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Dear Readers,

Have you been keeping up with the news on New York Mayor Zohran Mamdani lately?

In his first 100 days in office, Mayor Mamdani has moved full steam ahead on the housing crisis. His pied-à-terre tax entails a steep increase in property taxes, imposing targeted levies on second homes valued at over $5 million.

A pied-à-terre tax is an annual surcharge on high-value residential properties that are used as second homes rather than primary residences.

It is a bold plan to fulfil his proposed commitments, including building ‘200,000 permanently affordable homes’. At first glance, Mamdani’s policies resemble the kind of intervention the people of New York have been waiting for.

Yet while his viral ‘Tax Day’ video filmed outside Citadel CEO Ken Griffin’s penthouse seemed to win favour with young people, Mamdani appears to have landed himself in hot water with the wrong audience.

Let’s think about this. To the casual observer, this is a striking act. For some, a “tax the rich” scheme is the type of change they want to see. But for those of us who observe and track the 18.6-year Real Estate Cycle, there is something far less reassuring about this.

Let me remind you of just where we are today within that real estate cycle. The ‘Winner’s Curse’ or mania phase has now lasted longer than a year. There is a real danger in introducing Georgist-type policies at exactly the wrong time in the economic cycle.

How can anyone propose constructing 200,000 affordable homes at a time where land prices are at historic highs? When the cost of construction has never been higher. With credit becoming ever harder to get.

Targeting fixed assets during a period of urban fragility? Wrong move, Mamdani.

Mamdani wants to redistribute wealth via his new tax. He filmed a video to promote the surcharge outside of Ken Griffin’s $238 million penthouse.

Ken Griffin is an American billionaire hedge fund manager, entrepreneur, and investor. He is the founder, CEO, and 80% owner of Citadel LLC, a leading global investment firm.

Not only does Griffith call the stunt “creepy,” but he also decides now is the time to vote with his feet.
Source – NY Post

Rather than continue to back the $6 billion dollar redevelopment project at 350 Park Avenue in Manhattan, with its estimated 6000 well paid construction workers and supporting the creation of more than 15,000 permanent jobs in mid-town New York, he is expanding Citadel’s Miami headquarters by several hundred thousand square feet instead.

If Mamdani wants to redistribute wealth and billionaires like Griffin move, then the benefits are not reaped in New York. The benefits are reaped, in Griffin’s case, in Miami, where he seems quite happy to take his investment capital.
Reading the Fine Print

What Mamdani is doing operates at a punitive level. Attempts to hit “the man” where it hurts do not just affect these billionaires, but ripples through the wider community. When that investment capital leaves, it’s ultimately the community who misses out.

The people of New York miss out.

CNBC anchor Sara Eisen hit out at Mamdani’s video shortly after it was released – seemingly forewarning that it could have consequences from Griffin.

From the above article.

She noted in a social media post that Griffin “employs thousands of people in NYC” and is “investing billions more and creating thousands more jobs” – adding that “making him feel unwelcome and demonizing him seems risky.”

“Meantime Miami is welcoming him and his firm, with the massive jobs, investment and tax revenue he’s bringing,” Eisen wrote.

Plus, the usual billionaire ‘friends’ who would never stoop so low as to see a fellow rent seeker take all the blame themselves.

Billionaire hedge fund manager Bill Ackman came to Griffin’s defense on social media, warning that such attacks from Mamdani could push more business to Florida.

“We should be applauding Ken for spending $238 million in NYC, not attacking him for doing so,” Ackman wrote in a post on X last week, arguing that non-resident owners of NYC properties drive economic growth without acting as a drain on local resources.

“Ken’s company is a major employer in NYC of very high paying jobs which drive a considerable amount of our tax base. We wouldn’t want him to move even more employees to Miami,” he continued.

Honestly, you really have to ask yourself just what the average working person thinks about all this mudslinging given the high cost of living they are forced to deal with precisely because a precious few billionaires have mastered the art of capturing the economic rent generated by a productive society not for the many, but for themselves.

In fact, one would say it all feels like you’ve been taken for a ride!
None Of This Is New

Amidst all the white noise and nonsense surrounding Mamdani’s antics, a little voice recalled that in fact I had heard all this before. That’s why I returned to my own copy of Don Riley and Fred Harrison’s book Taken for a Ride. For a book published in 2001, its relevance to today’s news here is both striking and sobering.

In the book, Harrison and Riley provide a compelling, if uncomfortable, explanation for why these “tax-and-spend” strategies like Mamdani’s’ fail. They fail because they do not address the underlying problem.

Riley and Harrison examined the construction of London’s Jubilee Line as a case study. They showed that the increase in land values around new stations was enough to pay for the entire railway several times over. The public funded the infrastructure, while private landowners captured billions in “unearned” profit.

25 years later, I’m reminding you of this same reality. The playbook has always been the same, only the location has changed.

Unless we as a society shift from taxing buildings and wages to taxing the value of land itself, we will continue going round in a very expensive cycle until it comes to a crashing halt. One that happens every 18.6 years in fact.

And the cost ultimately falls on the worker. Leaving you to struggle to live under cost of living pressures and historic high home prices.

If you want to understand more about Riley and Harrison’s findings, Taken for a Ride is a compelling read. The depth of research and effort involved in tracing this sprawling paper trail is remarkable. All written by a landlord who benefited from Britain’s broken tax system.
You can find more information on Taken for a Ride on its product page below 👇

Darren J Wilson
and your Property Sharemarket Economics Team

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