REBNY report: New construction applications are down significantly

A new report from the Real Estate Board of New York found that new housing development has stagnated in New York City – and the real estate trade group says that is evidence for the need to replace an expired developer tax break meant to incentivize the construction of affordable housing.

The developer group’s January 2024 Multi-Family Foundation Plan Application Report found that developers had only filed 25 applications for residential building foundations, the first step for a new construction project. According to REBNY data, that’s in line with numbers for the past year, which saw an average of 24 initial filings per month. 

The applications from last month would produce 865 units. And only two applications were for larger projects with 100 units or more. 

That’s a significant drop from two years ago. In January 2022, developers submitted more than twice as many applications. And of those, nearly 20 were for large projects. In total, 2022 saw 45,593 proposed units based on residential building foundations. Last year, that number decreased to 9,909. And REBNY officials say the numbers from January are off to a poor start.

According to the group, January report shows that the trend of “persistently low filings” has continued since the expiration of the so-called 421-a tax abatement in June of 2022. And it said that the city is well below pace to hit its target goal of building 50,000 new housing units per year. “Legislators in Albany must enact sensible, data-driven policies to spur the creation of multi-family, mixed income housing, or the city’s housing crisis will only get worse,” said Zachary Steinberg, REBNY senior vice president of policy.

Renewal or replacement of the 421-a program has emerged as a key sticking point between Albany lawmakers and Gov. Kathy Hochul. The governor first proposed a similar replacement in 2022 as part of her budget, but it was not well-received by legislators and it fell out during negotiations. Last year, Hochul said a new tax incentive would be crucial for her proposal to build 800,000 new units of housing in the next decade, but left it up to the Legislature to come up with a program they would find acceptable. That again did not come to pass last year as discussions around housing collapsed without any significant new legislation passed. At the time, Assembly Member Linda Rosenthal, chair of the Assembly Housing Committee and a key player in housing discussions, asserted that the 421-a tax break doesn’t lead to enough affordable housing.

This year, Hochul has proposed a “placeholder” tax break program as part of her budget which lacks most of the crucial details like affordability requirements and labor standards. As written, it would leave the parameters of the program up to New York City to design and require unions and developers to negotiate labor standards.

The REBNY report also comes on the heels of new data from the city Department of Housing Preservation and Development. According to the Housing and Vacancy Survey, a report that comes out every three years, the city’s vacancy rate has hit a nearly 60-year low of 1.4%. That’s a sharp drop from just 2021, when the number had been 4.54%. What that means is that in the first half of 2023, only 33,000 apartments were available to rent out of the city’s stock of 2.35 million rental units. Mayor Eric Adams and his surrogates including Deputy Mayor for Housing, Economic Development and Workforce Maria Torres-Springer have made it clear that the survey is further evidence of the city’s need to prioritize building new housing, and enacting policy to enable that. Support from Albany for a new tax incentive is one of their central requests.