IBX Needs Billions in Funding to Pursue Housing “Dream”

Gov. Kathy Hochul has transit-oriented housing on her mind. 

She’s framing the Interborough Express as a way to boost density in nearby Queens and Brooklyn neighborhoods. But first, the light rail project needs another $2.75 billion for its buildout.

The IBX has been a priority for Hochul, despite the uphill battle of fully funding the $5.5 billion project with federal dollars unlikely to materialize in the current dynamic with President Donald Trump. 

Adding 18 light rail stops from Jackson Heights to Sunset Park with connectivity to nearby subway stations has the potential to bring 60,000 new units of housing or more. The Mamdani administration’s “South of Prospect Plan” not only proposes rezoning low-rise commercial corridors along McDonald and Coney Island avenues and nearby blocks, but also acknowledges the potential for growth along planned IBX stops in that part of Brooklyn.

At an MTA pop-up event in Queens with Assembly member and Senate nominee Claire Valdez and MTA Chair and CEO Janno Lieber, the governor told reporters that she is committed to transit-oriented development, calling it a “dream” she hopes the IBX can embody. Lieber, who has said that the MTA is looking at alternatives to cover the unfunded half of the project’s cost, told amNY that he doesn’t expect IBX to be completed for at least another five years.

The motley crew of Hochul, Lieber and Valdez also announced progress on the design and environmental review phases of the IBX on Wednesday, releasing new renderings of a light rail platform and nearby streetscapes.

One idea to fill the funding gap would involve a “land value tax,” which would lean on the higher property values that the IBX could bring to areas adjacent to a new light rail corridor. Parcels near the first phase of Second Avenue Subway expansion saw their value increase by approximately $5.5 billion, according to Reed Schwartz, associate infrastructure fellow at the Institute for Progress. 

“The IBX is going to generate a ton of value for people who own land near stations, because suddenly those areas will be connected to jobs and other parts of the city,” Schwartz said. “I do think it’s more fair that people who are seeing this benefit from the city’s investment are also the ones who are paying more for more of it, as opposed to a fare increase, which would hit everyone.”

It’s possible to impose taxes on parcels adjacent to the IBX under the terms of the fiscal 2027 state budget, namely a provision that enables value capture for transit investments. The MTA can also borrow against property taxes that the project will generate through a mechanism called tax increment financing.

The last instance where the city used a value capture model to fund a subway extension was more than a decade ago, when bringing the 7 train to Hudson Yards called for the sale of air rights, which allowed fees to be collected only on parcels where developers built. 

A Hudson Yards approach isn’t viable in the IBX context, due to 485x requirements and inclusionary zoning programs that would largely preclude the city from claiming fees for additional floor area near planned light rail stations, according to a report by Schwartz and Alex Armlovich, senior fellow at the Niskanen Center.

“This seems like an enormous unlock in terms of revenue and a virtuous cycle for transit development … as an example for capturing a large amount of revenue, not being so reliant on the federal government, this is very exciting,” Schwartz said.

What we’re thinking about: Do you think the MTA can find the funding to keep the IBX plan on track? Will nearby land likely foot the bill, or are there any alternatives to federal funding that they can tap? Let me know at ben.miller@therealdeal.com. 

A thing we’ve learned: New York has the heaviest government paperwork burden of any state, according to an analysis by document management platform Xodo. The state’s top rank for red tape factors in the mountain of tax, vehicle administration and healthcare documentation required in New York.

Elsewhere…

 — As supporters, detractors and small business owners debate the impact of Mayor Mamdani’s plan to bring five city-backed grocery stores to each of the boroughs, the model is already up and running across the Hudson River in Newark, NJ. The nearby city also has five of its own community grocery stores for each of its wards, offering food and essential goods at 30 percent below wholesale costs. The stores are owned and operated by local nonprofits and each supported with $250,000 in city dollars, which Mayor Ras Baraka plans to continue funding annually into the foreseeable future, Gothamist reports.

 — New York City’s iconic fleet of buses has long planned to reach a zero-emissions goal, but pumped the brakes on transitioning entirely to electric vehicles after the MTA announced plans to order 650 new coaches operating on compressed natural gas, according to The City Reporter. MTA head Lieber cited the need to quickly improve bus service as a rationale for switching to natural gas vehicles. State Comptroller Thomas DiNapoli warned last month that the 2040 target date for a zero-emissions fleet was already “in jeopardy.” 

 — Andrew Berman, executive director of Village Preservation and perennial thorn in the side of developers and pro-housing YIMBYs alike, got the profile treatment in Curbed. His multi-decade story charts Greenwich Village drastically transforming while maintaining its historic scale, with all the classic hallmarks of NYC land use battles including landmark buildings, wealthy longtime homeowners, new luxury towers and affordable rezonings.

Closing time

Residential: The most expensive residential sale recorded Friday was $7.9 million for 430 East 58th Street, 65A. The Sutton Place condo unit is new construction and 2,300 square feet. The Corcoran Group’s Noble Black, David Eskander and Jamie Gagliano had the listing.

Commercial: The most expensive commercial transaction was $54.5 million for 801 Bartholdi Street. Per reports, Azimuth Development Group sold the 63,000-square-foot property to Equality Charter School.

New to the Market: The highest price for a residential property hitting the market is $34 million for 70 Vestry Street, Unit 9S. The Tribeca condo unit is 4,400 square feet. Compass’ Elevated Team has the listing.

Breaking Ground: The largest new building permit filed was for a proposed 81,712-square-foot, 83-unit, mixed-use building at 14 Water Street in Stapleton. Leandro Dickson of LND Architect is the applicant of record.

— Joseph Jungermann