The new rent freeze approved Thursday night for rent-stabilized apartments in New York City fulfills one of Mayor Zohran Mamdani's signature campaign promises. It also raises questions on how big of a hit local real estate stocks could take from it.

Despite warnings of a crashing real estate market if the Mamdani-backed changes were enacted by New York City's Rent Guidelines Board, shares of real estate investment trusts with exposure to the New York City market all closed higher Friday, with Empire State Realty Trust and SL Green seeing the biggest gains of around 4.5% and 4% respectively. Others, including AvalonBay, Vornado, and Equity Residential, saw more modest gains.

BMO Markets' John Kim says that the news isn't hurting these companies because the New York real estate market's fundamentals remain strong due to a combination of little new housing supply, strong job growth, and lots of leasing activity by the REITs' office rental divisions.

"Most of the REITs own mostly market rate units," Kim notes. And rents for those units are continuing to climb due to the shortage of new units on the market.

"The economy is strong, job growth is good, and young people want to be here," he added.

While secondary cities like Miami and Dallas are gaining traction with some banks -- such as J.P. Morgan, Morgan Stanley, and Goldman Sachs -- "all the other choices have their flaws," he noted, from hotter weather to less desirable geography.

Piper Sandler's Alexander Goldfarb says the freeze will make market rate units, which are subject to fewer rent caps, more expensive. "All that's happened with this rent control freeze is that it's taking a bad situation and making it worse," he said.

In contrast, Mayor Mamdani called it "a historic victory for New York City tenants."

Notably, some New York-centric REIT stocks have yet to recover from their drop late last June when Mamdani won the Democratic primary for mayor. SL Green, for example, is down 11% from its low of around $58 back then, while AvalonBay is off nearly 7% since then.

That drop was driven not only by concerns about the impact a rent freeze could have on property owners' revenues, but also that Mamdani's related policies, such as a plan to raise taxes on the wealthiest New Yorkers, would make the city a less desirable place to rent office space as well.

AvalonBay is perhaps the most exposed to the rent freeze, as most of its business is residential, including 5.5% in New York City, according to its 2025 annual report.

While SL Green is almost entirely in the commercial real estate space, it has faced downward pressure from ongoing concerns that Mamdani administration policies could hurt the office real estate market over the longer term.

Write to Anita Hamilton at anita.hamilton@barrons.com

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June 26, 2026 17:27 ET (21:27 GMT)

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