Be Careful What You Wish (And Vote) For
Yes, political and economic forces absolutely do affect Manhattan's residential real estate market. For example, the settlement of the Burnett v NAR case, and changes in tax laws, interest rates, and elections, have all significantly changed our business.
Often, the practical results of these events are not as expected or intended. Here are a couple of examples of very recent current events with unintended consequences that are affecting our marketplace:
1. The FARE Act
Officially the Fairness in Apartment Rental Expenses Act, this New York City law took effect a few weeks ago on June 11, 2025. It shifts the responsibility of paying real estate broker fees from tenants to the party that hired the broker, typically the landlord or property manager. This means landlords can no longer charge tenants fees for brokers the landlords hired.
The law's intention was to make renting in NYC more affordable and transparent by lowering upfront costs for tenants.
So much for good intentions: in the few weeks since the law became effective, asking rents of new rental listings in Manhattan have shot up by 15% totally offsetting any brokerage fee savings.
2. The NYC Democratic Party Mayoral Primary Election
Last week, a relatively unknown, 33-year-old, Zohran Mamdani, shocked the world by winning the nomination. He is a "democratic socialist” and ran on a platform to make NYC more affordable. Specifically, Mamdani promised to "Freeze the Rent" and to shift NYC's already heavy tax burden from the lower and middle classes to the wealthy.
It is apparent that NYC is facing an affordability crisis where residents cannot afford to live in the city where they work. This incentivized the city's Democrats to vote to change leadership and select Mamdani as their candidate in November's election.
NYC’s knee jerk reaction to Mamdani's primary victory has been near panic. The stocks of some of the city's biggest developers and banks with major real estate portfolios tanked last week. Landlords' cash flows will most certainly be affected if Mamdani is elected, and the value of rental buildings may plummet.
Mamdani's intention to shift the real property tax burden from less wealthy outer borough homeowners to more expensive homes in wealthier neighborhoods may backfire. There are already anecdotal stories of wealthy New Yorkers planning to flee New York City, potentially crashing the luxury real estate market.
With respect to Mamdani's big win, I say, "Hold your horses, New Yorkers". Even if he is elected in November, and there is no guarantee he will be, the practical reality is that rents are unlikely to be frozen by a new mayor or anyone else. In an environment of skyrocketing insurance premiums, higher real estate taxes, and more expensive labor, building maintenance and repair costs, property owners need higher rents to maintain their buildings. Frozen rents will result in buildings falling into disrepair, and units being taken off the market altogether. With respect to property taxes, a total overhaul of the current system is unlikely. And a tweak to the system to create more understandable and equitable procedures and formulas is long overdue.
You heard it here first - reason will prevail despite voter frustration with the status quo. Things will not be as bad as everyone fears. But -- be aware and beware of unintended consequences.
