The swearing-in of Zohran Mamdani as New York City’s mayor on January 1, 2026, has sparked reactions across the real estate industry that range from cautious optimism to genuine concern, with sentiment largely depending on which property sector stakeholders occupy.
Despite strong market fundamentals—including robust new construction activity, successful office-to-residential conversions, recovering Class A office leasing and valuations, and a thriving free-market rental sector—regulatory uncertainty looms large. The incoming mayor’s central campaign pledge—a four-year freeze on rent-stabilized apartment increases—has become the focal point of industry anxiety.
Adams’ Housing Legacy: A Foundation Built on Supply-side Solutions.
Mayor Eric Adams’ influence on New York City’s development landscape will extend well beyond his tenure. Both Adams and Mamdani identified housing affordability as a critical challenge, yet their approaches diverge fundamentally. Adams operated from the conviction that insufficient supply lay at the heart of the crisis, prompting his administration to roll out comprehensive initiatives aimed at incentivizing private sector construction.
The centerpiece of Adams’ housing strategy, the City of Yes for Housing Opportunity, passed in December 2024. This ambitious citywide rezoning framework promises to generate over 82,000 new apartments across the next 15 years while directing $5 billion toward infrastructure and housing development. One year into implementation, Adams announced that housing permits surged 23% year-over-year through October 2025.
Beyond City of Yes, the Adams administration facilitated five major neighborhood rezonings spanning Midtown South, Brooklyn’s Atlantic Avenue corridor, Long Island City, Jamaica in Queens, and areas surrounding planned Metro-North stations in the Bronx. These rezonings collectively project nearly 50,000 new residential units, with approximately 15,000 designated as affordable.
Adams also established a charter revision commission that placed four housing-related measures on the November 4, 2025 ballot—all approved by voters. These charter reforms accelerate affordable housing development by streamlining land use reviews and allowing certain projects to circumvent traditional City Council member approval requirements.
On the tax incentive front, Adams championed extending the 421-a program before it expired in 2022. Following its sunset, he backed new housing provisions in the New York State FY 2025 Budget, which introduced the 485-x tax exemption as 421-a’s replacement. The state budget additionally authorized the Adams administration to create two new residential districts with elevated Floor Area Ratios (FAR of 15 and 18) and established the 467-m tax exemption specifically designed to stimulate office-to-residential conversions.
These policy initiatives have yielded tangible results. Development site sales reached $4.5 billion during the first three quarters of 2025—a 53% increase compared to the same period in 2024—while transaction volume climbed 17%, according to Ariel Property Advisors’ New York City Q1-Q3 2025 All Asset Report. Manhattan and Brooklyn captured 77% of dollar volume and 53% of transactions for ground-up development, underscoring demand for prime, shovel-ready sites. However, state-mandated wage requirements for 485-x projects containing 100 or more units have constrained large-scale development in the outer boroughs.
Office conversion and demolition transactions totaled approximately $1 billion during the first nine months of 2025, concentrated primarily in Manhattan. Supported by new incentives and zoning flexibility, numerous Class B and C office properties are being transformed into residential use. According to the mayor’s office, more than 12,000 homes are in the conversion pipeline, including 3,000 permanently affordable units.
Mamdani’s campaign platform presents a contrasting vision, proposing to shift housing production from private to public control. His plan calls for issuing $70 billion in municipal bonds to construct 200,000 publicly subsidized, permanently affordable, union-built, rent-stabilized homes over the next decade targeting low-income households, seniors, and working families. Combined with the approximately $30 billion the City already plans to allocate, the total investment would reach $100 billion.
Class A Office Market Momentum: Strong Leasing and Rising Values
Class A office property owners experienced a banner year. Manhattan office leasing exceeded 30 million square feet through the first nine months of 2025—the highest volume recorded since 2002, according to Colliers. Nearly 70% of this leasing activity concentrated in Class A buildings, with large transactions surpassing 100,000 square feet totaling over 6.8 million square feet, driven by creditworthy tenants in finance, law, technology, and artificial intelligence sectors.
At a recent Bisnow conference, Tony Malkin, CEO of Empire State Realty Trust (ESRT), emphasized robust leasing across the REIT’s 7.8 million square foot Manhattan office portfolio, which maintains occupancy above 93%. ESRT announced earlier this month its $386 million acquisition of the Scholastic Building at 555-557 Broadway in SoHo—approximately 368,000 square feet of office space and 28,000 square feet of prime retail—signaling continued confidence in Manhattan’s office market.
Office investment activity strengthened significantly, with sales reaching $4.8 billion through the first three quarters of 2025. Dollar volume increased 88% and transactions rose 49% year-over-year, per Ariel’s Q1-Q3 2025 All Asset Report. Premium Class A and Trophy office properties represented 79% of total office sales during this period, trading at an average of $819 per square foot—up 18% year-over-year and just 6% below the 2018 benchmark.
