The Developers Trying to Make New York’s 485-x Multifamily Incentive Work

It’s become fashionable in New York City commercial real estate to bash the state’s 485-x program, which provides tax incentives for new residential development in certain areas of the five boroughs in exchange for including affordable housing.

The criticism revolves around 485-x’s higher construction wage requirements in much of Manhattan and large swaths of the outer boroughs for projects with more than 99 units. Hence, the number of 99-unit projects. There were at least 154 such permits between April 2024 — the month 485-x took effect — and April 2026, per the City Reporter.

But only 1 percent of those projects were over 100 units, according to the City Reporter, which cited data from the New York City Department of Housing Preservation and Development.

By comparison, more than half of the buildings under the old 421-a program were over 100 units in the years before that incentive expired in 2022, BK Real Estate Advisors Chairman and CEO Bob Knakal wrote in a February Commercial Observer op-ed.

For some developers, though, especially those not among the city’s largest, the de facto magic number under 485-x works. Or at least they’re willing to try to make it work. 

Andrea Gjini, the founder of AG Holdings Group, is one such developer. He’s not going above the 99-unit mark, though he would if the arithmetic was favorable in the long run — but it isn’t, he told Commercial Observer.

“I just did the filing in a project and I wanted to make 120 units, and I let 21 units go, because the math for the project was not making sense,” Gjini said in an interview in June. “Expenses are 25 to 30 percent higher, and when you see the refinances that are coming up, and when you see the interest that they keep going up and down, it feels very uncertain to take a shot and to go beyond that number.”

Building more units can equate to greater delays on the regulatory side as well, with one three-month delay on a project at 19 East 198th Street resulting in Gjini making three $150,000 monthly interest payments on a project that wasn’t advancing due to delays at the New York City Department of Buildings, he said.

Geopolitical instability has also played a huge role in the amount of risk these developers are willing to take, with not only the cost of materials increasing since the war with Iran started, but also the logistics shifting.

“As we speak, I’m getting emails from my suppliers that they’re gonna raise the amount of money that they’ve been charging us for the deliveries because of high fuel prices,” Gjini said.

Tariffs have made shipping building materials internationally more complicated, and wait times and prices for things like steel are adding to budgetary and timeline constraints. Buying American-made materials doesn’t seem to be saving developers any money, either.

“I agree up to a certain point that we need to buy American products, we need to have the industry over here, but they have to work out the speed,” Gjini said. “We need to see better prices, but, with fewer options of where to buy products, the price has been higher, which is something that I don’t understand — why the price needs to be higher.”

The cost of lumber for Gjini has risen 10 to 15 percent since the steeper tariffs in early 2025, while milled steel costs have risen 5 to 20.7 percent between February 2025 and February 2026, according to the Associated General Contractors of America.

Spencer Levine, president at RAL Companies, said he sees 485-x as a “shortsighted” piece of legislation that didn’t take into consideration the likelihood that less affluent developers wouldn’t be able to swing all the cost of more labor while dealing with myriad other variables.

“The instability in the construction material and labor market certainly impacts everyone — the tariffs, and what’s going to happen today, tomorrow or next week with those, I think, is continuing,” Levine said in a June interview. “Those are conversations that are almost secondary to everyone. But what we’re seeing is this knee-jerk reaction to build under 100 units in order to avoid the union labor requirement.”

There aren’t a lot of excuses for developers to follow the 99-unit trend regardless of broader economic conditions, in Levine’s opinion, considering that the cost per unit on a product usually goes down with higher volume.

“The cost of materials doesn’t change as you make larger orders; you get the critical mass and the buying power,” Levine said. “Yes, obviously you’re spending more money, but you’re delivering a lot more scope. So, if the rental rates work and the operating margins are there, then you could certainly deliver more than that. The 99-unit arbitrary threshold doesn’t impact your cost of materials, in my opinion.”

RAL, however, has not used the 485-x program yet, but plans to use it for future sites.

