Issue 120 - The Unspoken Hidden Third Lever

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Issue 120 – The Unspoken Hidden Third Lever

April 1, 2026

These past two quarters of 2026 have been extremely productive in the real estate sector. The big question is: “Will this continue into the spring selling season?”

The biggest variables remain New York City policy changes, elevated mortgage rates, and broader global uncertainty.

While I touched upon this in my last newsletter, I think the most obvious concerns will continue to be NYC policy changes in conjunction with mortgage rates.

Though Mamdani has proposed a 2% “millionaire tax” on incomes above $1 million to help close New York City’s $5.4 billion budget gap, the city cannot enact such a measure on its own. It would require approval from the State Legislature and Governor Hochul, who has expressed opposition, making passage uncertain.

If the state does not approve the income tax, the mayor’s fallback is a proposed 9.5% increase in NYC property taxes, which could be enacted locally by the June 30th budget deadline. Once adopted, the new property tax rate becomes effective for the fiscal year, impacting nearly three million residential units and over 100,000 commercial buildings across NYC.

For condo/co-op buyers, this change translates into higher common charges (condos) and higher maintenance fees (co-ops). It also puts pressure on cap rates for rental buildings.

However, a “hidden third lever” option — now gaining traction in both Albany and City Hall — is a hybrid approach that closes the gap without major tax increases. It relies on a combination of general reserves, state aid, and internal cost reductions.

The mayor’s preliminary budget already assumes nearly $1 billion from the “Rainy Day Fund” and additional reserves to help balance the books. These funds were built after the 1970s fiscal crisis precisely for situations like this.

Governor Hochul has already signaled $1.5 billion in assistance for NYC over two years. State legislators are also proposing targeted taxes on corporations and ultra-wealthy residents that could send several billion dollars to NYC, potentially filling most of the gap. This approach allows Albany to help NYC without approving Mamdani’s specific millionaire tax plan.

Some City Council leaders argue the gap does not warrant tapping rainy-day funds and instead push for efficiencies, such as eliminating long-term vacant positions and agency cuts, which could generate about $1.7 billion in savings without new taxes. NYC agencies are already being instructed to identify savings to cut spending.

The likelihood of the 2% millionaire tax being approved is low to moderate, whereas the 9.5% property tax hike scenario is slightly higher. The third lever option — a compromise that avoids new tax hikes — is now being discussed publicly and gaining traction, for three main reasons: Hochul doesn’t want a “tax-the-rich” headline going into an election. The City Council isn’t eager to push through a major property tax hike. And while Mamdani is focused on generating revenue, he still needs to balance the budget.

Ultimately, this hybrid approach would have a far more muted impact on real estate, especially at the high end.

Beyond local policy, global economic pressures and interest rates will shape the market. Mortgage rates for 30-year fixed loans are now hovering in the 6%–6.5% range, depending on the borrower and structure. While rates have edged up slightly from their recent lows, many lenders are still offering options in the high-5% range, suggesting we may be settling into a more workable and predictable environment for buyers.

Rather than a sharp shift, we’re seeing a market that is beginning to find its footing — offering buyers more clarity and the potential to re-engage with greater confidence, helping them break through an affordable barrier.

Overall, buyers, sellers, and investors remain optimistic. However, some are sidelined by fears of volatility. At the same time, international demand continues to support the market, reinforcing New York’s global appeal.

One of the big concerns that looms over New York City was highlighted in a recent Politico piece, signaling a worrisome sign: “Moody’s, the bond rating agency, revised its fiscal outlook for New York City from ‘stable’ to ‘negative.’ It suggests Moody’s could eventually downgrade the city if its fiscal situation isn’t rectified.”

As always, many moving parts will determine whether the upcoming months are a boon or a bust for real estate.

To recap: Looking ahead, one of the key factors to watch will be how Mamdani and Hochul ultimately align on closing the budget gap. There’s a real opportunity here for a thoughtful compromise — one that balances fiscal responsibility with economic growth and keeps New York City competitive on a global stage.

If approached strategically, this moment could reinforce the city’s long-standing strength: its ability to adapt, attract capital, and remain a place where both investment and innovation thrive.

For real estate, the focus should remain on preserving and enhancing New York’s status as a world-class market. History has shown that when the city leans into smart policy and long-term thinking, it not only protects value — it creates it.

This is less about risk and more about execution. If leadership gets it right, New York is well-positioned to continue its upward trajectory.

It remains to be seen which path will be chosen, but as the days grow longer, we should be getting more clarity on how our local, state, and national political and economic factors will impact real estate for the rest of the year.

