Two years into New York's 485-x tax incentive program, developers are systematically capping projects at 99 units to avoid prevailing wage requirements that kick in at 100 units. The result: a structural shift in multifamily scale that may undermine the program's affordable housing goals.
Data from the City Reporter, cited in a Commercial Observer article, shows that between April 2024 and April 2026, at least 154 permits were filed under 485-x. Only 1 percent of those projects exceeded 100 units. By contrast, more than half of buildings under the old 421-a program were over 100 units in the years before that incentive expired in 2022, according to BK Real Estate Advisors Chairman and CEO Bob Knakal.
Developer Andrea Gjini of AG Holdings Group told Commercial Observer he dropped 21 units from a planned 120-unit project because the math didn't work under 485-x's wage requirements. “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,” Gjini said.
The 99-unit ceiling is a rational response to a binding constraint. Developers face higher labor costs, material price increases (lumber up 10-15 percent since early 2025 tariffs, milled steel up 5-20.7 percent), and regulatory delays. The wage rule adds a fixed cost that makes larger projects uneconomical for many sponsors.
A counterargument: the data may be skewed by early-stage pipeline or small projects. But the consistency of the 99-unit pattern and developer testimony suggests a durable market adaptation. Spencer Levine, president at RAL Companies, called the threshold “arbitrary” and said the trend is a “knee-jerk reaction to build under 100 units in order to avoid the union labor requirement.”
The open question is whether this cap is temporary or permanent. If developers continue to leave units on the table, the program could deliver fewer affordable units than intended. For lenders and investors, the implication is clear: underwrite 485-x projects assuming a 99-unit ceiling, and test whether larger projects can absorb the wage cost.