City Data Show Relentless 99-unit Building Trend in NYC

Last May, the Mamdani administration’s top housing officials said it was too soon to call the 485x tax abatement a failure, despite nearly all multifamily project filings showing 99 units or fewer.

“We’re in year two of a 10-year program,” Deputy Mayor Leila Bozorg said on stage at The Real Deal’s New York Forum. “Everyone needs to adjust to a new program… I do believe it needs more time.”

Yesterday, another six months’ worth of data were released by the city. To the surprise of absolutely no one, it showed more of the same. Developers are capping their buildings at 99 units, even when zoning allows many more, because of wage and affordability requirements that shoot up at 100 and 150 units.

Of 152 newly registered 485x projects, 20 projects contain exactly 99 units and only one contains more, according to a preliminary analysis by Nate Bliss, founder and CEO of Latent Urban Ventures. The exception was BedRock Real Estate Partners and LMXD’s 35-10 Steinway Street in Astoria, which is slated to deliver 560 units.

Overall, 49 projects of exactly 99 units and just four larger ones have registered to use 485x. Wednesday’s data dump was the final one before the state legislature reconvenes in January and considers changing the program or creating a new one for larger projects.

A slide prepared by Helen Hwang of Meridian Investment Sales shows the yield on cost for 99-unit projects is 6.1 percent, but only 5.2 percent for those with 150 or more units. Industry leaders have been showing her slides to elected officials in private meetings to persuade them that changes to 485x are needed.

“The numbers are clear: 485-x is not producing the large-scale housing New York City desperately needs,” Real Estate Board of New York President Jim Whelan said in a statement. “We cannot solve a housing crisis 99 units at a time.”

A property tax abatement of some kind is necessary for most rental projects because, otherwise, they don’t pencil out. Bliss was part of the Adams administration team that negotiated a housing package with the governor and state legislature in 2024. It included 485x to replace the expired 421-a program.

“We were grateful to have a program back on the books, one that had a 10-year time frame, which was novel,” Bliss said. “But at the moment it was passed, we knew it was going to be problematic, particularly for the large-scale projects.”

Indeed, at a TRD event a month later, developers said decades from now, people would wonder why the city had so many 99-unit buildings.

It is not only because of the higher labor costs mandated for large projects at the behest of construction and building service worker unions. Affordable rents are required for 25 percent of the residential space in buildings of 100 units or more, rather than 20 percent for smaller ones.

Developers also worry that if they build more than 99 units and an audit finds they didn’t meet the requirements, they will lose the entire tax abatement, which would bankrupt their project.

“It’s not just the wages,” Bliss said. “The compliance regime, the clawback of the taxes — there are other things making the program not work.”

About a dozen developers have been using a workaround to build larger projects, clustering 99-unit projects on single development sites. One recent filing shows 10 adjacent buildings, all just under 100 units.

“I’m very saddened to see that 485x is incentivizing inefficiencies,” said YuhTyng Patka, a partner at Adler & Stachenfeld who advises firms on multifamily projects. “Developers are very agile creatures and they adapt to what’s before them.”

The Building and Construction Trades Council, an umbrella group for construction unions, has called this a loophole and asked state legislators to close it. But that seems unlikely, given the city’s housing shortage.

From 2010 to 2020, under 421-a, buildings with 100 or more units accounted for 56 percent of new residential units. The four large 485x programs account for 9 percent of registered 485x units.

Bliss’s analysis of the new 485x data showed 67 projects in the Bronx, 51 in Brooklyn, 28 in Queens and six in Manhattan.

At TRD’s forum in May, the Mamdani administration’s housing commissioner seemed skeptical that projects of 100 units or more didn’t make financial sense.

“From pretty much the day I got into this position, we’ve been hearing a lot of consternation about 485x, that it doesn’t pencil and it doesn’t work,” Housing Preservation and Development Commissioner Dina Levy said. “I have been very curious to see some really detailed underwriting from developers as to where it’s falling short.”

But industry leaders say the proof is in the results. And now they have more results to take to Albany next year, as well as to City Hall, because support from the Mamdani administration will likely be necessary to persuade state lawmakers to act. The 485x program only applies in New York City.

To use as much of the allowable square footage as possible while staying under 100 units, developers are also building larger apartments and charging higher rents than they otherwise would.

“There’s a lot of housing that could have been built that’s not being built,” Patka said. “And the housing that is being built is inefficient. You are adding all these extra elevator banks and lobbies. That takes away space that would otherwise be going to housing.”

“That’s what I’m seeing over and over again.”