NYC construction rebounds as 485x fuels 99-unit era, REBNY says

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Last year was a low point for new construction in New York. But now that development pipeline is perking back up.

Last quarter, developers filed 424 applications for new building permits — 43 percent more than the same period last year, according to a new analysis from the Real Estate Board of New York. The total proposed square footage nearly doubled year over year.

When zooming into residential filings, the contrast is even more stark. The 6,943 proposed units last quarter is 58 percent more than the quarterly average since 2008.

The numbers show a slow turn back toward development after years of high interest rates and few incentives to build.

Since 2008, when REBNY first started analyzing data, building plans have come in waves. The financial crisis stymied construction for years. Total filings slowly crept back up, peaking again in 2014.

But the last decade saw another slow decline. Total filings in 2024 were just 1,279, about half the number of a decade earlier. Interest rates were high while the tax abatement program 421a, which encourages multifamily rental construction, expired.

“The absence of a multifamily housing construction tax incentive combined with interest rate increases, construction material price rises, and lingering supply chain disruptions have contributed to slow construction activity in recent years,” Zachary Steinberg, REBNY’s senior vice president of policy, said via email.

However the environment is now becoming more build-friendly. Inflation has cooled and a new tax abatement program, 485x, has come online to replace its predecessor. The Bronx led all boroughs in proposed multifamily development.

The 485x tax program is already changing the shape of that development. This year has seen a spike in the number of 99-unit buildings. There have been 28 filings for 99-unit buildings over the past four quarters. That is more than double the number of plans for buildings of that size filed between 2008 and 2024.

The 485x program doesn’t prohibit buildings with more than 99 units, but it does discourage them: Developers can win tax abatements for including affordable units in their buildings, but buildings with 100 units and up trigger a higher minimum construction wage.

To be sure, the development pipeline still isn’t flowing like it used to. Total filings are still 25 percent below the post-2008 average. And residential filings are still not on track to reach Mayor Eric Adams’ “moonshot” goal of 500,000 units built in the decade. Reaching that goal would require an average of 12,500 units per quarter.

“While multifamily activity has picked up in recent months, housing production continues to fall significantly short of the city’s needs,” Steinberg said.