Should cities run their own supermarkets?
New York’s mayoral front-runner thinks so
Many a New Yorker dreams of not paying rent. So do New York’s shops; retail space there is pricier than anywhere else in America, by a lot. Seldom is this wish granted. But for a select few publicly owned grocery stores, Zohran Mamdani, the Democratic nominee for New York City mayor, hopes to do just that. Alongside more typical left-wing fare, like rent controls and free buses, he pitched a more novel idea: a “public option" for groceries in the form of a state-run rival that would undercut existing supermarkets.
Food prices have spiralled, Mr Mamdani argues, and New Yorkers shouldn’t “subsidise private grocery-store operators" during their weekly shop. Another problem he flags is that some New Yorkers live in “food deserts", without ready access to fresh produce (the US Department of Agriculture found that New York had fewer such areas than any other state). The plan is to pilot one store in each of the city’s five boroughs, and scale up if those succeed.
This is a curious proposal. Grocery stores have among the lowest margins of any business in America: they generally make 1-2% in profit after tax (see chart). New York City, with a dense population, aggressive competition and high rental and wage costs, is particularly competitive. Mr Mamdani’s stores would not pay rent or property taxes—he wants to put them on city-owned land. But denying New York’s government the revenue those plots would otherwise have earned amounts to a chunky subsidy. If Mr Mamdani’s stores do manage to offer lower prices than privately run peers, it will be thanks to that implicit subsidy, funded by New Yorkers’ taxes.
At best, then, these stores might sell groceries a smidge more cheaply than conventional grocers, largely due to back-door taxpayer funding. For a government concerned about affordability for the poorest New Yorkers, indiscriminately part-financing the grocery haul of anyone who steps into one of Mr Mamdani’s stores is a curious way to do it.
Worse, private supermarkets could get run out of business, because even squeezing their margins to zero wouldn’t be enough to match a competitor that doesn’t pay rent. All this presumes that Mr Mamdani’s stores are run as well as a conventional supermarket or bodega. But from affordable housing to subway extensions, American cities have a sorry record of letting costs spiral. New York has been trialling a new set of no-frills public toilets, and budgeted about $1m for each one. Rather than creating a cheap and hyper-efficient city-owned grocery chain, a more plausible outcome is that mismanagement will eat up any savings made from not needing to pay rent or turn a profit.
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