New York real estate leaders have expressed strong criticism of the 485x tax incentive program, which was introduced as a replacement for the expired 421a program. At a recent event hosted by Crain’s and the Real Estate Board of New York (REBNY), MAG Partners chief executive officer MaryAnne Gilmartin described the 485x program as unworkable for developers constructing new buildings.
Gilmartin stated, “The 485x program really needs to be reconsidered,” adding, “My hope is that we don’t live with this program for a decade.”
The 485x incentive, which was part of last year’s state budget, aims to boost affordable housing construction following the end of 421a in 2022. However, its requirement for a $40-per-hour minimum wage on projects with 100 units or more has led many developers to submit proposals for buildings with only 99 units. Industry observers warn that this trend could undermine efforts to increase large-scale housing development.
Mary Ann Tighe, who leads CBRE’s New York tri-state operations, highlighted the scale of the issue: New York would need over five thousand separate 99-unit buildings to meet current housing demand. She said, “There’s an impulse to treat development punitively,” and added, “We have to stop thinking about tax incentives as some kind of giveaway.”
Recent data show a sharp decline in market-rate housing starts in New York City. The number dropped by approximately two-thirds compared to last year—from an average of 7,500 per quarter since 2021 down to around 2,500 per quarter this year. Similarly, the pipeline of units under construction fell from about 71,000 to roughly 47,000 during the same period.
Panelists at the event pointed out that political decisions in Albany are increasingly at odds with developers’ financial realities. They argued that rising construction and financing costs—combined with wage mandates—are discouraging private investment in rental housing at scale.
Despite these challenges, Tighe noted some positive trends. She observed that Manhattan leasing activity and pedestrian traffic have rebounded since the pandemic and suggested that New York City’s resilience remains strong.
Discussions also addressed potential structural reforms aimed at making it easier to build new housing. Some panelists supported proposed charter reform ballot measures designed to reduce City Council control over project approvals. They argued such changes could empower pro-housing council members to support new developments without facing political repercussions.
