Zohran Mamdani was elected mayor on his promise to freeze the rent. His stunts to popularize his slogan included running the New York City Marathon in a shirt reading “Zohran Will Freeze It,” plunging into the Atlantic on New Year’s Day, and publicly vowing to appoint to the Rent Guidelines Board (RGB) only members who “understood landlords are doing just fine.” Shortly after taking office, Mamdani appointed a majority of the nine-member RGB. Last month, the members fulfilled the mayor’s campaign promise, voting to impose 0 percent rent increases for both one-year leases and—for the first time ever—two-year leases for tenants in the city’s 1 million rent-stabilized units.
Last week, a group of affected property owners, represented by former First Deputy Mayor Randy Mastro and his law firm, filed a challenge against the RGB’s action, asking a state court on Staten Island to nullify the rent freeze. Mastro’s exhaustive complaint sets forth a series of strong arguments demonstrating that the RGB’s decision was arbitrary and capricious, an abuse of its discretion, and riddled with unlawful procedural irregularities.
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By law, the RGB must weigh evidence of certain economic factors when it decides whether, and by how much, to increase stabilized rents. Section 26-510(b) of the city Administrative Code requires the RGB to consider the “economic condition of the residential real estate industry,” including operating costs, taxes, financing, and vacancy rates. As attorney Christian Browne explained in City Journal after the rent-freeze decision, the RGB must make impartial determinations in a manner akin to a court. A failure to do so could constitute a violation of due process.
Defenders of the freeze point to the fact that courts have interpreted the Administrative Code to allow the RGB to consider tenants’ ability to pay. While this proviso undoubtedly affords the board discretion, it doesn’t permit it to set aside all the other factors. Doing so would effectively read all other considerations out of the statute, leaving tenants’ ability to pay the sole determining factor—despite the law’s clear text. If such political considerations could be dispositive, why didn’t the law’s drafters simply give the RGB’s powers to the mayor?
As the challengers emphasize in their pleadings, the evidence before the RGB—based upon the board’s own research—does not support a 0 percent increase. The board’s Price Index of Operating Costs report showed landlords’ expenses increased by 5.3 percent in the most recent year. According to the report’s findings, owners need increases of 3.4 percent on one-year leases and 4.8 percent on two-year leases to hold net operating income constant. About two weeks before the RGB vote, the city’s Water Board raised water and sewer rates by 6 percent. The RGB, however, ignored the actual increase and continued to rely on an assumption that utility costs would fall by 1.7 percent.
The board’s most glaring error is its selective and irrational manipulation of the data on owners’ net operating income (NOI). The RGB alleged that landlords have enjoyed a 6.2 percent jump in NOI. But that number is drawn from a dataset that includes buildings with both stabilized and market-rate units. In these mixed buildings, the income landlords derive from the market-rate units offsets increasingly distressed stabilized units, making it appear that the stabilized market is far healthier than is truly the case. NOI increased only 2.4 percent for buildings that contain solely stabilized units; in the Bronx, such buildings saw a slight decline in NOI. Tellingly, among 100 percent stabilized Bronx buildings with 100 or more units—the worst-situated buildings in the city—NOI fell by 7.7 percent.
As the lawsuit points out, not only did the RGB abuse the findings in the NOI report, but the calculation of NOI excludes mortgage payments. Manhattan Institute fellow Daniel Golliher and I recently explained in City Journal’s Substack that owners often use debt to finance major capital needs in older buildings long after the original note has been repaid. Just as is the case for most homeowners, the monthly mortgage payment often is the most significant financial burden on an owner, yet the RGB’s analysis—which is supposed to give an accurate description of the financial viability of stabilized buildings—omits debt payments from its consideration.
The inconvenient evidence showed, for example, that for one major lender with a large portfolio of loans to stabilized buildings, about a third of the borrowers lack the income from rents in their buildings to cover debt service.
Finally, and critically, Mastro’s complaint goes into meticulous detail on the RGB members’ histories of anti-owner bias. For example, Lauren Melodia, who’s supposed to represent the interests of the public at large, has a long history of statements, social media posts, and other forms of tenant activism. In 2023, she signed a letter that stated, “At its core, rent regulations are aimed at rebalancing the power dynamics between tenants and landlords, which disproportionately favor landlords.”
Melodia is not alone. This year, during the April 9 RGB hearing, tenant member Adán Soltren, Supervising Attorney at the Legal Aid Society, said that owners’ cost considerations should be taken “with a grain of salt.” He didn’t want to dedicate even “an hour to it.”
The most damning evidence comes from Christina Smyth, an RGB member appointed by Eric Adams who resigned from the board in protest on the morning of the vote. Smyth’s insider account corroborates the heaps of circumstantial evidence pointing to a prejudged process. In her resignation letter, she wrote that the record was “being built to fit a decision that was made before the first hearing was held.”
“This rebuilt board was required to deliver a rent freeze,” Smyth wrote. “Everything since has been theater.”
While courts afford deference to the government’s decision in reviewing Article 78 cases, the record in this case supports a finding that the RGB’s decision was arbitrary and capricious and was affected by open and obvious bias. The evidence strongly indicates that the board was determined to enact a freeze for political and ideological reasons, regardless of the research put before it.
Had the board approved even a 0.5 percent increase on two-year leases, it would be much harder to challenge. That would look like many other years of below-cost rent increases. But if the challengers lose the case (and the inevitable appeal), Mamdani and every future mayor will inherit the formal power to dictate RGB outcomes.
Mamdani may have overreached, however. His signature campaign promise might be more than he—or any mayor—can legally deliver.