Eye On The Market – Supply and The Mam

Host: Michael Cembalest
Date: February 5, 2026

Episode Overview

In this episode, Michael Cembalest scrutinizes New York City's chronic housing shortage in the wake of a newly elected democratic socialist mayor. He unpacks the city’s present housing crisis, analyzes historical and current policies—including recent zoning reforms and the impact of New York’s 2019 rent stabilization laws—and evaluates the feasibility of ambitious affordable housing plans. The discussion broadens to explore the results of rent control studies and the city’s structural and financial impediments to reform.

Key Discussion Points & Insights

1. Framing the Housing Crisis (00:24–03:40)

• Motivation for the Episode: Repeated client questions about the new mayor’s ability to solve housing shortages.
• Historical Context:
  • Cembalest references the documentary "Drop Dead City" about New York’s 1970s fiscal crisis, critiquing omissions regarding Mayor Lindsay’s role in causing the crisis through debt-fueled spending and payroll expansion.
  • Draws a parallel between past policy choices and today’s challenges.

2. The Current Landscape: Housing Supply, Demand & Regulation (03:40–08:45)

• NYC as a Renter City:
  • 70% renter-occupied units.
  • 40% rent stabilized, 7% public housing, 3% rent controlled, rest unregulated; yet, many "unregulated" units affected by new "good cause eviction" laws.
• Stagnant Stock:
  • "The New York City apartment rental stock is almost unchanged since 1965... That’s an amazing stat and tells you everything you need to know about why we have a housing shortage." (Michael Cembalest, 05:45)
  • Slow growth of rental units, with ownership housing representing most new stock.
• Falling Housing-to-Employment Ratio:
  • 1980: ~90%; now: ~80%.
• Extreme Scarcity:
  • Citywide vacancy rate of 1.4%; stripping out >$2,400 units: below 1%.
  • Healthy market needs ~5% vacancy for mobility.
• Permitting Woes:
  • 2024 saw uptick in housing additions, but permitting for new housing at a 21st-century low (excluding post-crisis years).
  • "North Carolina issues twice as many permits as New York State with half the population." (08:30)

3. The 2019 Housing Stability and Tenant Protection Act (08:45–14:30)

• Policy Intentions: Stop attrition of rent-stabilized units.
• Economic Outcomes:
  • Cost recovery caps for renovations are prohibitively low ($347/mo rent bump for a $100–110K renovation → 27-year payback).
  • Resulted in plummeting investments in building improvements and increased landlord "warehousing"—leaving apartments vacant.
  • Many rent-stabilized units now have negative NOI (Net Operating Income).
  • "Not renting them could cost less money than actually renting them." (13:30)
• Misallocation Effects:
  • Rent-to-income ratios have risen to 50+% for median renters (national average: 33%).
  • Only 9% of households are in appropriately sized units; most are under- or over-crowded.
  • "People are paying way too much of their money that they earn on rent... creates other really bizarre things related to immobility." (13:45)

4. Zoning, Development Constraints & the “City of Yes” (14:30–18:50)

• Zoning as the Root of the Crisis:
  • For 40 years, over half of NYC’s community districts have further restricted building through down-zoning/historic districting.
  • 40% of residential buildings now exceed allowable floor area; disincentivizes redevelopment.
  • Striking Statistic: "92% of all the housing near subway stops outside Manhattan... are three stories or less." (17:30)
• Recent Reforms ("City of Yes"):
  • Legalizes taller buildings and denser housing near transit in some areas.
  • Accessory Dwelling Unit (ADU) reform: basement/backyard 800 sq ft units now allowed.
  • Eases some parking requirements; expands commercial-to-residential conversion zones.
  • Floor Area Ratio (FAR) Reform: Disappointing due to "marginal and narrow" applicability.

5. Mamdani’s Ambitious Housing Plan (18:50–20:50)

• Policy Goals:
  • Build 200,000 subsidized, union-built rent-stabilized units in 10 years.
  • Double public housing repair spending (city reportedly $78B behind on repairs).
  • Initiate "rental ripoff" hearings; streamline permitting; solicit feedback from renters.
• Financial and Structural Hurdles:
  • NYC’s cap of 15% of tax revenues for debt service soon to be reached.
  • State constitutional borrowing limits leave ~$30B headroom—insufficient for $70B plan.
  • NYC net municipal obligations per taxpayer are already the nation’s highest ("even worse than Chicago, which is saying something" 20:15).

