New York Investors Are "Pausing Projects" in Five Boroughs as Rent Control Drives Capital to Red States, Operator Says

Written by:

Rudi Davis

Date:

04 Feb 2026

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The expansion of rent control and vacancy stabilization regulations in New York City over the past five years has triggered a capital outflow that is shifting where institutional real estate investors allocate capital, according to Aaron Manoucheri, co-founder of multifamily operator Manoucheri Brothers.

Manoucheri reports that both investors and owners are redirecting capital away from New York City and delaying projects across the five boroughs. “Investors, owners are definitely buying more abroad and pausing many of their projects that are on the ground here,” he says, describing a deliberate shift away from New York’s increasingly regulated housing market.

According to Manoucheri, recent regulations go beyond traditional rent stabilization and now attempt to control free-market pricing entirely. He argues that these policies make it difficult to run a business in New York’s multifamily sector, as the government is “trying to control the free market.”

The Regulatory Turning Point

Manoucheri identifies a key change that occurred about five years ago, when New York City strengthened its vacancy control regulations. He says this was a turning point that prompted many investors to move their capital out of New York and into less-regulated markets. “When vacancy control passed in New York City about five plus years ago, we saw some of our dear friends follow us,” Manoucheri recalls, referring to other investors reallocating funds to more business-friendly regions.

Manoucheri notes that his firm decided to avoid New York even before these regulatory changes, but acknowledges that some experienced operators have adapted. “I’m happy we never bought in New York, and there are other families that have, and they understand it better than I do. They’ve been around a long time and figure it out,” he says.

However, Manoucheri argues that the recent level of capital flight signals the regulatory burden has become too heavy, outweighing New York’s traditional advantages such as market depth, tenant quality, and the benefits of high-density housing.

Where the Capital Is Going

The investment dollars leaving New York are largely flowing to markets with fewer restrictions and a more business-friendly climate. Manoucheri points to Florida and other red states as primary recipients, describing them as places that “identify the definition of free market, the American dream, and protecting capitalism.”

He notes an increase in leasing activity and investor interest in these states, based on tracking migration through platforms such as Zillow, Apartments.com, RentCafe, and others. “In terms of new attention going to certain areas and in Florida, another red state, yes, the answer is absolutely,” he says. He describes the migration as steady and most noticeable among institutional investors and family offices, rather than a sudden surge. “I wouldn’t call it an explosion, but more so on the side of the investment front, principals and family offices and alike, definitely a newfound interest,” Manoucheri adds.

The Political Uncertainty Factor

Manoucheri says that political uncertainty in New York is adding to investor hesitation. Recent developments in city politics have heightened concerns about further regulation, even if not all campaign promises translate into policy. He points out that mayoral authority in New York is limited, so some proposals may not be enacted. “A lot of what’s been marketed won’t actually fall into place because he doesn’t have the powers that people think he does,” Manoucheri says. However, this unpredictability is leading investors to anticipate even stricter controls rather than any relaxation of current rules.

Broader Market Implications

The movement of capital from highly regulated markets like New York to less regulated alternatives is reshaping the competitive landscape in recipient states. The arrival of experienced operators and institutional money is raising property values and introducing new standards for property management and deal structuring in places like Florida.

Whether this shift is temporary or permanent will depend on how New York’s regulatory environment evolves and whether other major cities adopt similar policies. For now, Manoucheri says, the direction of capital flows is clear: investors are prioritizing markets with less restrictive regulation and a more predictable business climate. This trend is likely to continue unless New York and other regulated markets change course.