The Real Deal New York

New building permits plummeted 90% in July

June numbers inflated by developers locking in old 421a breaks
September 01, 2015 11:10AM

An overwhelming boom of new building permits in June as developers sought to take advantage of the old 421a tax abatement has given way to comparatively paltry numbers in July. Only 1,786 new units were included in permit applications in July compared to 17,786 in June, a 90 percent drop off, according to the U.S. Census Bureau. Queens and Brooklyn saw the greatest declines in permits, at 98 percent and 97 percent, respectively.

Permitting activity for the year remains high however, with nearly 43,800 units included in applications issued so far in 2015, already ahead of the largest total in recent years, 34,000 new permits in 2008, Crain’s reported.

Strong economic indicators have pushed up new construction, but the dominant factor was the possible expiration and ultimate modification of the 421 tax abatement, which grants property tax discounts to developers in Manhattan and part of Brooklyn if they set aside a percentage of units for affordable housing.

For decades, the requirement stood at 20 percent affordable units. The program officially expired on June 15. After much debate, lawmakers in Albany passed a new 421a abatement requiring between 25 percent and 30 percent affordable units, pending the outcome of negotiations between the Real Estate Board of New York and the Building and Construction Trades Council of Greater New York. [Crain’s]Ariel Stulberg