As of February 20, 2026, New York City Mayor Zohran Mamdani's recent budget proposal has sparked significant debate among property owners, renters, and city officials. Released on February 17, 2026, the Fiscal Year 2027 Preliminary Budget addresses a $5.4 billion gap inherited from the previous administration. The mayor's preferred solution is to increase taxes on high earners and corporations through state-level changes, but as a "last resort," he proposes a 9.5% increase in property taxes citywide. This could generate $3.7 billion in revenue but has faced strong opposition. 

What Is Mayor Mamdani's Property Tax Proposal?

Mayor Mamdani's plan outlines two paths to balance the $127 billion budget:

Preferred Path: Push Albany to raise income taxes by 2.2% on individuals earning over $1 million annually and adjust corporate taxes. Additionally, address the fiscal imbalance where NYC contributes more to the state than it receives back.

Last-Resort Path: Implement a 9.5% property tax rate increase, raising the average rate from 12.28% to 13.45%. This would affect over 3 million residential units and 100,000 commercial properties, including utilities. The budget also draws from reserves: $980 million from the Rainy-Day Fund in FY 2026 and $229 million from the Retiree Health Benefit Trust in FY 2027.

This proposal requires City Council approval and has drawn criticism. Council Speaker Julie Menin called it a "nonstarter," arguing it burdens small property owners, businesses, and communities of color. Homeowners in Southeast Queens have expressed outrage, fearing higher costs in already strained areas.

How Could This Affect NYC Real Estate Owners?

A 9.5% property tax hike would increase annual bills for homeowners and commercial owners alike.

For instance:

Homeowners: In areas like Queens, taxes could rise by hundreds to thousands of dollars per year, exacerbating affordability issues.

Commercial Owners: Higher taxes on over 100,000 properties could squeeze margins, leading to passed-on costs to tenants.

Renters: While protections exist for rent-stabilized units, market-rate landlords may raise rents to offset increases, worsening the housing crisis. 

Real estate experts warn of broader impacts, including higher rents, reduced property values, and an accelerated exodus of investors from NYC. Comptroller Mark Levine noted that relying on property taxes could be regressive and insufficient without specified efficiencies.

If you're an active property manager dealing with tenants, maintenance, and regulations, this uncertainty might make holding NYC assets less appealing.

What Is a 1031 Exchange and How Can It Help?

A 1031 exchange, named after IRC Section 1031, allows investors to defer capital gains taxes by selling one investment property and reinvesting proceeds into a "like-kind" replacement property. This strategy preserves equity, enabling purchases of higher-value assets without immediate tax hits.

Key rules:

- Properties must be investment or business-use (not personal residences).

- Replacement property must be identified within 45 days and acquired within 180 days.

- Use a qualified intermediary to hold proceeds.

In the face of potential tax hikes, selling now via a 1031 exchange could lock in current values and defer taxes.

Why Consider Delaware Statutory Trusts (DSTs) for Your 1031 Exchange?

DSTs are a passive investment vehicle compliant with 1031 rules, allowing accredited investors to own fractional interests in professionally managed properties like apartments or offices.

Benefits of DSTs:

Passive Ownership: No day-to-day management; sponsors handle operations for steady income.

Diversification: Invest in multiple assets or regions, reducing NYC-specific risks.

- Tax Deferral: Full 1031 benefits, plus potential for stepped-up basis in estate planning.

- Accessibility: Lower minimums (often $100,000) and limited liability.

- Risk Reduction: Pre-packaged deals minimize transactional risks.

Shifting to DSTs via a 1031 exchange lets you go passive, diversifying away from NYC's volatility.

Why Choose Fortitude Investment Group for Your 1031 and DST Needs?

Fortitude Investment Group, founded in 2006, specializes in helping high-net-worth clients with tax liabilities through securitized real estate like DSTs and TICs. With over 1,000 successful 1031 exchanges, 200+ years of combined experience, 15+ representatives across 7 states, and ~$1.7 billion in assets under advisement, we provide expert guidance to meet your objectives.

Our team assists in identifying and closing on investments that satisfy 1031 requirements while aligning with your goals.

Check out all of our eBooks and Guides on our Resources page here. 

FAQ: Common Questions About Mamdani's Proposal and 1031 Exchanges

Q: When was Mamdani's budget proposal released?

A: February 17, 2026.

Q: What is the proposed property tax increase?

A: 9.5%, potentially raising $3.7 billion.

Q: Who opposes the tax hike?

A: City Council Speaker Julie Menin, Queens homeowners, real estate groups, and Comptroller Mark Levine.

Q: How does a 1031 exchange work?

A: Sell your property, use a qualified intermediary, identify replacements in 45 days, and close in 180 days to defer taxes.

Q: Are DSTs suitable for all investors?

A: DSTs are for accredited investors meeting net worth or income thresholds, offering passive real estate exposure.

For a no obligation intro call, contact our team today!