New York’s 485x Multifamily Development Incentive: Why It Stinks

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Read The Full Article by Bob Knakal on Commercial Observer – Click Here

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New York City’s housing affordability crisis has one clear solution: more supply. When vacancies rise, rents drop — a simple, observable economic reality. During the pandemic, a spike in available units led to a dramatic 30% drop in Manhattan rents. No government policy has ever replicated that kind of relief.

Yet instead of incentivizing real development, NYC lawmakers have layered restrictions and wage mandates onto 485x — the latest in a series of diluted tax abatement programs. Once a powerful driver of housing construction, today’s version is ineffective, bureaucratic, and structurally flawed.

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Key Reasons Why 485x Falls Flat

• Overly Burdensome Wage Requirements
  For projects over 99 or 149 units, depending on exemption term, developers must meet minimum wage standards as high as $72.45/hour, making most projects financially infeasible.
• Incentivizing Smaller Projects
  Since the wage rules don’t apply to developments under 100 units, all 23 projects submitted since 485x began have been 99 units or less — a workaround that highlights the law’s inefficiency.
• Dramatic Drop in Development Activity
  Without real incentives, rental development has nearly vanished. In Manhattan below 96th Street, land sales for rental development dropped from 1.6 million buildable square feet to just 38,000 post-421a.
• Political Rhetoric vs. Reality
  Critics claim abatements are “giveaways,” yet the data shows without them, developers simply don’t build. The market response is loud and clear.
• Better Alternatives Exist
  The 467m tax abatement, which supports commercial-to-residential conversions, is working. Developers receive 90% tax reductions for 35 years after construction, making major projects viable again.
• Unmatched Demand for Housing
  With residential vacancy rates at 1.4% and office vacancies high, the shift to housing is essential — but must be made economically feasible through the right incentives.

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Frequently Asked Questions

What is the 485x tax abatement?

It’s a NYC housing incentive meant to replace the expired 421a program, offering limited tax relief in exchange for meeting affordability and wage requirements.

Why is 485x not working for developers?

The wage mandates for larger buildings make the economics impossible. Developers are choosing to build only up to 99 units to avoid compliance.

What’s the difference between 485x and 467m?

467m provides full tax relief during construction and a 90% tax reduction for 35 years post-conversion — making it a compelling option for converting office space to housing.

How much housing is being lost due to 485x?

The lack of viable incentives has nearly halted multifamily rental development. Compared to years with an active 421a, buildable land sales have dropped by over 95%.

What needs to change to fix NYC’s housing supply problem?

Policy needs to align with economic reality. That means reinstating real tax incentives, reducing bureaucratic red tape, and letting the private sector build — at scale and speed.