Apartments in the East Village of Manhattan
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The inauguration of Zohran Mamdani as the new mayor of New York City on January 1, 2026, has triggered a mixed reaction in the real estate community, ranging from indifference to alarm depending on the asset type.
While market fundamentals remain strong—as evidenced by new development and office-to-residential conversions, the rebound of Class A office leasing and values and a strong free-market multifamily sector—the regulatory picture is in flux. Specifically, the incoming mayor made a four-year rent freeze on rent stabilized apartments his signature campaign promise.
Enduring Impact: Mayor Adams’ Initiatives Reshape Housing Development Landscape
Long after he leaves office, Mayor Eric Adams’ policies will have a lasting impact on the development sector in New York City. Like Mamdani, Adams recognized the housing affordability crisis, but his administration operated under the core belief that it was primarily a problem of insufficient supply. Consequently, Adams introduced wide-ranging initiatives to encourage the private sector to build more housing.
In December 2024, the Adams administration pushed through the City of Yes for Housing Opportunity, a sweeping citywide rezoning initiative to create more than 82,000 new apartments over the next 15 years and invest $5 billion in critical infrastructure and housing development. Marking the initiative’s first anniversary, Adams reported that it has generated a 23% year-over-year boost in housing permits through the first ten months of 2025.
The administration also shepherded through the approval process five rezonings in Midtown South, Atlantic Avenue in Brooklyn , Long Island City, Jamaica in Queens and around the planned Metro-North stations in the Bronx. Together, these rezonings are expected to yield nearly 50,000 new apartments, of which around 15,000 will be affordable.
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Additionally, Adams convened a charter revision commission that put four citywide housing measures on the November 4, 2025 ballot, which were approved by the voters. The charter reforms will fast track public processes for affordable housing by streamlining land use reviews and allowing certain developments to bypass local City Council member approval.
Adams also advocated for the extension of the 421-a tax incentive before its expiration in 2022. After its lapse, he supported the new housing policies in the New York State FY 2025 Budget, which introduced the 485-x tax exemption as a successor to 421-a. The State budget also empowered the Adams administration to establish two new residential districts with a high Floor Area Ratio (FAR of 15 and 18) and added the 467-m tax exemption specifically to encourage office-to-residential conversions.
These initiatives are bearing fruit as development sales totaled $4.5 billion in the first three quarters of 2025, up 53% over the same period last year, and transaction volume rose 17% over the same period, Ariel Property Advisors’ New York City Q1-Q3 2025 All Asset Report shows. Manhattan and Brooklyn accounted for 77% of dollar volume and 53% of deals for ground up development, highlighting the demand for shovel-ready prime sites. However, State wage mandates for 485-x projects with 100 units or more, however, have limited large-scale projects in the outer boroughs.
Of the development sales, office conversion and demolition deals totaled about $1 billion in the first nine months of the year and were concentrated in Manhattan. Backed by the new incentives and zoning flexibility, many Class B and C offices are being repositioned for housing. More than 12,000 homes are in the pipeline for office conversions, of which 3,000 will be permanently affordable, according to Adams’ office.
In contrast, Mamdani’s campaign website proposed shifting housing production from the private to the public sector. This would include raising $70 billion new capital dollars in the municipal bond market to build 200,000 publicly subsidized, permanently affordable, union-built, rent stabilized homes over the next 10 years for low income households, seniors and working families. The funds would be on top of the about $30 billion the City is already planning to spend, making the total investment $100 billion.
New York City Mayor Eric Adams during a rally in favor of City of Yes for Economic Opportunity, which was approved by the New York City Council on December 5, 2024. (Luiz C. Ribeiro/New York Daily News/Tribune News Service via Getty Images)
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Class A Office Sector Sees a Bright Future: High Leasing Volume and Strategic Growth
Class A office owners have had a great year. Office leasing in Manhattan totaled over 30 million square feet during the first nine months of 2025, the highest level since 2002, according to Colliers. Nearly 70% of the leases were concentrated in Class A office buildings and large deals exceeding 100,000 square feet totaled more than 6.8 million square feet, led by credit tenants in finance, law, tech and AI.
