New York Developers Evade Tax Rules Using Unit Caps
Real estate firms are clustering smaller projects to bypass affordable housing and construction wage requirements in New York City.
Updated on Oct. 15, 2026 in Apartments
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Developers in New York City are filing applications for 99-unit housing projects to avoid stricter regulatory thresholds enacted on April 20, 2024. As of September 20, 2026, the Department of Buildings has recorded 112 such unregistered projects.
Why it matters
The 485-x program requires projects with 100 or more units to provide 25% affordable housing and pay a minimum construction wage of $40 per hour. By keeping unit counts at or below 99, developers lower their affordability obligation to 20% and avoid wage mandates.
Projects under 100 units require only 20% affordable housing compared to 25% for larger developments. Developers have used 48 clusters of small buildings to create 538 fewer affordable housing units than required for larger configurations.
The players
Department of Buildings
This New York City agency is responsible for enforcing construction codes and tracking building project filings.
Clipper Equity
This real estate investment and development company operates residential properties throughout New York City.
The details
Real estate firms are splitting individual lots into multiple, adjacent 99-unit buildings to fall just below the threshold for increased mandates. For example, Clipper Equity filed to divide a single East Harlem lot into seven separate 99-unit buildings to avoid the higher construction wage and affordability requirements.
Timeline
The Legislature enacted the 485-x program on April 20, 2024.
Developers built 48 clusters of small buildings between April 2024 and April 2026.
The Department of Buildings recorded 112 unregistered 99-unit projects by Sept. 20, 2026.
Six larger projects face a registration deadline of Feb. 19, 2027.
Culture Shift
The 485-x program was established to incentivize residential development through property tax exemptions in exchange for income-restricted units. Developers are exploiting this policy to avoid the costs associated with the higher-density affordability thresholds established by the legislation.
This trend limits the growth of affordable housing stock in New York City neighborhoods, potentially reducing access to income-restricted rentals for residents. Tenants looking for subsidized units may face fewer options as developers prioritize smaller building configurations to avoid regulatory overhead.
The takeaway
Developers are utilizing unit-count clustering as a strategic mechanism to lower development costs under current tax exemption laws. Prospective renters and housing advocates may see fewer affordable units available than the 485-x program initially promised to deliver.
What happens next
Six larger projects currently have registration deadlines pending, with a final cutoff date of Feb. 19, 2027.
Further reading
For broader context on local housing development, visit the Apartments section.
Source note: This article includes information reported by HousingWire.
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Do you believe housing developers should be allowed to use unit-cap loopholes to avoid affordability requirements?