6. Rent Freezes & Economic Consequences (20:50–22:30)

• Rent Freeze Research:
  • A meta-analysis of 100 studies found "unambiguous" results:
    • Rent freezes control prices, but cause immobility, stall construction, lower housing quality, and push up rents outside the regime.
    • "You can protect people in the short term, but you pay a longer-term and medium-term price for this kind of thing." (21:55)

7. Taxation Limits (22:30–23:30)

• Legal Limits:
  • Mayors can't raise personal/corporate income tax rates directly (state legislature’s role).
  • NYC already has nation-leading tax burdens: personal, corporate, and property taxes.
  • "Not a lot of wiggle room here to try to raise taxes to finance this plan." (23:15)

8. Looking Forward: If Ambitious Plans Stall (23:30–24:00)

• Back to Basics:
  • NYC must keep "hammering away" at restrictive zoning, construction costs, and foster public/private partnerships if the marquee plan fails.
• Positive Momentum:
  • "City of Yes" is a good start, and state-level noise ("Let Them Build" bill) is encouraging.
  • Cembalest references a Georgetown Journal article calling recent anti-eviction laws "counterproductive" for the most vulnerable and small landlords.

Notable Quotes & Memorable Moments

• On the Scale of the Problem (05:45):
  “The New York City apartment rental stock is almost unchanged since 1965… That’s an amazing stat and tells you everything you need to know about why we have a housing shortage.”
  — Michael Cembalest

• On Zoning Roadblocks (17:35):
  “92% of all the housing near subway stops outside Manhattan ... are three stories or less. If each one … was just doubled … the whole affordable housing crisis would be over.”
  — Michael Cembalest

• On Rent Controls (21:45):
  “A study just came out that combined 100 rent freeze and rent control studies. The authors describe the results as unambiguous… Labour mobility collapses, new construction starts decline, housing quality gets worse, the housing supply goes down or stops growing, rents skyrocket in the uncontrolled part of the city.”
  — Michael Cembalest

• On Fiscal Limits (20:10):
  “New York has the highest municipal net municipal obligations per taxpayer compared to a whole bunch of other cities, even worse than Chicago, which is saying something because they normally win gold medals in this kind of thing.”
  — Michael Cembalest

• On Policy Effectiveness (23:45):
  “If Mandani’s plan does not take flight ... New York’s going to have to go back to the hard work and hammering away at restrictive zoning policies, construction costs that impede development, and forge more private public partnerships…”

Timestamps for Key Segments

• 00:24 — Episode introduction & context
• 03:40 — Statistical breakdown of New York’s rental market
• 05:45 — “Unchanged rental stock since 1965” insight
• 07:30 — Vacancy rates and supply indices
• 08:45 — Analysis of the 2019 Housing Stability Act
• 13:45 — Rent-to-income ratios & mobility consequences
• 14:30 — Zoning’s role and historical constriction
• 17:35 — “92% near subway stops ... three stories or less”
• 18:50 — “City of Yes” reforms discussion
• 19:40 — Mamdani’s housing plan & funding constraints
• 20:10 — Fiscal comparisons with other major US cities
• 21:45 — Rent freeze meta-analysis
• 22:30 — Constraints on new taxes
• 23:30 — If big reforms fail: necessity of zoning and cost reforms
• 24:00 — Wrap-up and outlook

Tone: Analytical, Data-Driven, Critical

Cembalest’s delivery is measured and candid. He avoids partisan commentary, favoring empirical analysis and gently sardonic asides.

Useful for Listeners Who Missed the Episode

This summary distills the episode’s intricate exploration of NYC housing, policies, political context, and financial realities. Michael Cembalest deftly explains the core causes, unintended effects of current laws, and the narrow path forward for any major change. Listeners leave with a grounded, numbers-driven understanding of why NYC's rental crisis persists and why reform is so complex.