Call it an upset if you will — but New York State Assemblymember and self-described democratic socialist Zohran Mamdani appears to be on track to win the Democratic nomination for New York City Mayor after top contender New York Governor Andrew Cuomo called to concede the race. In all likelihood, in a deep blue area, Mamdani will be the next Mayor. Overall, his vision for Gotham could cause some unease for local commercial real estate due to the unknowns.
The main policy that stands out is the rent freeze, which would apply to all stabilized units, which is a little less than half of the total 2.3 million rental supply. This would mean monthly payments would stay the same and tenants don't have to worry about potential hikes. It comes as the NYC Rent Guidelines Board appears poised to jack up rents by up to 7.75 percent this month on stabilized units.
Assuming Mamdani is elected and his chosen rent board opts to freeze payments, it's fair to say that this would impact profits for landlords.
Allia Mohamed, CEO of openigloo, told GlobeSt. recently that a rent freeze would serve as a band-aid solution to the city's housing affordability crisis — but the real issue is the lack of supply in the market. New York nonprofit group Citizens Budget Commission estimates that the city needs hundreds of thousands of additional units to close the housing shortage gap. A 2024 study by McKinsey & Company pinpointed the total at 540,000 units.
To address the shortage, Mamdani wants to build 200,000 rent-stabilized, permanently affordable homes during the next decade. Also, he has called to make a $100 billion investment to preserve public housing for tenants over the next 10 years, raise zoning capacity, improve the speed of planning reviews and allowing more housing developments on public land.
Unfortunately, 200,000 units won't be enough to solve even half of the problem in Gotham. He will likely need some help from the private sector, even though he said in a policy post in February that "we can't afford" to wait for them. Would he be willing to provide tax breaks or incentives to entice CRE players to spur developments? That's an unknown — but that could be a potential positive for the industry.
But when it comes to funding his plans, he wants to raise taxes on the rich, leaving another potential negative for local CRE players. Mamdani has proposed to raise corporate taxes from 7.5 percent to 11.5 percent and place a two percent flat tax on those who earn above $1 million each year, which makes up the top one percent of NYC residents.
Additionally, the 33-year-old has called for nearly double wages from the current level of $16.50 to $30 by 2030. This could potentially bring positive effects, as raising hourly pay may increase apartment demand. However, landlords of rent-stabilized units might not be able to raise rents under Mamdani.
A lot of questions will remain about how Mamdani's policies will affect NYC CRE investment — especially in the multifamily space. But it's possible net operating income could come under some pressure. The biggest question is how Mamdani would work with the private sector to solve the crisis.
We'll have to see how the election plays out in November, as incumbent Mayor Eric Adams will run as an independent, Curtis Sliwa will be the Republican nominee on the ballot and Cuomo has opened up the possibility of running as a candidate on the Fight and Deliver line. But NYC CRE should prepare for the reality of Mayor Mamdani.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to asset-and-logo-licensing@alm.com. For more inforrmation visit Asset & Logo Licensing.
