Mamdani notches a loss in opening gambit to take on NYC landlords

New York City Mayor Zohran Mamdani suffered defeat in his first skirmish with multifamily property owners as part of a strategic war to remake the city’s rent-stabilized housing.​

On Friday, Summit Properties USA became the winning bidder for more than 5,000 rent-regulated units owned by bankrupt Pinnacle Development Group. The sale went through despite Mamdani’s push to delay the auction of units, which were plagued by unresolved maintenance issues and a flood of tenant complaints.​

Mamdani’s setback shows how even a mayor determined to capitalize on an affordability mandate can struggle once cases move into federal court. The fight in the Big Apple unfolds as cities and states nationwide tighten or explore rent stabilization, even as apartment industry leaders argue that such measures backfire, exacerbating shortages.​

New Year’s Day, Mamdani stood in a Pinnacle-owned building, using it as his bully pulpit to vow to take on landlords.​

“For too long, bad landlords have been allowed to mistreat their tenants with impunity,” he said. “That ends today.”

Mamdani also said the city counts itself among Pinnacle creditors, citing fines for violations and unpaid taxes.​

He sought a 30-day delay in the auction to pursue options he claimed could better safeguard tenants and stabilize troubled buildings.​

Instead, New York U.S. Bankruptcy Judge David Jones handed the mayor his first rebuke, which means Mamdani now must bless the bankruptcy auction’s outcome at a hearing scheduled for Thursday.​

Mamdani may also face additional challenges if landlords prevail in a federal lawsuit against the state over a 2019 rent stabilization law. That measure limits how much landlords can raise rents, even after renovations, for new tenants. Many landlords opted to leave units vacant rather than make improvements under the measure’s rent increase ceilings. The number of vacant, unimproved properties is estimated to run into the tens of thousands.

Bank forces Pinnacle bankruptcy​

Pinnacle, owned by billionaire Joel Wiener, filed for Chapter 11 bankruptcy last year after Long Island-based Flagstar Bank foreclosed on properties that carried nearly $600 million in debt.​

Summit struck a $451 million deal at auction for the properties in late December, just before Mamdani was sworn in on Jan. 1.

The deal covers a 90-building portfolio across four of New York City’s five boroughs. Those properties have become emblematic of both chronic disrepair and the fragility of regulated housing when highly leveraged owners falter.​

Pinnacle’s financial collapse sparked fears that the buildings could slide further into neglect during a protracted financial restructuring.​

Tenants filed letters with the court detailing how bad conditions have become in Pinnacle’s buildings.​

“In sum, Pinnacle seems to have purposefully decided to allow criminal activity to thrive in at least two of their buildings,” tenants said in a letter to the bankruptcy court.​

Judge Jones wrote that the court was “sympathetic and concerned” about reports of criminal activity and unsafe conditions. However, he noted that they didn’t request specific judicial action and indicated that he would not enter a substantive order.​

Instead, he said complaints should go to current and prospective owners and to governmental and regulatory authorities. They could also raise the complaints at future hearings.​

Summit executives assured the court that writing down much of Pinnacle’s debt through bankruptcy will free capital for long-delayed repairs. Tenant groups countered with questions over whether another private, profit-driven owner would deliver meaningful improvements.​

In his Jan. 1 speech at the apartment building, Mamdani noted that Summit ranked No. 6 on the city’s list of worst landlords.​

Early stress test for Mamdani​

The Pinnacle fight launched an instant stress test of Mamdani’s affordability mandate on rent-stabilized housing.

For now, his early failure highlights the limits of mayoral power once distressed rent-stabilized portfolios enter federal bankruptcy. Creditor rights and contract law tend to outweigh local housing priorities.​

Housing advocates say the episode is proof that New York needs stronger preservation tools. Those tactical solutions include dedicated acquisition funding and purchase options for tenants and public or nonprofit buyers. Otherwise, deteriorating regulated buildings will continue to run at high risk of speculative cycles.​

Meanwhile, national apartment groups are tracking more than 100 rent control and stabilization proposals nationwide.​

They are carefully watching Mamdani’s progress, viewing New York as a bellwether for the next round of fights.