Lev Kimyagarov, managing principal of Development Site Advisors, also sees the prevailing wage as little more than a speed bump. Kimyagarov penned an article in 2025 explaining why he thinks 485-x works, though it’s far from perfect.

“Yes, the developers are building 99 units if they have a chance to do so, subdividing lots, but I feel like the policy needs to be tweaked on both sides,” Kimyagarov told Commercial Observer in a July 17 interview. “Meaning, there should be more restrictions with 99-unit developments, but also the government should give more freedom for developers building larger developments.”

In the last two months alone, Kimyagarov has been in talks with associates to use a modular home model to manufacture components of larger multifamily developments off-site and assemble them on-site.

“Building vertically elsewhere might be a lot more expensive with modular construction,” Kimyagarov said. “But I think with the city’s rising employment costs and development costs, it has the potential to bridge the gap here with the management. So it’s been a real discussion. … We’re actually working with one of the manufacturers who would like to develop a site with modular in the city. We’re looking for a site for them, and they would want to use that future development as a showcase. And they’re looking to build a nine-story building, so not small.”

One of the major benefits of the 485-x program that is often overlooked is that it means savings over time for developers looking to play the long game, Kimyagarov argues. The program offers up to 40 years of tax abatement for large projects, which is five years longer than the old 421-a’s maximum.

A prevailing wage also doesn’t necessarily mean that a developer needs to sign a union contract for projects 100 units and above. And, if the project falls under the City of Yes for Housing Opportunity, the zoning overhaul the City Council passed at the end of 2024, there are additional max bonuses for density and deeper affordability, Kimyagarov pointed out.

James Whelan, president of the Real Estate Board of New York (REBNY), said the trade association and the industry at large had little involvement in the formulation of 485-x, and lobbying efforts to reform the tax incentive in Albany have been little more than chatter. But he’s not surprised some developers just aren’t in the position to take on greater risk for a bigger development.

“The reason people are building 99 units or below is because they are making an economic decision to do so,” Whelan said. “If the rules had been more wisely designed, you would see people seeking to make full use of the floor area ratio that is available. People aren’t going to build something that doesn’t make economic sense. … They might make a choice not to build [rental housing]. They might build condos, retail or a hotel.”

New York Gov. Kathy Hochul’s office seems to view the program as a success, however, while putting responsibility on the city government to prevent continuation of the 99-unit trend.

“The governor passed the most significant housing deal in decades to address the state’s housing affordability crisis by building more housing, all while creating good-paying jobs,” a spokesperson for Hochul’s office said in a statement. “While the state does not have a regulatory role in 485-x, the governor has been clear that home prices are too high and building housing must be a top priority.”

REBNY released a report on 485-x in November 2025 which illustrated that the prevailing wage requirement is turning what should be a development boom into more of a pop.

In the third quarter of last year, there were about 11,746 proposed units of housing in New York City, which was 162 percent higher than the historical average. But it was still below the 12,500 units-per-quarter goal set by then-Mayor Eric Adams and Gov. Hochul.

Meanwhile, some developers are finding ways to build more housing without union labor contracts or a prevailing wage.

Ami Weinstock, another developer, was working on a series of six 99-unit buildings in Jamaica, Queens, in 2025, and another 97-unit residential project at 62-65 60th Place in Ridgewood, Queens.

No market in the city seems impervious to all the fluctuating trends influencing the decision to cap things off at only 99 units, either.

Housing developer Vilson Lumaj, for example, recently acquired the land and air rights for two 99-unit buildings at 761-769 East Tremont Avenue in the Bronx, which the brokers on the sale were pretty honest about at the time that the deal closed this past June.

“The development is going to be two 99-unit buildings, which will be a work-around for the prevailing wage required under 485-x,” Rosewood Realty Group’s Jonah Corney told Commercial Observer at the time. “I guess it’s a sign of poor policy.

Mark Hallum can be reached at mhallum@commercialobserver.com.