Mamdani’s appointment of Lina Khan a warning to private equity, experts say

Experts say New York mayor-elect Zohran Mamdani’s selection of Lina Khan, the former Federal Trade Commission chair, for his transition team acts as a warning to private equity firms in the state that have raised rents and monopolized local healthcare industries. Throughout the US, private equity has increasingly monopolized industries through the practice of “roll ups,” acquiring many small local firms and rolling them into one larger firm, giving them power to simultaneously raise prices and lower quality. This practice is especially problematic in healthcare industries, where private equity involvement has been linked to worse health outcomes, including death. Serving as FTC chair under Biden, Khan was among the first to aggressively go after this practice on the national level, said Martin Kenney, distinguished professor at the department of human ecology at the University of California, Davis and author of Private Equity and the Demise of the Local. While Khan might have comparatively less power on a transition team for a city government, where she will provide advice on how to run a municipal cabinet, Kenney said her appointment is “a signal”– of warning to New York private equity firms and, more positively, that younger Democrats like Mamdani are taking a new approach. “Kamala Harris should have campaigned on some sort of populism,” Kenney said, noting Harris’s message should have been: “We’re going to break up the monopolies, you know, we’re going to go after Wall Street. There’s a lot of Americans out there who hate Wall Street, you know.” Now, Khan will be in Wall Street’s backyard. A more populist campaign would have highlighted Khan’s mission to scrutinize private equity “roll ups” as well as big tech acquisitions, including Meta’s acquisition of WhatsApp and Instagram. During her time at FTC, Khan brought multiple suits against private equity and big tech monopolies. She didn’t win all of them, but still had impact. “She started to do those investigations at the FTC of these kinds of roll ups. So for private equity, that meant that they couldn’t just waltz in and buy up all of these various [medical] practices,” he said. Her work affected real estate too. “Mobile home parks, which used to be run by a lot of independent owners, private equity would come into a region and buy up all the mobile home parks, then raise all the rents.” Just knowing they might be scrutinized made firms more cautious. “Once you get the FTC investigating, you become more careful,” Kenney said. In New York City, private equity firms have been known to use aggressive tactics to get residents of rent controlled buildings to leave so they can raise rents. “They made it a hellhole for the tenants. They played all sorts of shitty little tricks on them, and they eventually moved,” Kenney said. The real estate private equity firm Sugar Hill Capital Partners has been accused of allowing its buildings to become unlivable – through problems like rat infestations – so that tenants in rent controlled units will leave and they can raise rents. Notably, Mamdani’s campaign centered around making rent more affordable; Kenney thinks that Khan’s appointment is most directed at private equity landlords. When it comes to private equity owned health companies, Loren Adler, associate director and fellow at the Brookings Institution’s Center on Health Policy said “there was a lot of focus on trying to shine sunlight on private equity firms buying up a bunch of small practices and combining them into a larger entity”. For example, Khan filed a complaint against US Anesthesia Partners and its private equity owners for attempting to monopolize Texas’s anesthesia industry (though she ultimately lost). Adler agrees with Kenney that Khan’s appointment is largely symbolic, given that “municipal power is only so strong”. However, there are a few ways Mamdani could make things difficult for private equity-backed health companies in New York. While the mayor might not have power to stop acquisitions, “it’s pretty easy to force transparency at the municipal level”. One reason that private equity is able to get away with monopolizing health industries is they usually are not required to disclose acquisitions below a certain threshold, so ownership of a clinic can change without consumers ever knowing. This was something that Khan worked to change under Biden. “There’s a lot of facility approvals, land use permits and things like that that happen at the municipal level. So there’s some power to compel that sort of disclosure,” Adler explained. Mamdani could also create more competition for private equity firms by strengthening New York City’s already strong public hospital system, and resisting contracting with private equity firms for things like ambulance services and medical devices. “New York also already has one of the most robust public hospital systems. There’s already a good jumping off point,” Adler said.