Developers Build Small Apartment Projects to Dodge Tax Rules
Under 100 units, new buildings avoid the affordability and wage requirements of the city's 485-x tax exemption program.
Updated on Nov. 13, 2026 in Apartments
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Developers across New York City are building apartment projects with fewer than 100 units to qualify for a tax-relief program. The Real Estate Board of New York counted 172 new or planned projects of that size in the five boroughs from July 2024 to September 2026.
Why it matters
The 485-x program requires larger buildings to include more affordable apartments and pay construction workers higher minimum wages, and smaller projects sidestep those conditions. The city estimates it needs 700,000 new homes over the next decade, so the shift toward smaller buildings bears directly on how much housing gets built.
The Real Estate Board of New York counted 172 new or planned sub-100-unit projects from July 2024 to September 2026, compared with 13 recorded from 2008 to 2023. Brooklyn accounts for 65 of the recent projects, Queens 58 and Manhattan 17, and the extraction does not address how many will be completed.
The players
Chess Development
Chess Development is a New York City real estate developer that has been involved in building apartment projects in the city.
The details
Developers are dividing projects into separate buildings to stay under the 100-unit threshold; the Eastline at 1655 First Ave. and 355 E. 86th Street comprises two legally separate 99-unit buildings sharing a courtyard and amenities. Buildings under 100 units must make 20% of apartments affordable and may receive a 25-year exemption on the tax increase from new construction, while 100-to-149-unit buildings must set aside 25% and pay construction workers at least $41 an hour.
Timeline
2008 to 2023: 13 small-scale apartment projects recorded in the five boroughs.
July 2024: Period tallying small apartment projects begins, when the count surged.
2022: The 421-a tax exemption program expired.
September 2026: Period tallying 172 small apartment projects ends.
Roadmap
The 2022 expiration of the 421-a tax exemption left developers looking for a successor incentive, and the 485-x program's 100-unit threshold now shapes project design. Small buildings that stay under that line avoid its affordability and construction-wage requirements, so the threshold is steering how housing is built in the city.
Renters in new small buildings may find a share of apartments priced as affordable units if the building meets the 20% requirement, while the rest are set at market rates. Prospective tenants should check whether a building's affordable units are income-restricted before applying.
The takeaway
Small apartment projects are becoming a way around the 485-x program's affordability rules, so renters and buyers should look closely at a building's affordable-unit commitments before signing a lease or purchase.
Further reading
For related coverage, see the Apartments section's latest reporting on New York City housing.
Source note: This article includes information reported by New York Post.
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