Issue 124 – “The Freeze Heard Across New York”

August 1, 2026

Even those of us who spend most of our days in the world of sales rather than rentals cannot ignore the conversation dominating New York real estate this summer: the city’s newly approved two-year rent freeze on nearly one million rent-stabilized apartments. The decision, fulfilling one of Mayor Zohran Mamdani’s signature campaign promises, has ignited passionate debate from tenants, landlords, developers, and economists alike.

As Time Magazine recently reported, “’Freeze the rent’ became the definitive rallying cry of Mamdani’s affordability-focused mayoral campaign for New York City, one of the most expensive cities in the world. Despite skepticism that he could actually pull it off, a board he controls made good on his pledge just six months into his term.”

In a 7-1 vote this June, the Rent Guidelines Board approved a rent freeze on one- and two-year leases on rent-stabilized apartments — which, according to the Time article, “make up about 27% of overall NYC housing stock.”

For tenants living in stabilized housing, the appeal is obvious. In a city where affordability persists as one of the defining challenges of our time, freezing rents offers immediate relief and greater certainty in an increasingly pricey environment.

Yet, as is so often the case in New York real estate, the story is more nuanced than the headlines suggest.

The New York Post presented the other side of the story, explaining that building owners are grappling with rising operating costs: insurance premiums, labor expenses, property taxes, and capital improvements have all increased substantially.

Critics argue that while the freeze protects tenants in the short term, rising expenses without corresponding rent increases may make it harder, particularly for smaller landlords, to maintain and improve aging buildings.

Rent freezes are not unprecedented. Previous freezes have provided short-term relief for tenants while renewing debates over maintenance, capital improvements, and investment in aging housing stock.

The broader issue is supply. Economists across the political spectrum generally agree that New York’s housing shortage cannot be solved through rent regulation alone. As Vox reported, demand continues to outpace inventory, making new housing production, zoning reform, and development incentives essential.

Although the freeze does not directly affect market-rate apartments, landlords with both stabilized and market-rate units may feel pressure to offset constrained revenue by increasing free-market rents where legally permissible. New York State’s 2024 Good Cause Eviction law, however, limits annual rent increases to the lesser of 10% or the local inflation index.

For buyers, particularly investors considering multifamily assets, the freeze introduces additional uncertainty around future income growth. Buildings with significant rent-stabilized components may trade at lower valuations because purchasers will have to underwrite higher operating costs against stagnant revenue.

For sellers, especially owners of mixed-use or rent-stabilized assets, the challenge becomes demonstrating long-term upside. We may see some owners delay sales, while others bring assets to market sooner out of concern that future regulation could become even more restrictive.

From a residential perspective, one unintended consequence may be increased demand for condominiums and co-ops. When rental policy becomes less predictable, many affluent New Yorkers begin to view ownership as a more stable, controllable alternative.

Foreign investors are unlikely to retreat from purchasing trophy condominiums or prime co-ops, which operate outside the stabilized system. In fact, increased regulation in the rental market could strengthen the appeal of luxury ownership as a store of wealth.

The greater consequence will be on institutional and international investors exploring multifamily acquisitions, where limits on revenue growth coupled with rising operating expenses may prompt some capital to pause, reprice risk, or seek opportunities elsewhere.

A major concern today is that the economics are more challenging than they were a decade ago. The Rent Guidelines Board’s own data shows that operating expenses continue to rise, with insurance costs increasing by more than 10% and overall operating costs rising by more than 5%. The effects will likely be felt most acutely in neighborhoods with large concentrations of rent-stabilized housing, while luxury condominium markets such as Tribeca, SoHo, and much of the West Village, where condominium and market-rate inventory dominate, will experience relatively little direct change.

New York remains one of the most desirable real estate markets in the world. The larger question is whether future housing policy can strike the right balance between protecting tenants and preserving the incentives necessary to maintain and improve the city’s housing stock. Recent reporting suggests that landlords and tenants alike are increasingly worried about the long-term sustainability of that balance.

Perhaps most interesting is what this moment reveals about New York itself. Housing has become far more than an economic issue—it has become a cultural and political one. The debate over rent stabilization reflects larger questions about who gets to stay in the city, who can afford to enter it, and what balance should exist between protecting existing residents and encouraging future investment.

As someone whose business focuses primarily on the sales market, I often remind clients that New York real estate rarely moves in straight lines. Policy shifts ripple through every corner of the market, shaping rental demand, buyer behavior, and investment strategy alike.

Yet what doesn’t change is New York’s capacity to reinvent itself. The conversation around housing will evolve, administrations will change, and policies will come and go. But the city’s enduring challenge — and opportunity — will always be finding ways to be both livable and aspirational.