NYC CRE Braces for Likely Mamdani Mayoral Election Win This Week

Mitch Korbey, chair of the Land Use & Zoning group with Herrick, said that freezing rents could hurt smaller and mid-sized landlords and even tenants.

"Given escalating costs, it is enormously challenging to maintain apartment buildings – and a freeze will certainly discourage investment and ultimately hurt tenants," he warned.

Danny Fishman, co-founder and CEO of GAIA Real Estate, which manages 12 multifamily properties in NYC, is also concerned about a potential rent freeze.

"Mamdani’s policies will negatively impact landlords as costs will skyrocket, affecting even free-market buildings," he warned.

"In addition, his policies will harm working professionals and new residents, leading to an outflow of wealthy individuals and families, further damaging the city’s stability and growth."

While Jonathan Chambre, a senior director at Apprise by Walker & Dunlop, declined to comment on the local politics and Mamdani, he did note that rent freezes aren't something that has been unprecedented. In fact, it happened three times under the Bill de Blasio administration and the multifamily sector survived just fine. Chambre added that rent-stabilized units at the time were attractive to own because they were considered to be a "value add" investment.

"The buildings had never been so well maintained, going back to the 1970s when the dilapidation rate was extremely high," he said.

However, the landscape has changed. This is due to two reasons, according to Chambre. One is due to rent laws changing in 2019, which capped rent increases on certain buildings and added regulations to vacancy regulations. The other is the build-up of distress, as interest rates and costs have spiked. From a financial standpoint, it does not make sense for landlords to renovate them, as thousands of rent-stabilized units are sitting vacant, according to Chambre.

"You can't spend $100,000 to renovate an apartment to charge $800 a month," he explained.

Those are the challenges today and what makes rent freezes a headache for landlords today. However, there is one caveat. The city's Rent Guidelines Board determines whether rents will increase or not each year. While the Mayor appoints members, it may take time to gain control of the housing authority as members' terms expire. Chambre said that it could take four years before a Mayor replaces everyone on the board. So rent freezes might not pose an immediate threat.

Mixed Views on Ballot Initiatives

Additionally, NYC residents will get three ballot proposals to vote on. This includes fast-tracking applications, simplifying the review process for modest projects and establishing an appeals board to potentially override decisions. Korbey is much more optimistic about these moves and said they have a "tremendous impact" on eliminating "hyper-localism" and will lead to a more predictable climate for housing developments.

"Too many rezonings and too many projects that need entitlements have been ensnared in local politics – and New York has become less affordable as a result," he said.

"These ballot initiatives will bring significant change. New York’s renters need them, and it is clear from who is fighting them how badly we need them."

However, Chambre doesn't share those same thoughts and doesn't think they will be game-changing.

"I wouldn't say that these ballot initiatives are something that is seriously on the mind of very many developers or very many operators," he admitted.

But regardless, the ballot initiatives appear to have unanimous support, according to a poll commissioned by the Partnership for New York and conducted by the Morning Consult, with over two-thirds of voters supporting each initiative. The hope is that this will lead to more homes quicker across NYC.

Where There Might be Common Ground

While landlords in the multifamily space have expressed concerns about rent freezes and tax hikes, Mamdani has shown a recent willingness to work with the private sector to solve the housing crisis.

Korbey lists a few areas where 34-year-olds and developers might be able to find common ground. One is pushing to amend the 458x affordable housing incentive program to cut labor costs for developments that exceed 99 units. Another is the hope that Eric Adams' appointee, Dan Garodnick, sticks around as the chief of planning or assumes the role of Deputy Mayor and Ahmed Tigani is retained as HPD commissioner under Mamdani.

"The zoning reforms of City of Yes, as well as rezonings in Midtown South, Long Island City and Jamaica Rezonings, are the direct result of Garodnick’s leadership of “New York’s Smartest” – the City Planning Department," Korbey explained.

He added that there's bullishness that Mamdani will continue to build off the regulatory reforms and rezoning to construct more affordable housing units — especially in undersupplied neighborhoods.

Possible Law Change to Encourage Rent Stabilized Investment

Meanwhile, going back to the rent-stabilized apartments that are sitting vacant, Chambre wonders if local policymakers will change the law at some point. This could encourage investment again in those buildings.

"Something will give at some point," he emphasized.

"There probably are people who are saying, right now, you can buy these buildings for 50% less than they were available for five years ago. If I'm not leveraged, if I can break even, earn a small profit, I see long-term upside in the future of New York City and part of that piece is the assumption that in the long term, things will be done in a way that works well for all residents of the city."

While rent-stabilized units remain a question mark, the hope is that this is the bottom for them. Chambre said there's potential for cap rates to go down.

But overall, he noted that the institutional investment appetite for multifamily as a whole is "very strong" in NYC and he doesn't see that changing.

But, of course, some of Mamdani's policies may cause some uncertainty. In the end, the hope is that common ground can be found with his new potential administration and the CRE sector to help solve the housing crisis in the city