Housing development in New York City experiences a notable surge in the second quarter, identified by a spike in new residential permit applications.
In the heart of New York City, the second quarter of 2025 has seen a significant surge in new building filings, with a total of 8.5 million square feet accounted for – a 43% jump year-over-year and nearly double the amount from the same period in 2024 [1]. This increase has been largely driven by the implementation of the 485-x tax incentive, a critical tool designed to stimulate affordable housing development in the city.
The 485-x tax abatement offers developers reductions in property taxes if they include affordable housing units in their projects, an essential support given the high costs of construction in NYC. From 2010 to 2020, the predecessor 421-a program helped produce 68% of new housing units, demonstrating the considerable impact such incentives have had on increasing housing supply [1].
While the 485-x program primarily applies to rental buildings and includes wage requirements for projects with 100 or more units, it remains pivotal for ground-up construction projects and affordable housing production [3][4]. Developers like Charney Companies are leveraging the extensions and incentives to advance large-scale projects, such as expansive residential developments in areas like Gowanus, Brooklyn [3].
Under the program, in new buildings with up to 99 units, 20% of the apartments must be affordable. Eleven of the projects filed in the second quarter were filed with exactly 99 units, the maximum allowed before a new labor requirement kicks in [2]. This means that over 1,900 new affordable apartments will be added to the city, further addressing the acute housing shortage.
The issue of high housing costs is a unifying concern among New Yorkers across income levels, and the housing crisis was a top concern for voters in the Democratic mayoral primary [6]. The city's vacancy rate currently stands at 1.4%, the lowest since 1968, highlighting the need for new housing of all kinds, not just affordable units [2].
The shift in new filings may indicate that developers are adjusting their business models to fit the new requirements of the state's 485-x tax break. The number of new building filings in the second quarter of this year represents a 28% increase from the first quarter, suggesting a growing commitment to affordable housing development [1].
This tax tool complements other housing initiatives to increase supply and combat affordability challenges in NYC's ongoing housing crisis. The 485-x tax incentive plays a vital role in encouraging the development of affordable rental housing in New York City by reducing property tax burdens for developers who commit to including affordable units, thereby helping to address the city's acute housing shortage despite some limitations related to wage requirements [1][3][4].
Developers are taking advantage of the 485-x tax incentive, which offers reductions in property taxes for including affordable housing units in projects and has been crucial for affordable housing development in New York City. This incentive helped produce 68% of new housing units from 2010 to 2020. With the implementation of this program, over 1,900 new affordable apartments will be added to the city, addressing the acute housing shortage. This tax tool, along with other housing initiatives, plays a vital role in encouraging the development of affordable rental housing in New York City, particularly in ground-up construction projects. Furthermore, the shift in new filings may indicate that developers are adjusting their business models to fit the new requirements of the state's 485-x tax break, suggesting a growing commitment to affordable housing development.
