“We don’t tell a New York owner when to sell — that’s their call. What we do is make sure that if they decide the next decade shouldn’t look like the last one, the exit doesn’t have to start with a tax bill.” 

— Daniel Raupp, Founder & Managing Partner, Fortitude Investment Group LLC

Short answer: New York City’s for-sale inventory is loosening faster than the national market, while rental inventory across all five boroughs remains the tightest it has been in years. Add a first-ever two-year rent freeze on stabilized units and expanding tenant protections on free-market apartments, and a growing number of multifamily owners are concluding that 2026 is the year to sell, not hold. A 1031 exchange into a Delaware Statutory Trust (DST) lets them do that without an immediate tax bill.

Rental Inventory is The Tightest in Two Decades.

Manhattan rental inventory has declined for 24 consecutive months, the longest streak in StreetEasy’s 20-year history. Of the city’s 2.3 million rental units, roughly half are free-market and half are rent-regulated, so this tightness touches owners across the spectrum, not one segment.

The Rent Freeze, and What It Means for Owners

On June 25, 2026, the Rent Guidelines Board voted 7-1 to set the first two-year rent freeze in its history on roughly one million stabilized units, covering leases from October 1, 2026 through September 30, 2027. A landlord coalition has since sued in Staten Island court, with a hearing set for September 2, 2026.

New York’s own housing agency estimates about 57,000 rent-stabilized units sit vacant because renovating and re-leasing them doesn’t pencil out under current rules, and attorneys have pointed to recent stabilized-building sales closing 30% to 50% below what the seller originally paid. A landlord survey cited in the litigation found roughly a third of stabilized-building mortgages already carry insufficient income to cover debt service, before the freeze even takes effect.

Free-market owners aren’t insulated either. Good Cause Eviction, in effect statewide since 2024, extends renewal protections and rent-increase limits to market-rate units for any owner of ten or more units statewide. Brokers and owners report the law is already reducing tenant turnover in free-market buildings, meaning fewer vacancies to reset at market rent and a slower path to repricing a unit even when the building itself isn’t rent-stabilized.

Put together: an owner of a mixed stabilized/free-market building, or a portfolio spread across several small multifamily properties, is now navigating frozen income on one side, slower turnover on the other, active litigation with an uncertain outcome, and rising operating costs (insurance, labor, fuel, Local Law 97 compliance) that don’t pause for any of it. For many, that combination, not any single policy, is what’s prompting the phone call to ask about selling.

Taxes: What’s Settled, What Isn’t

Earlier in 2026, a proposed 9.5% citywide property tax increase, which would have been the first since 9/11, was floated to close a multibillion-dollar budget gap. It was withdrawn by May 2026 after significant pushback. City and state officials continue to pursue other revenue measures, including corporate and high-earner tax increases, to close the same budget gap the property tax hike was meant to address. Owners of larger holdings should expect this conversation to continue in some form, even with the specific 9.5% proposal off the table for now.

Where the Capital Is Actually Going

Investor behavior backs this up. Free-market properties accounted for 94% of Manhattan’s multifamily dollar volume and 78% of transactions in 2025 despite representing only half the rental stock. Regulated and unregulated buildings now trade at a structural 100 to 300 basis point cap rate spread, capital pricing in the regulatory difference directly.

A Diversified DST Portfolio as the Off-Ramp

For owners across all five boroughs, whether the asset is a stabilized walk-up, a free-market multifamily building, or a mixed-use property, a 1031 exchange into a Delaware Statutory Trust converts a single, geographically concentrated, actively managed NYC asset into fractional ownership of a professionally managed, diversified portfolio, without the tenant management, capital improvement decisions, or regulatory exposure of direct ownership, and without triggering capital gains tax at sale.

For Owners Carrying a Mortgage, DSTs Solve a Real Problem

Many NYC multifamily owners hold significant debt on their building, and the 1031 exchange rules require replacing that debt, dollar for dollar, on the new property to fully defer the gain. Doing that with a traditional fee-simple replacement property means qualifying for and closing on a new mortgage inside the 180-day exchange window, a process that can easily run four to six months once appraisal, underwriting, and lender conditions are factored in, all while the seller’s identification clock is already running. DSTs are typically structured with the debt already in place at the trust level, non-recourse to the individual investor, so the replacement-debt requirement is satisfied on day one with no personal loan application, no new underwriting, and no risk of the deal falling through over financing.

DSTs also tend to close in days rather than months, since the investor is acquiring a fractional interest in an already-owned, already-financed asset rather than negotiating and closing a new purchase. And because most DST properties are already stabilized and cash-flowing at acquisition, distributions to investors typically begin far sooner than the lease-up or stabilization period a newly purchased fee-simple property often requires.

There’s also a diversification argument many sellers overlook: exchanging one NYC building for one new fee-simple property just relocates the same concentration risk, one asset, one market, one tenant base, into a new address. A DST portfolio spreads that same equity across multiple properties, markets, and asset types, which is a materially different risk profile than owning a single building outright.

Finally, DSTs offer estate planning advantages that a single physical property often can’t match. Fractional DST interests can be divided among heirs more cleanly than a deeded building, avoid the operational disputes that can come with co-owned real estate, and heirs generally still receive a step-up in basis at the owner’s death, which can eliminate the deferred gain entirely for the next generation.

Fortitude Investment Group has completed 1,000+ exchanges and independently vets every DST offering before it reaches a client. If you’re weighing a sale in this market, we can walk you through what a DST exchange would look like for your specific property.

This article is for informational purposes only and does not constitute tax, legal, or investment advice. DST investments are available only to accredited investors and involve risk, including loss of principal. Consult your tax and legal advisors before making any exchange decision.

Securities offered through Concorde Investment Services, LLC (CIS), member FINRA/SIPC. Advisory services offered through Concorde Asset Management, LLC (CAM), an SEC registered investment adviser. Fortitude Investment Group is independent of CIS and CAM.

This material is not an offer to buy or sell any security or investment product. Past performance does not guarantee future results. All investments involve risk, including possible loss of principal.

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