Will New York Turn into Mumbai? Barry Sternlicht’s Warning on Rent Freezes and the Future of Urban Housing

In global cities, housing has always been the tightrope between compassion and capitalism. From London to Los Angeles, the struggle to balance affordability with investor confidence defines the health of urban economies. The latest flashpoint in this debate comes from New York City, where a proposed citywide rent freeze by newly elected Mayor Zohran Mamdani has drawn fierce opposition from one of America’s most prominent real estate investors, Barry Sternlicht, the billionaire founder of Starwood Capital Group. His warning is blunt: if the city pushes this policy too far, it risks “turning New York into Mumbai.”

At first glance, Sternlicht’s remark sounds provocative, even hyperbolic. But behind the comparison lies a deeper economic caution: when governments intervene excessively in rent markets without addressing supply constraints, they can trigger unintended consequences, from investment flight to property decay. For a city already burdened with high costs and complex regulations, the rent freeze debate exposes the delicate mechanics of urban economics in crisis.

The Economic Premise: When Affordability Collides with Incentives

Mayor Mamdani, a Democrat who campaigned on a platform of working-class relief, argues that New York’s affordability crisis has reached a tipping point. Median rents in Manhattan, according to Zillow, crossed $4,500 in mid-2024, a 12% jump from the year before and nearly 30% above pre-pandemic levels. In Brooklyn and Queens, the story is no different: over 60% of tenants now spend more than a third of their income on housing.

Mamdani’s rent freeze proposal stems from this reality. His logic: incomes have stagnated, corporate landlords have accumulated windfall gains, and housing should be a human right, not a speculative asset. The plan would temporarily halt rent increases across the city, giving tenants “breathing space” while new affordability measures are rolled out.

But Sternlicht’s counterpoint cuts to the heart of economic sustainability. “The far left gets really nuts and says the tenants don’t have to pay,” he told CNBC. “Well, you can’t kick them out if they don’t pay. So, the neighbour finds out, and they don’t pay, and the next guy doesn’t pay, and then you’re basically going to turn New York City into Mumbai.”

Behind the bluntness is a fundamental truth about market psychology: once the expectation of payment or property rights weakens, confidence collapses. Sternlicht warns that such a freeze could trigger a chain reaction, from non-payment of rents to a withdrawal of developer capital, ultimately shrinking supply and eroding quality.

Lessons from Mumbai: A Cautionary Parallel

Mumbai, the city Sternlicht invoked, offers a real-world illustration of how rent control can distort markets over decades. The Rent Control Act of 1947, intended to protect tenants from post-war rent spikes, froze rents at mid-20th-century levels. While well-intentioned, the policy led to a slow-motion crisis: landlords lost incentives to maintain properties, buildings deteriorated, and new rental construction virtually stopped. By the 1990s, much of South Mumbai’s rental housing stock was crumbling, and tenants were trapped in unsafe, century-old structures.

Economists estimate that more than 100,000 rent-controlled units in Mumbai still exist, some with tenants paying less than ₹500 ($6) per month for properties worth millions. The city’s rental yield, the annual return a property owner earns from rent, has hovered below 2%, among the lowest in the world. The unintended result: capital fled the rental sector entirely, funnelling into ownership housing and speculative land deals.

Sternlicht’s fear is that New York, if it moves from regulation to rigidity, could follow a similar path. The city already struggles with bureaucratic zoning rules, long approval timelines, and union-driven construction costs that make new developments prohibitively expensive. A broad rent freeze, in his view, could be the final deterrent to private capital in housing.

The Structural Reality: Supply, Not Subsidy, Drives Affordability

The deeper issue, as Sternlicht points out, is not affordability alone but supply elasticity. New York adds roughly 25,000 new housing units per year, far short of the 50,000–60,000 units experts say are needed to stabilize prices. According to a 2024 Urban Institute report, the city faces a deficit of over 500,000 affordable homes. Layering a rent freeze on top of restrictive zoning and high financing costs risks amplifying the shortage rather than alleviating it.

Economists across the ideological spectrum agree that rent freezes rarely solve affordability crises in isolation. While they offer immediate relief, they can distort incentives for landlords to maintain properties or build new ones. A Brookings Institution study found that cities with long-term rent control experienced a 15–25% decline in new rental construction compared to cities without such policies.

Moreover, Sternlicht argues that the city’s broader ecosystem, safety, mobility, and investor sentiment, matters as much as price controls. “If residents feel unsafe, they leave,” he noted. “And when people leave, the city loses its tax base, its vitality, its ability to invest back into the community.”

The Political Balancing Act

Mamdani’s vision extends beyond rent freezes. His broader agenda includes fare-free public transit, free childcare, and a new Department of Community Safety, funded by higher corporate taxes and levies on top earners. It’s an ambitious blueprint, reminiscent of progressive European urban models. But New York is not Copenhagen; it is a complex, layered economy built on private capital, financial services, and property markets that collectively generate nearly 20% of the city’s tax revenue.

Balancing equity with efficiency has always been the art of governance. The political energy behind rent freezes is undeniable, housing anxiety is real, and voters demand tangible relief. Yet, the path to durable affordability lies not in freezing markets but in freeing supply: streamlining construction permits, incentivizing mid-market housing, and revisiting zoning that keeps 70% of the city locked into low-density designations.
 

The Takeaway: A City’s Soul Lies in Its Systems

New York’s future will not be determined by ideology alone but by execution, the ability to reform without retreating into populism. Sternlicht’s “Mumbai warning” is not a dismissal of compassion but a plea for coherence: a reminder that urban economics, like urban life, thrives on balance.

The question, then, is not whether New York can afford compassion, but whether it can design it sustainably. Because in the end, cities collapse not when they care too much, but when they stop caring about how things work.