The urban landscape of New York City is undergoing a significant transformation, driven by a state tax incentive program known as the 485-x. While the program was designed to encourage new housing development, it has inadvertently led to a reduction in affordable housing units. This shift is particularly evident in East Harlem, where a large gravel lot at East 125th Street and Park Avenue is set to become a cluster of high-rise apartments.

The property owner, Clipper Equity, plans to construct seven separate 99-unit buildings instead of one large 700-unit structure. This division allows the developer to take advantage of the 485-x program, which offers tax exemptions for buildings with 99 units or fewer. However, this strategy also means that Clipper is required to include 35 fewer affordable apartments compared to what would be required for a single larger building.

The Rise of Smaller Building Clusters

A Gothamist analysis of permit data from April 2026 to April 2026 identified 48 clusters of adjacent buildings with 99 units or fewer across New York City. These clusters range from two buildings to as many as seven, like the proposed East Harlem complex. The 485-x program requires owners of buildings with 99 units or fewer to reserve 20% of apartments for low- and middle-income tenants, whereas buildings with 100 or more units must reserve 25%.

As a result, developers receiving the tax break are constructing 21% fewer affordable units than they would have with larger buildings. Gothamist’s analysis shows that developers have added 538 fewer affordable units than they would have with larger buildings. Housing experts argue that this tactic limits new apartment production and hinders the city’s ability to meet its affordability needs.

The Impact on Affordable Housing

Brad Greenburg, CEO of NYU’s Furman Center, a housing research group, stated, “You’re losing units of production on the affordable side and These projects are not delivering the maximum number of units that they could have, and it’s never good to lose units.” City Hall spokesperson Matt Rauschenbach noted that Mayor Zohran Mamdani is not advocating for changes to the state 485-x program, emphasizing the critical role of state tax policy in housing production.

Labor unions have criticized the 99-unit tactic as a loophole that allows developers to avoid paying higher wages. Developers, on the other hand, argue that it is a sound business strategy that makes projects financially feasible. Despite the controversy, the use of this tactic has become increasingly common since the tax program went into effect in 2026.

Case Studies and Future Implications

To assess the impact of this trend, Gothamist used city data to identify adjacent 99-unit buildings with the same owners, architects, zoning diagrams, and financing records. For example, a two-building development on Mt. Hope Place in the Bronx features two nearly identical towers standing side-by-side. Another cluster at 1655 First Ave. in Manhattan appears to be a single complex but is actually two distinct buildings.

In Southeast Queens, a 286-unit development on Far Rockaway Boulevard was built as three separate buildings, resulting in 15 fewer affordable units than if it had been constructed as a single building. Similarly, a 198-unit development on the Upper East Side, built as two 99-unit buildings, included 10 fewer affordable units than it would have as a single structure.

The 485-x property tax break was enacted in 2026 to replace the expired 421-a program, which offered tax breaks for apartments priced above what low-income New Yorkers could afford. The new program applies different construction wage and affordable housing rules to different size projects in exchange for tax abatements. Critics argue that the program limits the number of new affordable apartments during a historic housing shortage that has fueled record-high rents.

As New York City continues to grapple with its housing crisis, the impact of the 485-x program on affordable housing production remains a contentious issue. The city’s ability to meet its affordability needs hinges on finding a balance between incentivizing development and ensuring that new housing remains accessible to low- and middle-income residents.