Before 485x, projects with exactly 99 units were rare — only 13 were filed in 15 years. Last quarter alone, developers filed 21.
Meanwhile, just 12 of 207 multifamily projects filed were for 100 or more units.
These statistics, flagged by a Real Estate Board of New York report Wednesday, might seem like nothing to worry about, given that the unit count in new filings surged to 11,746.
The problem is that all of these 99-unit sites are zoned for more than 99. In a housing shortage, the last thing the city wants is to leave units on the table or induce developers to inefficiently split projects into several buildings, each under 100 units.
But the construction workers’ wage floor that kicks in for 485x projects with 100 or more units is too scary for developers, investors and lenders.
The funny thing is, the wages required on 100- to 149-unit projects receiving the state’s 485x tax break (which is essential for mixed-income rental projects) aren’t much different from what developers pay for 99-unit projects. Why not just pay a bit more?
The reason: Developers (and their lenders) don’t want to risk falling short of the wage floor — which can happen even if they are trying to meet it. The penalties are severe. Better to stick to 99 units and not have to worry about compliance costs.
Projects of 100 or more units are most likely to happen in high-rent areas such as Soho. “The numbers work,” a developer told me Thursday at a Brooklyn real estate breakfast.
One panelist at the event, developer Sergey Rybak, told the audience that the wage floor does drive up costs, but “the cost of 485x is not such a drastic difference.” He noted that higher wages can mean getting a contractor who works 20 percent faster, offsetting the extra labor expense.
True, but what matters is what is actually happening. And what’s happening are 99-unit projects, and virtually none of 150 or more, where an even higher wage floor kicks in. (This does not apply to fully affordable housing.)
Every developer I have asked believes 485x needs to be changed. But I have not found any who think it will be changed in 2026, which is an election year for Gov. Kathy Hochul and state legislators.
The reason: The average voter does not care about 485x, but construction unions do.
What we’re thinking about: This seems odd. The Wall Street Journal reported Nov. 7 that Blackstone is selling off a $1.8 billion senior housing portfolio of about 90 properties, some at more than 70 percent below their purchase price. Five days later, Baker Tilly’s third-quarter commercial real estate report declared, “The senior housing sector is experiencing a strong rebound in 2025, after a period of recovery brought on by significant operational challenges during and after the Covid-19 pandemic.” Send thoughts to eengquist@therealdeal.com.
A thing we’ve learned: Construction spending nationwide was down 4.7 percent (adjusted for inflation) in the past 12 months, according to a JLL report. The decline came despite increases in spending on data centers, utilities, infrastructure and especially office-to-residential conversions, which doubled. JLL blamed uncertainty caused by “policy volatility,” namely unpredictable trade policy (aka tariff chaos) and immigration enforcement.
Elsewhere…
As yesterday’s Daily Dirt reported, because of a pending legal challenge, New York will postpone the January start of its law that essentially requires all-electric buildings for projects of seven or fewer stories. The mandate kicks in for larger buildings in 2029.
But developers of New York City projects are already making them all-electric. Technology is making electric heat increasingly efficient, and contractors can now make buildings nearly airtight.
While opponents of the bill are framing it as an affordability issue, as is Gov. Kathy Hochul, it seems likely that new buildings will be cheaper to heat and not necessarily more expensive to build.
The real issue is how to make existing buildings compliant with the city’s Local Law 97. Richard Lipsky, who is organizing opposition to the law, says Co-op City told him its compliance cost would be more than $2 billion.
Closing time
Residential: The top residential deal recorded Thursday was $23.5 million for a 3,556-square-foot, sponsor-sale condominium unit at 50 West 66th Street in Lincoln Square. Janice Chang and Timothy Hsu with Douglas Elliman had the listing.
Commercial: The top commercial deal recorded was $85 million for the 136,730-square-foot apartment building at 181 Front Street in Dumbo. The Carlyle Group sold the 105-unit property to an LLC tied to HUBB NYC Properties.
New to the Market: The highest price for a residential property hitting the market was $7.85 million for a 1,941-square-foot condominium unit at 40 Bleecker Street in Noho. Danielle Nazinitsky with Decode Real Estate has the listing.
Breaking Ground: The largest new building permit filed was for a proposed 807,803-square-foot, 792-unit, 38-story project at 45 West Street in Greenpoint. Robert Laudenschlager with SLCE Architects filed the permit on behalf of TF Cornerstone.
— Matthew Elo