- Developers filed 21 applications for 99-unit buildings in Q3 2025—more than the total from 2008 to 2023.
- The 485-x tax break increases labor costs for buildings with 100+ units, prompting developers to cap projects at 99 units.
- The program helped revive housing construction after the 421-a tax abatement expired, with residential filings up 152% year-over-year.
Developers Work Around New Tax Rules
According to Bloomberg, New York City’s new 485-x tax incentive was meant to boost affordable housing. Instead, it’s also changing how developers design their buildings.
In Q3 2025, developers filed 21 applications for 99-unit projects, according to the Real Estate Board of New York (REBNY). That’s more than the total filed between 2008 and 2023. Developers are intentionally capping their projects at 99 units to sidestep higher labor costs required by the new tax rules.
Wage Requirements Shape Building Size
The 485-x program requires developers to pay workers at least $40 an hour for buildings with 100 or more units. Projects with 150 or more units face even higher wage thresholds—up to $63 an hour, depending on location.
To avoid these costs, many developers are limiting their buildings to exactly 99 units. Though this strategy may reduce unit counts per building, it helps control construction budgets and keep projects financially viable.
Get Smarter about what matters in CRE
Stay ahead of trends in commercial real estate with CRE Daily – the free newsletter delivering everything you need to start your day in just 5-minutes
Smaller Projects, Bigger Numbers
Despite these constraints, 485-x has helped restart residential construction across the city. The end of the 421-a program in 2022 brought many projects to a halt. But in Q3 2025, developers filed 207 multifamily building applications—a 152% jump from a year earlier.
Projects with 99 or fewer units made up 90% of all filings during the quarter.
Zachary Steinberg, REBNY’s executive vice president of external relations, said the wage rules increase costs and limit how much housing developers can deliver. “We need tools that help produce as many units as possible,” he said.
Housing Crisis Still Looms
Rising rents continue to highlight the scale of New York’s housing shortage. In October, Manhattan’s median rent reached $4,600—a 7.1% increase from last year, according to data from Miller Samuel and Douglas Elliman.
Housing remains central to local politics. Outgoing Mayor Eric Adams backed the “City of Yes” plan to create 80,000 new homes. Mayor-elect Zohran Mamdani campaigned on a rent freeze for stabilized units.
What Comes Next
The rise of 99-unit buildings shows how tax policy can shape construction trends. While 485-x sparked more development, it may also limit project size. Without adjustments, developers might keep prioritizing small projects over large-scale solutions.
Policymakers face a tough balance—encouraging affordable housing while managing labor standards and construction costs.
