Real estate stocks with New York City exposure tumbled Wednesday after Democratic Socialist Zohran Mamdani took the lead in the city's mayoral primary, spooked by his pledge to freeze rents on over one million rent-stabilized apartments.
Vornado Realty Trust dropped 6.7%, SL Green Realty fell 5.7%, and Equity Residential declined 2.3% as investors digested the possibility that the 33-year-old state assemblyman's campaign promises could become reality. Flagstar Bank, with heavy exposure to New York multifamily loans, slid nearly 4%.
Mamdani staged an upset victory over former Governor Andrew Cuomo in Tuesday's Democratic primary, though results remain unofficial under the city's ranked-choice voting system until he surpasses 50% support1. The Democratic nominee will be heavily favored in the November general election against Republican Curtis Sliwa and independent candidates, including incumbent Mayor Eric Adams1.
His victory comes as the city faces a housing crisis, with vacancy rates at a 56-year low and median two-bedroom rents reaching $5,5602. About half of the city's rental apartments—roughly one million units—are rent-stabilized and subject to annual decisions by the mayor-appointed Rent Guidelines Board3.
Mamdani has committed to pressing his RGB appointees for a four-year rent freeze on stabilized properties, a position that has drawn both support and criticism1. The current board is scheduled to vote June 27 on whether to approve increases of 1.75% to 4.75% for one-year leases or 3.75% to 7.75% for two-year leases2.
"Nowhere in the law does it say the mayor has the power to force the 9-member, independent Rent Guidelines Board into premeditated rent freezes," said Kenny Burgos, CEO of the New York Apartment Association1.
However, leading economists endorsed Mamdani's platform, arguing that "unchecked rent spikes destabilize neighborhoods, increase homelessness—a far costlier public burden—and drain local economies"3.
The idea isn't unprecedented—former Mayor Bill de Blasio froze rents three times1. Victor Rodriguez of CoStar Market Analytics suggested the impact may be "more perception than reality," noting that while a freeze would be "less ideal for owners," it wouldn't be "catastrophic"1.
Deutsche Bank estimated that $16 billion to $18 billion of Flagstar's multifamily loan portfolio could be exposed to New York rent regulations, representing about a quarter of the bank's total loan book2.
The selloff reflects broader concerns about an already-pressured real estate sector grappling with elevated interest rates and reduced office demand following the pandemic3.
