NYC’s Housing Crisis: The 99-Unit Conundrum

Introduction to the Problem

They got 99 problems — with a new tax program. New York City developers have hit a fresh snag in trying to solve the city’s housing crisis: A new tax program that costs them extra dough if they want to construct buildings with 100 apartments or more.

The Tax Program: 485-x

That new program, 485-x, which was meant to ensure workers got paid more per hour for large-scale multi-family developments, has had the opposite effect. Bloomberg reports that New York City developers filed 21 applications for residential buildings with exactly 99 units in the third quarter — a notable rise from the 13 filed between 2008 and 2023, citing data from the Real Estate Board of New York.

Impact on Housing Crisis

The city’s housing crisis was a marquee issue that sent voters racing to the polls for the recent mayoral election, and this specific 99-unit trend limits injecting the city with the dose of large-scale development needed to solve it.
New York is in the thick of a housing crisis, which became a big issue among voters during last week’s mayoral election. James Steidl – stock.adobe.com

The Tax Program’s Effects

The tax program, according to REBNY, will deliver more small- and medium-scale buildings — and not enough large ones. Macronatura.es – stock.adobe.com
Under 485-x, which allows for a tax break should the building contain a certain number of affordable units, developers building addresses with 100 units or more must pay workers at least $40 an hour. That raises construction costs by about 2%, according to REBNY, adding that projects with more than 150 units in certain areas see costs bloat between 10% and 30% due to the wage mandate.

Location-Based Costs

The state legislature passed 485-x in 2024, replacing the previous 421-a that expired in 2022, whose labor costs were lower. In a statement to The Post, when mentioning the location-based costs associated with buildings of 150 dwellings and above, REBNY said that “is why we are not producing the housing we need to solve our affordability crisis. We need tools that will help produce as many units as possible to offset years of citywide underproduction.”

Consequences of the 99-Unit Trend

The third quarter overall saw a total of 194 applications for buildings with 99 units or fewer — a figure that accounted for 90% of all residential filings. Developers and REBNY researchers say the new 485-x program will make it tough to bring larger-scale buildings to the city — and will ultimately lead to fewer units than 421-a provided, per Bloomberg.

Quarterly Filings

Of the buildings proposed in the third quarter, according to REBNY, 196 were within buildings with fewer than 149 units and 11 were in buildings of 150 units and up. (However, Bloomberg notes that 485-x saw city developers file for 207 multi-family residential buildings in the third quarter, marking a 152% year-over-year jump.)

Advocacy for Change

“It’s critical that policymakers and other advocates do not become complacent in response to the quarter’s housing production totals,” Zachary Steinberg, REBNY’s executive vice president of external relations and advocacy, told Bloomberg. “The strong results come following a decade-plus of underproduction that needs to be addressed and can’t be done 99 units at a time.”

Conclusion

The 99-unit trend in NYC’s residential building applications is a direct result of the new 485-x tax program. This program, aimed at ensuring higher wages for workers in large-scale developments, has inadvertently led to a surge in smaller-scale projects. As the city grapples with its housing crisis, it’s crucial for policymakers to reassess the program’s impact and work towards solutions that encourage the development of larger, more affordable housing units.

FAQs

• Q: What is the 485-x tax program?
  A: The 485-x program is a tax break for developers who include a certain number of affordable units in their buildings, but it mandates higher wages for workers in larger developments.
• Q: How has the 485-x program affected NYC’s housing market?
  A: The program has led to an increase in applications for buildings with 99 units or fewer, as developers aim to avoid the higher labor costs associated with larger projects.
• Q: What are the implications of this trend for NYC’s housing crisis?
  A: The trend limits the development of larger-scale, more affordable housing units, exacerbating the city’s housing crisis.
• Q: What do advocates suggest to address the issue?
  A: Advocates recommend that policymakers reassess the 485-x program and work towards solutions that encourage the development of larger, more affordable housing units to address the city’s underproduction of housing.