In New York City, the 485-x programme represents one of the few tools capable of significantly re-stimulating the construction of rental housing. However, it is widely misunderstood, as politicians and developers interpret the same incentive in fundamentally different ways. For policymakers, 485-x is a housing production programme. For developers, on the other hand, it is a feasibility framework, the thresholds of which determine what can actually be financed and realised.
Understanding this divergence helps to explain the first wave of registrations. An analysis of 312 filings up to April 2026 shows that only three projects (0.9 per cent) comprise 100 or more units. The remaining 99.1 per cent stay below 100 units, while the median project contains just 24 units. Almost a third of projects have no more than 10 units.
The 100-Unit Limit as a Cost Barrier
These figures require an important caveat: the register identifies potential applicants, not completed buildings, and registration patterns cannot prove intent in individual projects. Nevertheless, the aggregate signal is too consistent to be ignored when projects at various locations repeatedly end up at 99 units. From a developer's perspective, the 100-unit limit is not an administrative threshold, but a cost barrier.
Under Option A, the commonly chosen 35-year tax exemption combined with a 20 per cent affordability requirement, exceeding this limit entails additional labour obligations. Industry estimates suggest that prevailing wage requirements can increase construction costs by approximately 18 to 28 per cent, depending on building type and labour mix. For a typical mid-rise building, this could mean an additional 45 to 65 US dollars per square foot, or 6 million to 12 million US dollars for a project with 120 to 150 units. At current borrowing costs and rental prices, this increase can turn a marginally financeable development into a project that fails to secure capital commitments.
In contrast, dividing a plot into two buildings, each with 70 to 99 units, can preserve the tax benefit while avoiding the wage cost trigger, leading to a stronger and more predictable pro forma. Developers are not necessarily against higher density. They manage construction risk, lender requirements, and execution risk. If a rule defines feasibility, the market shapes projects around that rule.
Impact on Location Choice and Project Size
The register contains several patterns consistent with this response. At 362 and 370 Livingston Street, two buildings each with 99 units are listed. Addresses along Bergen and Wyckoff Street appear as four buildings, each with 99 units. Most notably, the compilation around Flatbush Avenue Extension, Fleet Place and Willoughby Street is registered as five separate buildings, each with 99 units, or 495 units in total. Functionally, these sites may resemble large developments. However, according to 485-x, each component remains below the critical threshold.
What might be a single development opportunity from an urban planning perspective becomes a series of smaller projects from a credit review perspective, as regulatory treatment changes from the 100th dwelling unit. A second, less obvious threshold is 10 units. Buildings of this size or below can receive benefits while remaining market-rate, with half of their units becoming rent-stabilised. Above 10 units, developers enter a more demanding tier of affordability. For smaller builders in Brooklyn and the Bronx, this change can affect the economic rationality of building. Projects with six to ten units do create housing, but they cannot address the city-wide shortage on a significant scale.
The contrast with 421-a is insightful. Under the previous incentive programme, projects with 300 to 500 units were not uncommon. Filings from 2017 and 2018, for example, included 554 units at 2 North Sixth Street, 501 at 10 Montieth Street, 469 at 123 Linden Boulevard, and 467 at 29-22 Northern Boulevard. The old incentive often rewarded scale and full utilisation of zoning capacity. The new framework appears to reward precision in navigating regulatory thresholds. This shift also influences where housing is built. Managing thresholds is easiest on cheaper, flexible sites that can be subdivided into multiple buildings.
- —In the current sample, 44.2 per cent of reported units are in the Bronx.
- —Brooklyn contributes 32.8 per cent.
- —Queens and Manhattan lag significantly behind.
- —Outer borough production is valuable, but transit-oriented sites that would allow higher density might deliver less than their zoning permits.
Large institutional developers might still be able to cross the limit. They can internalise construction management, negotiate labour contracts, finance at lower spreads, and hold assets long enough to absorb higher upfront costs. Mid-sized builders, reliant on third-party construction firms and more expensive capital, generally have less flexibility. The programme could therefore limit large-scale production to a narrower group of firms.
The conclusion is that 485-x has restarted housing production, but New York will not solve its shortage by encouraging developers to become experts at staying small. The goal should not be to weaken labour standards, but to offset the costs of compliance through longer exemptions, lower application fees, additional benefits during the construction phase, low-cost financing, and incentives tied to the number of units delivered. Reform should tighten aggregation rules so that coordinated projects cannot be split simply for the purpose of staying under 100 units. The programme should reward developers for fully utilising sites, rather than making 100 units the point at which a project no longer works. Lev Kimyagarov is co-founder and managing partner of Development Site Advisors.
