Zohran Mamdani’s First Big Housing Test Is Already Here

Pinnacle’s restructuring advisers have blamed three concurrent problems for their insolvency: inflation, interest rates, and, in so many words, tenants. While inflation has undoubtedly increased operating costs, and Pinnacle’s mortgage rates leapt from 3 percent to as much as 10.25 percent, according to court documents, it’s the third item on its list of grievances that the financial press has glommed onto: the 2019 Housing Stability and Tenant Protection Act, or HSTPA, which closed many of the loopholes Pinnacle and others relied on to thrust rent-stabilized units into the speculative market. Tenant groups were the leading force behind the law, and it did, indeed, make life for landlords harder. But only because their business strategy depended on evicting longtime working-class tenants, through increasing property values and soaring rents, which, in turn, permitted further speculation through risky refinancing.

This is what researchers have called “pulling out equity.” In a 2022 report titled “Gambling With Homes, or Investing in Communities,” the Local Initiative Support Corporation, or LISC, outlined how this works. Let’s say a landlord purchases a $1 million building with a $750,000 loan. When the property’s appraised value increases, due partly to the landlord increasing the rent, the study shows that the landlord would more than likely use that new leverage at the bank for an even bigger loan, this time to purchase a $3 million building. The landlord—call them a “housing provider”—is a market genius so long as they continue buying up properties, at the expense of their other buildings, in which they rarely reinvest. But when the rulebook catches up, the market shifts, and—as Julia Duranti-Martinez, senior program officer at LISC, put it—“your assumptions about rent increases don’t hold anymore,” suddenly those loans aren’t such a masterful gambit. Now, they’re just “really bad bets.”

In an emailed statement to The New Republic, a Pinnacle spokesperson said it was “unfortunate that some seek to exploit the already difficult situation facing multi-family housing in New York to advance a political ideology that ignores the rapid rise in maintenance, insurance and other costs which have stressed housing across the city regardless of ownership.” Between 2019 and 2024, Bloomberg—not exactly The Daily Worker—found that “immediately hazardous” housing violations had increased fourfold in Pinnacle buildings, twice the rate of similar rent-stabilized properties. More than that, buildings located in gentrifying neighborhoods saw the “sharpest increases” in housing violations.