New York’s 485-x Is Teaching Developers to Stay Below 100 Apartments at a Time – Commercial Observer
In New York City, 485-x is one of the few tools capable of restarting rental construction at a meaningful scale. It is also widely misunderstood because policymakers and developers experience the same incentive in fundamentally different ways.
For policymakers, 485-x is a housing production program. For developers, it is a feasibility framework whose thresholds determine what can actually be financed and delivered.
Understanding that divergence helps explain the first wave of filings. An analysis of 312 registrations through April 2026 shows that only three projects, or 0.9 percent, contain 100 apartments or more. The other 99.1 percent remain below 100 units, while the median project contains just 24 apartments. Nearly one-third have no more than 10 units.
Those figures require an important caveat. The registry identifies prospective applicants, not completed buildings, and filing patterns cannot prove intent in any individual project.
Still, when projects repeatedly stop at 99 units across separate addresses, the aggregate signal is too consistent to ignore.
From a developer’s perspective, the 100-unit line is not an administrative threshold. It is a cost boundary. Under Option A, the commonly selected 35-year exemption paired with a 20 percent affordability requirement, crossing that line brings additional labor obligations. Industry estimates suggest prevailing-wage requirements can increase hard costs by roughly 18 to 28 percent, depending on building type and labor mix.
For a typical mid-rise building, that can mean another $45 to $65 per square foot, or $6 million to $12 million on a 120- to 150-unit project. At current borrowing costs and rent levels, the increase can turn a marginally financeable development into one that cannot secure capital.
By contrast, dividing a site into two buildings of 70 to 99 units can preserve the tax benefit while avoiding the wage trigger, producing a stronger and more predictable pro forma. Developers are not necessarily rejecting density. They are managing construction exposure, lender requirements and execution risk.
When a rule defines feasibility, the market designs around the rule.
The registry contains several patterns consistent with that response. At 362 and 370 Livingston Street, two buildings are listed at 99 units each. Addresses along Bergen and Wyckoff streets appear as four 99-unit buildings. Most strikingly, the assemblage around Flatbush Avenue Extension, Fleet Place and Willoughby Street is filed as five separate 99-unit buildings, or 495 apartments in total.
Functionally, these sites can resemble large developments. Under 485-x, each component remains below the critical line. What may be a single development opportunity from a zoning perspective becomes a series of smaller projects from an underwriting perspective, because the regulatory treatment changes at apartment 100.
There is a second, quieter cliff at 10 units. Buildings at or below that size can receive benefits while remaining free-market, with half of their apartments becoming rent-stabilized. Above 10 units, developers enter a more demanding affordability tier. For smaller builders in Brooklyn and the Bronx, that change can alter the economic rationale for building. Six- to 10-unit projects add homes, but they cannot address a citywide shortage at a meaningful scale.
The contrast with 421-a is instructive. Under the former incentive program, projects of 300 to 500 apartments were not unusual. Filings from 2017 and 2018 included 554 units at 2 North Sixth Street, 501 at 10 Montieth Street, 469 at 123 Linden Boulevard and 467 at 29-22 Northern Boulevard. The old incentive often rewarded scale and fuller use of zoning capacity. The new framework appears to reward precision around regulatory thresholds.
That shift also affects where housing gets built. Threshold management is easiest on lower-cost, flexible sites that can be separated into multiple buildings. In the current sample, the Bronx accounts for 44.2 percent of reported units and Brooklyn for 32.8 percent, while Queens and Manhattan trail well behind. Outer-borough production is valuable, but transit-rich sites capable of supporting greater density may deliver less than their zoning allows.
Large institutional developers may still cross the line. They can internalize construction management, negotiate labor agreements, finance at lower spreads, and hold assets long enough to absorb higher upfront costs. Mid-market builders relying on third-party contractors and more expensive capital generally have less flexibility. The program may therefore reserve large-scale production for a narrow group of firms.
The bottom line is that 485-x has restarted housing production, but New York will not solve its shortage by teaching developers to become experts at staying small.
The goal should not be to weaken labor standards, but to offset the cost of meeting them through longer exemptions, lower application fees, additional construction-period benefits, low-cost financing and incentives tied to the number of homes delivered. Reform should tighten aggregation rules so coordinated projects cannot be divided solely to remain below 100 units.
The program should reward developers for using sites fully, not make 100 apartments the point at which a project stops working.
Lev Kimyagarov is the co-founder and managing principal of Development Site Advisors.
