Understanding the Challenges of NYC’s 485-x Program: Construction Wages, Project Feasibility, and Market Reality

Thank you to Eddie Small and Crain’s New York Business for including my perspective in their recent article analyzing New York City’s 485-x tax exemption program and its impact on the feasibility of new residential development. As the city seeks to spur housing production, the wage requirements embedded in 485-x have become a pivotal—and often determinative—factor in whether rental projects can move forward.

When Wage Requirements and Project Size Collide

Under the current structure of 485-x, developments categorized as “very large rental projects” (150+ units in specific designated areas) and “large rental projects” (100+ units anywhere in NYC) must meet elevated construction wage requirements. While well-intentioned, these requirements significantly increase project costs, often to the point where even well-capitalized developers cannot make the numbers work.

In my comments to Crain’s, I noted that among my own clients, not one has committed to building a qualifying 150-unit project in a neighborhood that would trigger the highest applicable wage levels. This is not due to unwillingness, but purely economic reality.

As I said in the article:

“I think it’s entirely rational what’s going on.”

Construction costs are—and always have been—a central consideration when firms evaluate the feasibility of major development projects. When required wages push total project costs beyond what rents or financing can support, even strong incentives like 485-x struggle to bridge the gap.

What This Means for NYC’s Housing Goals

The city urgently needs more rental housing, especially at attainable price points. While 485-x was designed to encourage exactly that, the program’s wage thresholds have created a situation where many projects that would add significant housing supply are simply not economically viable under current rules.

Until there is greater alignment between policy goals, cost realities, and incentive structures, developers will continue to face difficult decisions about whether—and where—to build.

How We Can Help

At Rosenberg & Estis, P.C., my colleagues and I work closely with developers, owners, and lenders to navigate the complexities of 485-x and similar incentive programs. We advise on feasibility, structuring, compliance, and financing strategies that help clients move projects forward in a challenging environment.

If you are considering a 485-x development or exploring financing under the program, please feel free to reach out. We would be glad to assist.