Scott Rechler, CEO and Chairman of RXR, which maintains substantial New York City office investments, reportedly met with Mamdani in August to stress that “safety and public order” remain essential for the city’s prosperity, according to the Wall Street Journal. Following his election victory, Mamdani announced that Police Commissioner Jessica Tisch agreed to continue serving in his administration—a move that may alleviate concerns regarding “defund the police” rhetoric from some transition team members.
Transition Team Composition Report Priorities.
Among the 400 individuals appointed to Mamdani’s 17 transition committees, 24 were assigned to the housing transition team, predominantly representing the affordable housing sector. While rent-stabilized property owners lack direct representation, stakeholders hope their concerns will reach the incoming administration through intermediaries.
Real estate representatives on the housing committee include: Jed Walentas, CEO of Two Trees Management and Chair of the Real Estate Board of New York; Lisa Gomez, CEO of L+M Development Partners, an affordable housing developer; Carolee Fink, COO of M Squared; Matt Wambua, Vice Chair of Merchants Bank; Carlina Rivera, President and CEO of the New York State Association for Affordable Housing (NYSAFAH); and Rafael Cestero, CEO of the Community Preservation Corporation. Gomez, Fink, and Wambua previously served in city government during the Bloomberg and de Blasio administrations. The housing committee also includes representatives from pro-housing advocacy groups and tenant organizations.
Additionally, the mayor-elect recently convened meetings with housing developers, bankers, and investors to discuss affordable housing production and preservation strategies.
The Rent-Stabilized Crisis: A Sector Under Severe Strain
Rent-stabilized properties represented 20% of total multifamily sales dollar volume during the first nine months of 2025, continuing to experience pricing declines. Many rent-stabilized buildings now trade at discounts averaging 50% below pre-2019 Housing Stability and Tenant Protection Act (HSTPA) valuations. HSTPA suppressed rent increases even for long-term vacancies, contributing to an estimated 50,000 vacant stabilized units citywide. Over the past five years, operating expenses in rent-stabilized buildings have climbed 28% while allowable rent increases totaled merely 11%.
This struggling asset class became the cornerstone of Mamdani’s affordability campaign, with the mayor-elect pledging to freeze rents for four years across the 1 million rent-stabilized apartments that comprise 44% of the city’s rental inventory. While the mayor cannot directly freeze rents, he appoints Rent Guidelines Board members who vote on annual rent adjustments.
A recent New York Apartment Association (NYAA) report concluded that without government offsetting of operating expenses, approximately half of pre-1974 rent-stabilized buildings would face bankruptcy if the Rent Guidelines Board implements a four-year rent freeze. The outcome would be financial and physical building deterioration, potentially triggering tenant displacement. In mixed-income buildings containing both market-rate and stabilized units, market-rate rents would likely spike to cover operating shortfalls.
“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,” stated 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 determined that approximately 47% of all rent-stabilized units exist in buildings that are 100% or nearly entirely rent-stabilized. More than 200,000 apartments across 5,000 buildings—primarily located in the Bronx and Northern Manhattan—already experience severe financial distress.
Additional housing organizations have raised alarms about the rent-stabilized sector’s deteriorating condition, including Enterprise and the National Equity Fund, the NYU Furman Center, and the New York Housing Conference.
The New York Housing Conference proposed establishing a $1 billion city financing program for publicly subsidized rent-stabilized housing at default risk. NYAA estimates an additional $3.65 billion is necessary to prevent widespread mortgage defaults for majority rent-stabilized, pre-1974 buildings that remain privately owned while contributing $1.6 billion annually in property taxes.
Pragmatic Governance: A Path to Mutual Success
New York City stands at a critical juncture. The Adams administration established infrastructure for substantial housing supply expansion—485-x, 467-m, comprehensive rezonings, and the City of Yes for Housing Opportunity—initiatives poised to deliver thousands of new units, including a significant office-to-residential conversion pipeline. Should the incoming Mamdani administration embrace this momentum, it will inherit these benefits immediately.
Simultaneously, Mamdani’s emphasis on rent-stabilized housing presents both challenges and opportunities. A four-year rent freeze would unquestionably intensify the sector’s existing financial distress. However, the administration also possesses an opportunity to reassess HSTPA-era restrictions and establish viable pathways enabling owners to reinvest in their properties. Expanding Article 11 provisions, restoring the 610 amendment, and facilitating conversions of financially distressed rent-stabilized buildings into long-term affordable housing could stabilize portfolios, safeguard tenants, and generate substantial affordable housing inventory.
Ultimately, the narrative of the next four years will hinge on execution. If Mamdani governs pragmatically—protecting tenants while ensuring the financial sustainability of housing providers—New York City can transition from divisive rhetoric toward collaborative progress. The opportunity exists for a balanced, pro-housing agenda that fortifies the city’s future.
Source: Forbes
