The 99-Unit Loophole: How 485-x Is Reshaping What Gets Built

New York is building more housing than it has in decades. At least on paper.

The numbers suggest a recovery. The projects themselves tell a different story.

In Part 1, The Crisis in Numbers, we looked at the apparent rebound in New York housing: more filings, more completions, more activity than we’ve seen in years. But most of that momentum came from decisions made under a policy that no longer exists.

So what’s replacing it?

Right now, the clearest answer isn’t found in policy documents. It’s showing up in the projects themselves; in a number that keeps appearing with unusual precision.

99.

POLICY CONTEXT

From 421-a to 485-x

When 421-a expired in 2022, the effect was immediate and predictable. Development slowed, projects stalled, and many in the industry stepped back entirely. The program had its flaws, but it did something essential: it made rental housing financially viable in New York City.

Its replacement, 485-x, is the new tax abatement program passed at the state level, designed to reinvigorate the development of affordable housing by private sector developers. It does that by offering multi-year property tax relief in exchange for the developer’s commitment to hitting specific affordability targets.  

The law aims to fix the flaws of 421-a, bringing more affordability. stronger tenant protections, and better wages for construction workers. On paper, it is a more equitable program.

In practice, it is producing something more complicated.

As of Q3 2025, only 3% of projects in the NYC development pipeline can be attributed to 485-x.

That number alone should give us pause. The program exists. The need for housing has not changed. And yet the pipeline it was meant to generate is, so far, a fraction of what came before.

THE RULE

Where the Line Gets Drawn

One provision in 485-x may be having an impact on how projects are being designed.

The law was meant to spur affordable housing creation, and at the same time ensure construction workers were treated fairly in the process.  New York City's construction trades are only twenty percent unionized, down from 35% in the 1970s.  When the new law was negotiated, conditions were placed that tied the tax abatement to workers' wages, bringing them closer to union rates. For buildings with more than 99 units, developers must pay construction workers at least $40 per hour. In certain designated areas, that number jumps to $72 per hour for projects over 150 units.

The intent is straightforward. If public incentives are used to support private development, the workers building that housing should share in the benefit.

But the market tends to respond less to intent and more to thresholds.

The problem is not whether developers want to build. It’s how quickly the numbers stop working once they cross a certain line.

THE DATA

Why “99 Units” Keeps Showing Up

The data coming out of 2025 filings tells a very specific story.

In Q3 alone, 21 of 61 buildings filed in the 50–99 unit range were submitted with exactly 99 units. Since Q2 2024, 56 buildings have been filed at precisely 99 units compared to just 13 over the previous 15 years.

This is not a coincidence. It is a pattern.

A recent report from the Real Estate Board of New York describes a surge in mid-sized projects clustered just below the wage threshold. City & State reporting has tied this behavior directly to the structure of 485-x.

“Forty-one of the permits filed were for projects containing between 50 to 99 units… Eleven of those projects were filed with exactly 99 units, the maximum allowed before a new labor requirement kicks in.”

When that many projects land on the same number, it stops being design. It becomes a strategy.

WHAT WE’RE HEARING

How Developers Are Responding

We are hearing the same thing from multiple clients, across different project types and boroughs.

Sites that would naturally support larger buildings are being split. Projects are being reconfigured into multiple smaller structures. In some cases, entirely separate buildings are being designed where one would have made more sense.

This comes at a cost.

More stairs. More elevators. More lobbies. More consultants. More filings. More coordination. More inefficiency across the board.

From a design and construction standpoint, consolidation is almost always the more rational approach.

But from a financial standpoint, the calculation has changed.

It is now more cost-effective to duplicate a building than to cross the 100-unit threshold.

That is a remarkable place for the market to land.

THE PARADOX

When Good Policy Changes Behavior

The goal of 485-x was to produce more affordable housing while ensuring that workers are better compensated.

What we are seeing instead is a shift in the type of housing being proposed.

Not necessarily less housing. But smaller buildings. Fragmented sites. A ceiling forming just below the point where additional requirements begin.

At the same time, other programs like 467-m which was designed to encourage office-to-residential conversions, are beginning to gain traction, particularly in Manhattan. These parallel efforts may help fill some of the gap, but they do not change the underlying dynamic.

Developers are not ignoring the policy. They are adapting to it.

And adaptation, in this case, is happening with precision.

WHAT THIS MEANS

Incentives Are Working — Just Not as Expected

It is tempting to look at this behavior and frame it as manipulation.

But that misses the point.

Developers are doing what the system allows, within the constraints that exist. The same way they rushed to file under 421-a before it expired, they are now calibrating their projects to fit within the economics of 485-x.

This is not a story about bad actors. It is a story about incentives doing exactly what they are designed to do — shaping behavior.

The question is whether that behavior aligns with the city’s goals.

If we want larger buildings, more units, and greater efficiency in construction, then we have to be honest about where the thresholds are landing and what they are producing.

LOOKING AHEAD

We are currently working within this tension ourselves.

One of our projects on Greenpoint Avenue in Brooklyn is being designed to take advantage of the City of Yes zoning changes while navigating the realities of today’s cost structure. Another, a nine-story development in Newark, will bring more than 700 units to a long-neglected site.

Both projects are moving forward. Both require careful calibration of design, cost, and policy.

Neither fits neatly into a single incentive structure.

The broader question is not whether 485-x is working. It is how it is working — and whether the outcomes match the intent.

Next in the series: Part 3 — The Labor Crisis Nobody Is Talking About: Who is actually building New York, and what happens when that workforce disappears.


Building Studio is a New York City architecture firm with expertise in multifamily and affordable housing development. Learn more at buildingstudio.com/multifamily-architects-nyc.

About the Author

Michael Goldblum is a partner at Building Studio Architects, a New York City based architecture firm specializing in multifamily and affordable housing. With more than 30 years of experience and over 10,000 residential units designed, he has deep expertise in zoning, land use, and navigating complex regulatory environments.