Meanwhile, only 12 of the 207 multifamily projects submitted involved 100 or more units.
These statistics, highlighted Wednesday by a report from the Real Estate Board of New York, may seem like nothing to worry about, considering that the number of new filings has risen to 11,746.
The problem is that all of these 99-unit locations are zoned for more than 99 units. When there’s a housing shortage, the last thing the city wants is to leave units on the table or push developers to inefficiently split projects into several buildings, each under 100 units.
But the wage floor for construction workers that applies to 485x projects with 100 or more units is too daunting for developers, investors and lenders.
The funny thing is that the wages needed for 100- to 149-unit projects that receive a 485x tax credit from the state (which is essential for mixed-income rental projects) aren’t much different from what developers pay for 99-unit projects. Why not just pay a little more?
The reason: Developers (and their lenders) don’t want to risk falling under the payroll floor – which can happen even if they try to meet it. The penalties are severe. It’s better to stick with 99 units and not worry about compliance costs.
Projects of 100 or more units are most likely to take place in areas with high rents, such as Soho. “The numbers are correct,” one developer told me Thursday at a real estate breakfast in Brooklyn.
One panelist at the event, developer Sergey Rybak, told the audience that the wage floor does drive up costs, but “the 485x cost isn’t that drastic of a difference.” He noted that higher wages can mean getting a contractor who works 20 percent faster, offsetting the additional labor costs.
That’s true, but what matters is what actually happens. And what happens are projects of 99 units, and almost none of 150 or more, where an even higher wage floor comes into effect. (This does not apply to fully affordable housing.)
Every developer I’ve asked believes 485x should be changed. But I haven’t found anyone who thinks this will change in 2026, which is an election year for Governor Kathy Hochul and state lawmakers.
The reason: 485x doesn’t interest the average voter, but construction unions do.
What we’re thinking about: This seems strange. The Wall Street Journal reported on November 7 that Blackstone is selling for $1.8 billion portfolio of senior housing of approximately 90 properties, some of which are more than 70 percent below their purchase price. Five days later, Baker Tilly’s third-quarter commercial real estate report stated: “The senior housing industry is experiencing a… strong rebound in 2025, following a period of recovery due to significant operational challenges during and after the Covid-19 pandemic.” Send your thoughts to eengquist@therealdeal.com.
Something we learnedAccording to a national report, construction spending across the country fell by 4.7 percent (adjusted for inflation) over the past twelve months. JLL report. The decline came despite increases in spending on data centers, utilities, infrastructure and especially office-to-residential conversions, which doubled. JLL blamed the uncertainty caused by “policy volatility,” namely unpredictable trade policies (also called tariff chaos) and immigration enforcement.
Elsewhere…
As yesterday’s Daily Dirt reported, due to a pending legal challenge, New York will delay the January start of its law essentially requiring all-electric buildings for projects of seven or fewer stories. The mandate will take effect in 2029 for larger buildings.
But developers of projects in New York City are already making them fully electric. Technology is making electric heat increasingly efficient and contractors can now make buildings virtually airtight.
While opponents of the bill see it as an affordability issue, as does Governor Kathy Hochul, it seems likely that new buildings will be cheaper to heat and not necessarily more expensive to build.
The real problem is how to bring existing buildings into compliance with the city’s Local Law 97. Richard Lipsky, who is organizing the opposition to the law, says Co-op City told him the compliance costs would be more than $2 billion.
Closing time
Residential: The highest housing deal recorded on Thursday was $23.5 million for a 3,556-square-foot condominium unit for sponsorship sale at 50 West 66th Street in Lincoln Square. Janice Chang and Timothy Hsu with Douglas Elliman did the entry.
Commercial: The best recorded commercial deal was $85 million for the 136,730-square-foot apartment building at 181 Front Street in Dumbo. The Carlyle Group sold the 105-unit property to an LLC affiliated with HUBB NYC Properties.
New on the market: The highest price for a home that came on the market was $7.85 million for a 1,941-square-foot condominium unit at 40 Bleecker Street in Noho. Danielle Nazinitsky of Decode Real Estate has the listing.
Groundbreaking: The largest new building permit filed was for a proposed 807,803-square-foot, 792-unit, 38-story project at 45 West Street in Greenpoint. Robert Laudenschlager of SLCE Architects submitted the permit on behalf of TF Cornerstone.
— Matthew Elo
#Daily #Dirt #problems #485x