At a recent Bisnow event, Tony Malkin, CEO of Empire State Realty Trust (ESRT), highlighted the robust leasing activity in the REIT’s 7.8 million rentable square foot office portfolio, which includes Manhattan office buildings that are over 93% leased. ESRT announced earlier this month that it is making an even bigger commitment to Manhattan by acquiring for $386 million the Scholastic Building at 555-557 Broadway in SoHo, comprising approximately 368,000 square feet of office and 28,000 square feet of prime retail.
Office investment activity strengthened to $4.8 billion sales through the first three quarters of 2025, with dollar volume up 88% and transactions rising 49% year-over-year, Ariel’s Q1-Q3 2025 All Asset Report shows. Top-tier Class A and Trophy office buildings accounted for 79% of the total office sales over the nine month period, trading at an average of $819/SF, up 18% year-over-year and just 6% below the 2018 benchmark.
Scott Rechler, CEO and Chairman of RXR, which is heavily invested in the New York City office sector, reportedly met with Mamdani in August and stressed the “need for safety and public order for the City to thrive,” according to the Wall Street Journal. Following his election, Mamdani announced that the current Police Commissioner Jessica Tisch had agreed to remain in her post in his administration, which may counter fears about the “defund the police” rhetoric professed by some on his transition team.
Empire State Realty Trust, which owns the Empire State Building, announced its Manhattan office properties were over 93% leased as of September 30, 2025.
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Multifamily Remains New York City’s CRE Anchor
Among all asset classes, New York City multifamily attracts the most consistent investor interest. Three very different submarkets, however, make up the multifamily ecosystem: free market, affordable housing and rent stabilized.
Free Market Properties Drive Bulk of Multifamily Investment
Free market multifamily comprised 68% of the total $6.6 million in multifamily dollar volume during the first nine months of 2025, and 48% of the transactions, according to Ariel’s report on Q1-Q3 2025 New York City investment sales. Activity was largely concentrated in high-income areas, with Manhattan (below 96th Street) and prime Brooklyn accounting for 94% of all free market transactions citywide.
Over 1.1 million tenants live in free market units and unlike rent stabilized properties, free market buildings offer investors minimal legislative restrictions and falling vacancy rates and shrinking inventory, which have led to high rent growth. As a result of this performance, free market properties (above 10 units) in Manhattan have seen a pricing increase of over 10% to $863/SF compared to the first three quarters of 2024.
Prime free market investments include larger, newer institutional assets, where sponsors hold firm and capital partners step in; deregulated larger and older properties, especially in Manhattan and prime Brooklyn; and small, tax-class protected walk-ups, that trade mostly among private owners and partnerships.
Affordable Housing Sales Strategic and Infrequent
Demand for affordable multifamily remains strong—from private to mission-driven to nonprofits to institutional investors—all seeking long-term, impact-aligned opportunities to provide quality housing to low-income tenants while at the same time producing a return.
These are structured as public-private platforms with government agencies (HPD, HDC, HUD) and the supply is structurally limited. These assets aren’t typically distressed but require capital reinvestment and renewed incentives every 10 years or so. Operators face a decision each cycle: recommit or exit. As a result, sales are strategic and infrequent — not because there’s no demand.
Mayor-Elect Targets Rent Stabilized Multifamily with Four-Year Rent Freeze
Rent stabilized assets, which represented 20% of the total dollar volume of multifamily sales in the first nine months of 2025, continued to see pricing declines this year. Many rent stabilized buildings are trading at discounts averaging 50% of the values recorded before the Housing Stability and Tenant Protection Act (HSTPA) of 2019. HSTPA suppressed rents even upon long-term vacancies, resulting in an estimated 50,000 vacant stabilized units. Over the last five years, expenses in rent stabilized buildings have climbed 28% while allowable rent increases totaled only 11%.
Yet it is this beleaguered asset class that was the centerpiece of Mamdani’s affordability campaign, with the mayor-elect declaring that he will freeze the rents for four years for the 1 million rent stabilized apartments, 44% of the city’s rental supply. While the mayor can’t freeze rents directly, he is responsible for appointing members of the Rent Guidelines Board whose members vote on rent increases.
