Zohran Mamdani's NYC Bank Dead Pool
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August 20, 2025 | Premium Service | What New York area banks could take big losses or even fail if the Ugandan born Marxist Zohran Mamdani is elected Mayor of New York City? This telegenic cartoon character is riding a wave of public angst over, you guessed it, inflation, and he offers consumers nothing but empty hopes. Zohran wants to freeze the rent on all NYC recent stabilized apartments, an idiotic but popular idea that may sweep him into office.
As we’ve noted in past missives, NYC is the biggest slum lord in the world, operating more than 500,000 publicly owned, rent controlled apartments built before 1947, where residents typically pay less than half of the cost of maintaining public units. As a result of the massive operating losses borne by the city, these aging units are poorly maintained and slowly becoming dilapidated and unsafe. The whole stock of rent controlled housing should be demolished and redeveloped, but the City of New York is paralyzed.
New York City public housing, managed by NYC Housing Authority, faces significant challenges in maintenance and repair, with many century old buildings suffering from disrepair and neglect. This has led to hazardous living conditions for residents and substantial degradation in property values, but the progressives who control New York City care not. It's all about today. Mamdani is merely the logical progression in a century of socialist construction in Gotham going back to Robert Moses and Tammany Hall.
Two million more New York residents live in privately owned rent stabilized apartments that amount to half of all apartments built after 1974. The 2019 rent control law passed by the New York State Assembly already makes it impossible for landlords to recover the cost of renovating these units. Specifically, the 2019 law, among other provisions, repealed the vacancy bonus and longevity bonus, which allowed a property owner to raise rents as much as 20% each time a rental unit became vacant.
Today, when the older rent-stabilized units come vacant, they are typically gutted and then locked since private landlords cannot rent – or insure – older units that are not brought up to tough NYC building codes. This means that the owner must increase rents on the market priced units to make up any shortfall from rent stabilized units that cannot be renovated and safely leased. The 2019 NY rent legislation is slowly reducing the supply of rent-stabilized units and has made many private multifamily rental properties impossible to finance.
But more important, political opportunists like Mamdani offer no solutions to the very real issue of affordability because the cost of building new “low income” housing is astronomical. Affordable housing is really not even possible in New York City and definitely not if NYCHA and/or the State of New York are involved. Only by encouraging cooperation between private developers and public agencies can the supply of new housing be increased. But the Democrats have used their monopoly on political power in Albany to make New York investors the bad guys. And no surprise, these established national property investors now build anywhere but New York.
Multifamily loans are the new subprime asset class because of political risk. The obvious question is what is going to happen to the banks, the GSEs like Fannie Mae and Freddie Mac, and U.S. Department of Housing and Urban Development (HUD), when Mamdani is elected Mayor? At a minimum, the valuations for all rental multifamily rental properties in New York City are likely to suffer. Banks will be even less willing to lend on these assets,especially with the Trump Administration cutting back on HUD programs.
Source: HUD/FHFA/FDIC (2024)
HUD exposure to rent-stabilized apartments primarily occurs through its involvement in various housing subsidy programs. These programs, such as Section 8 Housing Choice Vouchers (HCVs) and project-based Section 8, can be used in rent-stabilized buildings. Additionally, HUD oversees the Public Housing Assessment System (PHAS), which includes rent-stabilized units that are part of public housing or have been converted under the Rental Assistance Demonstration (RAD) program. The Trump budget cuts HUD subsidy programs in half and imposes time limits on rent vouchers, for example.
The GSEs (Fannie Mae and Freddie Mac) have significant exposure to NYC rent-stabilized apartments through their multifamily lending activities. This exposure is a growing concern for federal regulators, as rent stabilization laws can impact property values and potentially lead to loan defaults. The GSEs have roughly $500 billion in multifamily exposures. While the exact percentage of rent-stabilized units within the GSEs' portfolio is not explicitly stated, a substantial portion of their multifamily lending supports buildings with rent-stabilized units.
US banks own about $650 billion in mostly prime multifamily loans in portfolio. The inferior assets are in commercial mortgage backed securities, while the real crapola subprime assets are held by the GSEs and HUD. Earlier this year, news reports indicated that the Securities and Exchange Commission was scrutinizing New York bank exposure to multifamily properties affected by rent stabilization laws, raising concerns about the risks to investors.
The banks specifically targeted by the SEC included Dime Community Bancshares (DCOM), The Delaware National Bank of Delhi, NY, and Flagstar Financial (FLG), but this is only a partial list of banks with significant multifamily exposure in the New York area.
Below we use the powerful analytics of BankRegData, EDGAR and the FFIEC to provide a comprehensive list of banks above $1 billion in assets in the New York area and our comments on the public information available for some of the banks with the largest exposures.
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