FundFire: How a ‘Freeze the Rent’ Campaign Pledge Could Roil NY Real Estate
- Parkview Financial
- Jun 29
- 4 min read
By Davide Mamone | FundFire | May 2, 2025
Following Zohran Mamdani’s win in the Democratic mayoral primary has sparked conversation across the real estate industry- particularly around his proposal to freeze rents on nearly a million stabilized units in NYC. Paul Rahimian, CEO of Parkview Financial, shared his thoughts with FundFire, noting that policies like this could unintentionally slow new development and limit housing supply.
Read the full article below, originally published by FundFire.
The surprising victory this week of 33-year-old democratic socialist and state lawmaker Zohran Mamdani over former governor Andrew Cuomo in New York City's Democratic mayoral primary sent shockwaves through many financial market players. But the candidate's signature pledge may turn out to be a drag for some real estate managers and a boon for others.
Mamdani's main campaign housing promise – to freeze rent increases for the city's nearly 1 million rent-stabilized units that make up almost half of the rental stock – may put significant pressure on existing owners but actually benefit certain large real estate managers that can exploit new opportunities, some industry players told FundFire.
Opportunistic and distressed deals could abound should current owners and investors decide to exit the rent-stabilized space. Meanwhile, other non-rent stabilized assets, including multifamily and class B residential properties, could see a rent bump and potentially boost revenues from existing assets.
For decades, smaller investors took advantage of the city's tax incentives to purchase rent-stabilized buildings, with many of them also betting that they would be able to use provisions that allowed them to eventually convert some units back to market-rate status.
But in 2019, the city changed the rules, passing the Housing Stability & Tenant Protection Act, which prevented most landlords from de-regulating stabilized units and raising rents following capital improvements.
"I had looked at properties that were purchased before and what they [are] sold for now, and in all honesty, [the value] probably dropped 40%," said Robert Martinek, director of real estate at EisnerAmper. "Basically, you know, it killed that market, so to speak."
Freezing the rent on those buildings permanently could be "a total disaster" for those owners, whose expenses – stretching from maintenance to insurance – continue to rise at a pace of 4% or 5% per year, he added.
"If you cannot raise those rents, you'll see cash-flow decrease escalating over time," Martinek said.
If a rent freeze led to more owners selling these assets under pressure, the result could be juicy distressed or opportunistic deals or real estate managers familiar with the city's market and capable of planning for long-term returns or strategic flips.
"When there's blood in the water, the vulture funds are going to come in," he said. "If someone thinks they can make money, there will be a buyer."
NY Optimism
Generally, there is a belief that New York's capital markets can rebound from most restrictive policies, and that would even apply to "freeze the rent," according to Michael Carney, senior vice president at Heitman, a $48 billion real estate manager.
Indeed, a new report issued by the city's rent guidelines board in March showed that owners' revenues increased roughly 12% after operating costs across the city despite the 2019 legislation.
Government policies are unlikely to change "the market's longstanding, solid supply-demand fundamentals," Carney said in an email. "Also, increased recognition of the housing crunch in New York has led to recent modifications to the [2019 law], including now allowing permanent, rather than temporary, rent increases for renovations of stabilized units."
However, the potential for freezing rents may create significant imbalances among current owners, because stagnating revenues could lead to loan defaults for certain players in today's high-rate environment, according to Paul Rahimian, CEO of Parkview Financial, a direct private lender specializing in short-term bridge and construction financing.
"Development may also stall, as real estate developers will be reluctant to take on the risk of building new projects if rental income can be frozen," he said in an email.
That scenario might exacerbate something that industry watchers consider an unintended consequence of rent control regulations: driving fair market rents even higher due to an overall lack of housing supply.
Indeed, a rent freeze policy has the potential to disincentivize property owners from "renovating and re-leasing vacant stabilized units," said Heitman's Carney.
In this context, New York City's class B properties of "predominately fair-market units" still look interesting to real estate managers, he added.
"The ability to invest capital into aging housing stock to potentially create value, while still offering a discount to top-of-the-market rents in new construction buildings, is attractive in a market with notoriously high barriers to entry, a diverse set of high value-add demand drivers and perennially tight vacancies," Carney said.
But the full fallout of a rent freeze policy isn't yet known. "Extreme policies like 'freeze the rent' can also cause real estate owners to pull back from the market entirely," according to Rahimian. "We believe that if a real estate owner wants to continue real estate investments, they would lean towards newly developed assets, as they have a lower chance to be affected by extreme policies."
Recently, Mamdani softened his stance on private market involvement in housing construction, telling the New York Times that he recognizes that "there is a very important role to be played" in tandem with "a muscular role for the public sector."
In the meantime, Martinek said he believes that only a watered-down version of the policy, such as capping rent increases more aggressively on some units for certain range periods, could eventually receive final approval.
"In a free trade market, it's going to be difficult, especially after what [we] went through [recently]," he said. "I would not expect a rent freeze to occur."
By Davide Mamone
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