A growing number of New York City developers are designing residential buildings with exactly 99 apartments to qualify for a major tax incentive while avoiding stricter labor and affordability requirements tied to larger projects.
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According to city data reviewed by local nonprofit newsroom THE CITY, developers filed permits for more than 150 residential buildings containing exactly 99 apartments between April 2024 and April 2026.
The trend is tied to the city’s 485-x tax exemption program, which replaced a previous residential construction tax incentive in 2024. Under the new rules, projects with fewer than 100 apartments are exempt from higher construction wage requirements and face lower affordable housing obligations.
Projects with 100 or more units must pay construction workers a minimum hourly wage of $40 and dedicate a larger share of apartments to permanently affordable housing.
“It feels very counter to the overall goal of what we’re trying to achieve here, which is that we’re trying to build more housing,” said Justin Pelsinger of Charney Companies.
Industry professionals say developers are increasingly altering building layouts and project designs to remain under the 100-unit threshold while still maximizing development potential.
In some cases, developers are splitting what appear to be single large buildings into multiple technically separate 99-unit structures on the same property.
“For a bigger building at the edge of 99, you can goose the unit count down by combining the units,” said John Woelfling, partner at Dattner Architects. “So you’re not providing more housing, you’re just providing bigger units.”
Under the 485-x program, buildings with fewer than 100 apartments are required to reserve 20% of units as affordable housing. Projects with 100 to 149 units must reserve 25% of apartments as affordable and permanently rent-stabilized.
Larger developments in some sections of Manhattan, Brooklyn and Queens face even stricter affordability and wage requirements.
Developers argue the financial pressures associated with higher labor costs, interest rates, insurance expenses and construction materials are driving the trend.
“A lot of the trades that we normally use wouldn’t work,” said Elie Pariente, principal at EMP Capital Group. “If we were to go for more than 99 units, we would have to hire brand-new trades and brand-new contractors that we’ve never worked with before.”
Architects and consultants also noted that dividing projects into multiple smaller buildings can create inefficiencies, including duplicate stairwells, trash rooms and elevators.
“We’re now putting in added walls, added trash rooms, added stairs, added elevators, so we’re basically losing square footage that would have been available for units,” said Toby Snyder, senior associate at FXCollaborative Architects.
Construction labor leaders have strongly criticized the growing use of 99-unit projects, arguing the practice reduces affordable housing production and weakens wage protections for workers.
Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York, called the strategy “a scam.”
“The sad part of it is, who suffers? The people suffer because they’re building less affordable units,” LaBarbera said.
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Union officials also warned that developers attempting to divide projects into multiple connected 99-unit buildings could face scrutiny over whether the developments should legally be treated as single projects under wage regulations.
Meanwhile, some large-scale developers continue to pursue projects well above the threshold despite the added requirements. TF Cornerstone, for example, plans to develop more than 1,000 apartments across three buildings on the Greenpoint waterfront using the 485-x program.
Still, developers say broader economic conditions continue to shape project decisions.
“If we were in a lower interest rate environment and commodity pricing came down, and insurance pricing was not at record high, could we make something work with the $40 wage floor?” said Eli Weiss, principal at Joy Construction Corp. “Absolutely.”
Originally reported by Samantha Maldonado in The City.