A recent report issued by the New York Apartment Association (NYAA) found that unless the government offsets operating expenses, roughly half of the pre-1974 rent stabilized buildings will be bankrupt if the Rent Guidelines Board votes to freeze rents for four years. The result would be a financial and physical collapse, which could lead to tenant displacement. Or in buildings with a mix of market-rate and stabilized units, a spike in rents for market rate tenants to cover expenses.
“Freezing rents for four years without any plan for rising costs is not a path to stability; it’s a recipe for widespread building failure and displacement,” said Kenny Burgos, CEO of NYAA. “The publicly available data paints a very clear picture of distress and ultimately destruction of this vital housing stock.”
The NYAA study found that about 47% of all rent stabilized units are in 100% or nearly 100% stabilized buildings. It’s estimated that more than 200,000 apartments in 5,000 buildings primarily in the Bronx or Northern Manhattan are already in severe financial distress.
A number of other housing groups have also raised the alarm about distress in the rent stabilized sector including Enterprise and the National Equity Fund, the NYU Furman Center and the New York Housing Conference.
The New York Housing Conference has proposed that the city create a $1 billion financing program for publicly subsidized rent stabilized housing at risk of default. NYAA estimates an additional $3.65 billion is needed to prevent widespread mortgage defaults for majority rent-stabilized, pre-1974 buildings that are privately owned and pay $1.6 billion annually in property taxes.
Values of multifamily buildings with 75% or more rent stabilized units have fallen by 50% on average since HSTPA was passed in 2019.
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Signaling and Transition Team Matter
Of the 400 people named to Mamdani’s 17 transition committees, 24 were named to the housing transition team, many from the affordable housing sector. While rent stabilized owners aren’t part of the group, it is hopeful that their concerns will be shared with the new administration.
Those representing real estate include Jed Walentas, CEO of Two Trees Management and Chair of the Real Estate Board of New York; Lisa Gomez, CEO of L+M, an affordable housing developer; Carolee Fink, COO of M Squared; Matt Wambua, Vice Chair of Merchants Bank; Carlina Rivera, President and CEO of the NY State Association for Affordable Housing (NYSAFAH); and Rafael Cestero, CEO of the Community Presentation Corporation. Gomez, Fink and Wambua worked in city government in the Bloomberg and DeBlasio administrations. Several representatives from pro-housing groups as well as tenant organizations were also named to the housing committee.
In addition, the mayor-elect recently met with housing developers, bankers and investors to discuss the production and preservation of affordable housing.
Mayor-elect Zohran Mamdani campaigned on freezing rents on rent stabilized apartments for four years. (Photo by ANGELA WEISS / AFP) (Photo by ANGELA WEISS/AFP via Getty Images)
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Pragmatism Could Deliver a Win for Mamdani — and for New York City
New York stands at a pivotal moment. The Adams administration laid the groundwork for a major expansion of housing supply—485-x, 467-m, broad rezonings and the City of Yes for Housing Opportunity—initiatives that will produce thousands of new units, including a meaningful pipeline of office-to-residential conversions. If the incoming Mamdani administration chooses to embrace this momentum, it will inherit the benefits of this groundwork on Day One.
At the same time, Mamdani’s focus on rent-stabilized housing presents both risk and opportunity. A four-year rent freeze would undoubtedly deepen the sector’s already severe financial pressure. But the administration also has a chance to rethink HSTPA-era constraints and create real pathways for owners to reinvest. Expanding Article 11, restoring the 610 amendment and enabling conversions of distressed rent stabilized buildings into long-term affordable housing could stabilize portfolios, protect tenants and deliver genuinely affordable stock at scale.
In the end, the story of the next four years will come down to execution. If Mamdani governs pragmatically—protecting tenants while supporting the financial viability of housing providers—New York City can move from polarized rhetoric to shared progress. The door is open for a balanced, pro-housing agenda that strengthens the city’s future.