Navigating the Political Landscape and the Effects of Rent Regulation
With policies on rent regulation up in the air in Albany and Amazon’s decision to pull out of Long Island City, the local political climate is more dramatic than ever. To gain more insight on this, I interviewed Bradley Tusk, founder and CEO of Tusk Ventures, a venture capital fund which has advised Uber and Fan Duel, among others, and is now representing CHIP on rent regulation. He previously served as Michael Bloomberg's campaign manager, as deputy governor of Illinois and as Senator Chuck Schumer's communications director. We were joined by Eric Soufer, Managing Director at Tusk Ventures who previously served as Director of Communications and Senior Counsel for policy to the New York State Attorney General.
Initially I asked Tusk what led him to take an interest in rent regulation in New York City, to which he said the first was affordable housing.
“It's clearly the preeminent political issue facing lots of cities around the U.S. Bill de Blasio, here in New York, based his campaign in 2013 around it, hasn't actually accomplished much on it, but the issue clearly resonated with the voters. He got elected. You hear the same story in Austin and San Francisco and Seattle and Los Angeles and cities up and down the country,” Tusk said.
He further explained that in the political sphere, the affordable housing debate is largely and loudly voiced by Democrats that focus on tenant activism. According to Tusk, real estate landlords are not being heard by lawmakers because they “tend to do their politics in a way that made more sense in 1959 than 2019.”
“I don't know exactly what the whole mega-rights solution is for affordable housing, but I know the ideas, and they have to come from both the landlord and real estate side and from the tenant side. And whenever you have just one side controlling the narrative, it's not going to work.”
Tusk said he believes that political issues have to strongly resonate with the voters at large for elected officials to take interest. One of the biggest challenges he has seen in the commercial real estate industry is that political issues are largely viewed by industry leaders as good or bad for property owners.
“Politicians, media, voters, no one’s sympathetic to some rich person just saying, ‘I want this’ or ‘I don't want this.’ And if you can't think about how to frame these issues in terms of the broader public narrative around what people need, what makes tenants lives better and easier, what can bring down the cost of housing, bring down the cost of construction…you're not going to win. Because you're not inherently sympathetic and it's not a particularly interesting narrative,” Tusk said.
Soufer added, “We think it's really important to identify who is actually going to be impacted by [rent regulation] changes and it's not just Manhattan landlords, it is actually small business owners, multi-generational businesses and at the end of the day, it is really about the tenants who don't just want an affordable place to live…Unless you create an economic structure so that property owners can invest in their properties and maintain affordable quality housing, it's just not going to happen.”
Soufer referred to a New York Times column written by Paul Krugman in 2000 that noted, “in 1992 a poll of the American Economic Association found 93 percent of its members agreeing that ‘a ceiling on rents reduces the quality and quantity of housing.’ Almost every freshman-level textbook contains a case study on rent control, using its known adverse side effects to illustrate the principles of supply and demand.”
The solution, Soufer says, begins with educating lawmakers about how the real estate industry works because most of them have only heard the tenant activist side of the story. Lawmakers also need to know who is affected by rent regulation. He says it isn’t just tenant activists, it’s multi-generational businesses that have proudly invested in their communities over and over again to build their communities back up from the economic slump of the 1960s and ‘70s.
I asked Tusk if he thought it was possible to reverse the polarizing political climate in New York. He said that the vast majority of New Yorkers want to create jobs, and want reasonable rules around things like rent regulation or zoning or construction, but those same people don't usually show up to vote in elections.
“I think what we've got to be able to do is align the city's politics and elections with the city's economic interests and start getting more and more people start to turn out to vote because then that will reflect the majority and we won't make these really stupid, extreme decisions like they've been making the last couple years, but again that requires some major advance in voting and that's why we're spending so much time trying to create a mobile voting.”
Tusk referenced one of his companies’ initiatives, Mobile Voting Project (mobilevoting.org), which is working toward providing constituents with a way to vote in elections from their phones to increase voter turnout.
“Ultimately, if we get to a world where 70% or 80% of the people are turning out and voting because they do it on their phones, then the views of the main stream will start to take hold in city policies and state policy under the federal law,” Tusk said.
This begged the question: is New York City still a good place to do business? Overall, Tusk said that it is. He has offices all over the world, but chooses to live here.
“This is where I can find lots of really smart, hard-working, fast-moving people who I like working with or partnering with or even fighting against because it makes it more interesting and more fun.” Tusk said. “One of the positive effects of having so much crowding is people want to be here they want to stay here. I didn't move to the suburbs, I'm raising my kids here in New York City, so is Eric.”
Tusk noted that people choosing to live in New York City is contingent on the fact that the city feels safe and clean, the quality of life is high and the schools are acceptable. He believes that the mayoral office needs to put more emphasis on its operational and functional responsibilities to keep the city this way.
“We had really, really good leadership in twelve years of Bloomberg and quite frankly Rudy [Giuliani] did a pretty good job for eight years, but it's not going to stay that way forever. It is critical we put someone in that job who doesn't just view it as an ideological platform to try to run for higher office and is interested in picking up the trash, the water coming through the pipes cleanly, the stop lights working. If that all works the city pretty much takes care of itself.