This is a question we have heard often. With a sense that NYC politics are distinct from other parts of America, it is natural to wonder how a change at city hall should influence how we think about living or investing in New York.
Our initial view is that a new mayor will probably not change New York’s economic or housing landscape as much as people imagine, despite winning the election with a meaningful majority.
Why?
Because even an ambitious new mayor is structurally constrained by the legal framework that governs New York City. Albany holds many of the levers that truly shape the city’s long-term trajectory, such as core rules governing taxes, property classifications, rent regulations, major development incentives, and more.
Here are some key areas that the mayor of New York cannot change without the approval from New York State:
Because these “big levers” sit in Albany, even a highly energetic or reform-minded mayor must work through the State to enact major structural changes.
In addition, many other agencies which impact the city are not controlled by the mayor (such as public transportation and water).
For example, two of the mayor’s campaign promises were:
First, free bus rides for all may be appealing, but buses in NYC are controlled by the MTA (Metropolitan Transportation Authority), an agency which is controlled by a 17-member board, not the mayor of New York City. As of today, we believe that the MTA has no plans to implement this initiative, as it would lead to a material loss of revenue that is used for infrastructure, among other things.
Next, while we believe that the shortage of affordable housing in New York City is generally agreed to be a serious problem, we are not aware of any agreement about the best way to address it.
New York City has roughly 1 million rent stabilized apartments. Rent regulation is frequently at the center of discussions about affordability and investment. The Rent Guidelines Board (RGB) votes each year on allowable increases for 1- and 2-year rent-stabilized leases. However, the Board exists only because of state law, and the state dictates the rules it must follow.
Under the New York State Rent Stabilization Law (RSL) and the Emergency Tenant Protection Act (ETPA), the state determines:
Because of this structure, NYC cannot:
However, NYC can:
Thus, all major changes to rent stabilization require approval from the State Legislature and the Governor.
The mayor can shape the conversation but he cannot change the underlying system.
From an investor’s standpoint, PSG has had a cautious view on New York City general obligation debt for more than a decade, despite having a very strong credit rating. There are other issuers with similar or even better credit ratings that make us more comfortable.
We’ve seen New York weather many political transitions and economic cycles in the past with remarkable resilience. Residents, businesses and investors have typically not made major long-term decisions based solely on who is mayor. However, policies that impact safety, cost of living and quality of life do have material impacts over the long haul.
Our bottom line: the trends that have occurred over the last decade are likely to continue, regardless of who serves as Mayor.
If you’d like to talk about how potential changes to the NYC infrastructure fits with your own planning or investment strategy, we’re here to help.
Important Disclosures:
All opinions expressed in this article are for informational and educational purposes and constitute the judgment of the author(s) as of the date of the writing. These opinions are subject to change without notice and are not intended to provide specific advice or recommendations for any individual. PSG does not provide tax, legal or accounting advice, and nothing contained in these materials should be taken as such. To determine which investments may be appropriate for you, consult your wealth advisor prior to investing. As always please remember investing involves risk and possible loss of principal capital and past performance does not guarantee future returns.