Key facts
- New York City developers are prioritizing larger units with more bedrooms due to the 485-x tax abatement.
- The 485-x incentive, enacted in 2024, has led to the vast majority of new housing projects having 99 units or fewer.
- This shift provides more affordable units for families compared to previous tax incentives like 421-a.
- Over 90% of housing permit applications in the first three months of 2026 were for developments with 99 units or fewer.
- The 'City of Yes' zoning provision allows developers to build larger units by utilizing available square footage.
New York City apartment developers are increasingly opting for larger units with more bedrooms, even as a new tax incentive, 485-x, restricts projects to a maximum of 99 units. This strategy aims to maximize the value of development sites and provides a greater number of family-sized affordable housing units, a shift from previous programs that often favored studios and one-bedrooms.
The 485-x tax abatement, enacted in 2024, includes prevailing wage requirements that have led to a significant reduction in the number of units developers are building. Data shows that over 90% of housing permit applications filed in early 2026 were for developments with 99 units or fewer. This has resulted in an estimated 538 fewer apartments than sites could have accommodated. Despite these restrictions, developers are actively seeking sites for 99-unit projects, driving activity in the development market.
Industry professionals noted that the combination of the 485-x incentive with the 'City of Yes' zoning provision, which allows for larger units by capitalizing on available square footage, is leading to this change in unit mix. This contrasts with the previous 421-a tax break, where affordable units, particularly larger ones, were often designated for higher income levels (up to 130% of AMI). The current approach is seen as beneficial for the city in the long run, providing much-needed larger affordable units.
Speakers at Bisnow's New York Affordable Housing Conference highlighted that the demand for larger units, including three-bedroom apartments, has been lacking. The current incentives are helping to balance this by encouraging the construction of bigger units, which is viewed as a positive development for families seeking housing in the city.