeed high relative to other cities in the U.S. and Global North. But at the same time, the proposed rate is only two to four percentage points higher (depending on if the final tax regime is graduated or not) than an already high rate at which there has been no massive exodus of investment. Part of this is because any company operating in NYC (e.g., by having offices there, like Google, Meta or Microsoft) will be subject to NYC corporate taxes, regardless of where its headquarters are. Furthermore, 80% of tax filers are small corporations (e.g., grocery stores and restaurants) that cannot relocate. Finally, while taxes are important to corporations, they are not the only factor they consider when deciding where to set up. Labor costs and the availability of skilled workers are just as important, if not more so.
Second, with regard to individuals, there indeed has been an exodus of NYC residents earning more than $200,000 from high-tax states. Yet, they do not flee to low-tax states like Wyoming, Alaska, or Texas, but rather to high-tax ones like New Jersey, Connecticut, and California. Nor is it the ultra-rich who leave. The top 1% have a lower migration rate, and the number of millionaire tax-filers in NYC has risen over the years. Therefore, this “millionaires’ exit” already exists, but it is not driven entirely by high income taxes. In fact, according to the Fiscal Policy Institute, it is the rising costs of housing that drive people from NYC, which is one of the core issues Mamdani is promising to tackle, as explained above. Even the recent massive emigration of NYC residents seems to be related to the COVID-19 pandemic.
Mamdani’s 2% income tax on millionaires may exacerbate this trend. NYC residents can relocate to Long Island or New Jersey and maintain their employment in the city. A more precise and concrete analysis is required to examine whether the gains in city revenues due to the 2% tax on millionaires can balance the losses due to the “millionaires exit,” however smaller this exit is in reality compared to the doomsday scenarios Mamdani’s critics suggest.
Yet, there are alternatives to Mamdani’s plans that may be more efficient and egalitarian. Taxing capital gains instead of income would be an indirect tax on millionaires. This reform would tax the percentage of top earners’ wealth that exists as unrealized capital gains (an amount that reaches 46% for the top 1%), but which the ultra-wealthy use as collateral to borrow and fund their lifestyles like income. According to the Institute on Taxation and Economic Policy, New York state loses out on $13.4 billion annually in tax revenue by not implementing such a tax.
Additionally, Mamdani could tax profits of pass-through businesses (also known as limited liability companies), which per current law are taxed at the level of individual owners rather than as corporations. Furthermore, in 2017 the federal government defined the global intangible low-taxed income (GILTI) for corporations to ensure that U.S. shareholders of foreign corporations pay a minimum tax on foreign earnings. Both New York City and state already do so, but New York City currently exempts 50% of such income. Reducing the exemptions from the current GILTI form is another option.
It must be noted that some of these policies can only be determined at the state level, so the mayoral administration cannot implement these on its own. This is a complication Mamdani has acknowledged.
Looking at the Big Picture: Political Economy of Cities
All around the world, and particularly in the Global North, big cities have experienced a deep cost-of-living crisis. Recent work in economics and regional economic development, as well as the experiences of economic planning in China and the European Union, show that the tools of coordinated social-democratic policies can help to address these market failures. In some ways, Mamdani’s policies are barely controversial and have been successfully implemented elsewhere.
This article does not suggest Mamdani’s plans will work as he and his supporters hope: there are aspects of his policies that will benefit from clarification or reconsideration. However, it does argue that those critics who argue that Mamdani’s plans are simplistic are relying on their own simplistic arguments. There is uncertainty with how Mamdani’s proposed policies will play out, assuming they do become more than proposals. If there is a less-hedged qualification to offer Mamdani’s policy platform, it is that it acknowledges the living-of-cost crisis in NYC and offers the ambition to tackle it. That is, after all, the foremost reason why voters elected him over his rivals.
Author Disclosure: The author reports no conflicts of interest. You can read our disclosure policy here.
Articles represent the opinions of their writers, not necessarily those of the University of Chicago, the Booth School of Business, or its faculty.
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