I
nvestors panicked over the prospect of a rent freeze in New York City, sending shares of real estate companies plummeting. Vornado Realty Trust and SL Green, two of the city's largest developers, fell more than 5% as investors feared Zohran Mamdani's potential win at City Hall would severely impact their businesses.

    Other real estate investment trusts (REITs) with significant ties to New York City also suffered losses. Equity Residential dropped 3%, Empire State Realty Trust fell 4%, and LXP Industrial Trust declined 2.5%. Flagstar Financial, Dime Community Bank, and Flushing Financial, all of which have major exposure to rent-regulated multi-family properties in the city, saw their shares fall between 3% and 5%.

    Mamdani's campaign promise to freeze rents on all rent-stabilized apartments has analysts warning that it could hurt building owners already struggling with higher costs. "Politicians continue to march down a perilous path for rent-regulated multi-family," said brokerage Stephens, citing the potential for allowable rent increases to lag behind expense growth.

    A rent freeze could also exacerbate existing challenges in New York's real estate sector, including higher interest rates and the shift to remote work that has left office buildings vacant. Analysts predict that Mamdani's policies could lead to "more selective corporate spending/hiring in the city and more out-migration of individuals and families," reducing demand for office space.

    Flagstar Financial's multi-family loan portfolio is estimated to be impacted by a rent freeze, with $16 billion to $18 billion at risk. However, some analysts believe that the impact on the bank's stock will be minimal in the long term. Meanwhile, Florida's Republican Gov. Ron DeSantis predicts that Mamdani's policies will only worsen the exodus of wealthy New Yorkers to the Sunshine State.