In the New York commercial real estate industry, the state program 485-x, which offers tax incentives for new residential construction projects in certain areas of the five boroughs in exchange for the inclusion of affordable housing, often draws criticism. The criticism focuses on the higher construction wage requirements under 485-x in large parts of Manhattan and extensive areas of the 'Outer Boroughs' for projects with more than 99 units. This leads to a preference for projects with exactly 99 units.
Between April 2024, the month 485-x came into effect, and April 2026, at least 154 such permits were issued, according to City Reporter. However, only 1 percent of these projects comprised more than 100 units, as City Reporter stated, citing data from the New York City Department of Housing Preservation and Development. In comparison, under the predecessor programme 421-a, which expired in 2022, over half of the buildings exceeded the 100-unit mark, as Bob Knakal, Chairman and CEO of BK Real Estate Advisors, wrote in an opinion piece in Commercial Observer in February.
For some developers, especially those not among the city's largest, the de facto magic number under 485-x works. Andrea Gjini, founder of AG Holdings Group, is one such developer. He does not exceed the 99-unit limit, although he would if the calculation were favourable in the long run. However, this is not the case, as he told Commercial Observer. Gjini reported in a June interview that he had planned a project with 120 units but had to give up 21 units, as the project would otherwise not have been profitable.
Costs are 25 to 30 percent higher, and given impending refinancings and fluctuating interest rates, taking the risk and increasing the number of units is very uncertain. More units can also lead to greater regulatory delays. A three-month delay on a project at 19 East 198th Street meant Gjini had to make three monthly interest payments of USD 150,000 each, while the project made no progress due to delays with the New York City Department of Buildings.
At the same time, geopolitical instability plays a major role in developers' risk appetite. Material costs have risen since the conflict with Iran, and logistics have also changed. Gjini receives emails from his suppliers increasing delivery fees due to high fuel prices, which further strains project calculations. Tariffs have made the international shipping of building materials more complicated. Waiting times and prices for materials such as steel contribute to budget and schedule constraints. Even purchasing American materials does not seem to result in cost savings.
According to Gjini, timber prices rose by 10 to 15 percent since stricter tariffs in early 2025, while the costs of rolled steel increased by 5 to 20.7 percent between February 2025 and February 2026, as reported by the Associated General Contractors of America. Spencer Levine, President of RAL Companies, views 485-x as short-sighted legislation that failed to consider the difficulties of smaller developers. Instability in the building materials and labour markets, as well as tariffs, affect all players in the industry. Levine sees the current situation as an overreaction that leads to building projects with fewer than 100 units to bypass union labour requirements and thus reduce costs.
Levine noted that costs per unit tend to decrease with larger volumes. The 99-unit limit does not necessarily influence material costs. RAL has not yet utilised the 485-x programme but plans to do so for future sites. Lev Kimyagarov, Managing Director of Development Site Advisors, considers the mandated wages a minor obstacle. Kimyagarov published an article in 2025 explaining why he believes 485-x works, even if it is not perfect. He is of the opinion that the policy should be adjusted to allow developers to build larger buildings while maintaining restrictions for smaller projects. In the past two months, he has had discussions about using a modular housing model for construction.
