It was more than two years ago, Mayor Eric Adams looked into a camera and announced an ambitious plan to fix New York City’s long-standing housing crisis.

His goal: create half a million new home units in ten years.

“This is our mission,” he said. “Our moonshot.”

What You Need To Know

  • The City of Yes zoning overhaul was signed by Mayor Eric Adams in December

  • In spring 2024, the state budget included incentives to encourage development through office conversions and new construction

  • Developers who NY1 spoke with expressed more enthusiasm about the conversion program as opposed to the new construction one

One of the major keys to launching that number higher included action taken at the city level and state level — aiming to incentivize more development.

City of Yes was the comprehensive zoning package passed by the City Council. It made it easier to convert office buildings into apartments by changing the latest date for the process to be streamlined from 1961 to 1990.

“Just by simply doing that, all these buildings suddenly became eligible for conversion when previously they weren’t previously,” said Robert Fuller, a principal with the architecture firm, Gensler.  

Fuller showed NY1 a diagram of a nearly mile long stretch along 3rd Avenue in Midtown East. It demonstrated that the number of buildings eligible for the streamlined conversion process more than doubled.

“We have eight active conversion projects going on right now in Manhattan north of 5,000 units collectively,” he said.  

And in the 2024 state budget, there was a new tax incentive program for office to residential conversions called 467-m.

Conversion projects that begin construction by the middle of 2031 would be eligible for massive real estate tax break for up to 35 years, in exchange for 25% of units being affordable apartments.  

“It creates a tremendous value for developers,” said Daniel Berman, the vice president at the firm Metro Loft NYC, which has completed more than a dozen conversions in the Financial District alone.  

Berman said the tax benefits could save them hundreds of millions of dollars.

“We have another six projects but we are looking — we have a very healthy appetite,” he said.

He said he has optimism for what’s to come. It comes on the heels of New York City creating the most new housing units in a single year since at least 2010, according to city data.

However, the need for more housing remains high.

Vacancy rates in Manhattan are just over 2% as of June, and in Brooklyn, about a third of units are going over-asking price, according to data from Miller Samuel, a real estate appraisal and consulting firm.  

“The general take is the market is tight,” Jonathan Miller, CEO of Miller Samuel, said.

Miller pointed out that in his June monthly housing report, it shows Manhattan median rents at an all-time high.

“And it is the fourth record set for median rent in the last five months,” he said.

Miller says the 500,000 new apartment benchmark in a decade, while optimistic is what the city needs.

But the new apartments can’t just be office conversions.

“I think ground up construction is part of the equation,” he said.

To try to incentivize new construction, the City Council reduced parking requirements for buildings, which can be costly. In the 2024 state budget, it included a new tax incentive program called 485-x.

It gives up to 40 years of tax breaks for buildings are under construction through June 2034. All in exchange for meeting affordable housing unit thresholds.

However, developers NY1 spoke with for this story expressed less enthusiasm for the new construction tax incentives compared to the conversion ones.

“We haven’t been looking at any ground-up opportunities,” Joey Chilelli, principal at Vanbarton Group, said.

Chilelli said there’s a reason they’re not looking at new construction: the state’s prevailing wage requirement.

“It makes it more expensive to build in the ground-up development, anywhere from 20% to 30% on the labor component,” he said.

While he wasn’t alone in his concern, at least one city leader wasn’t panicked.

“I think it’s a little bit too early to tell, but some of the data is promising,” Ahmed Tigani, acting commissioner of the New York City Department of Housing Preservation and Development, said.

Tigani said developers go through his agency to apply for the tax exemptions.

HPD data shows since last year, developers have expressed plans to use the new construction tax incentives on 118 buildings, which would yield about 2,600 new home units.

Remember, the eight projects Robert Fuller’s firm is actively involved in would yield 5,000 units from conversions alone.

However, Tigani, when asked, said he believes 485-x does do enough to encourage new construction.

“I think that 485x is something that will build up over time,” he said.

He added that he believes developers are still trying to find projects well-suited for 485-x, and that this program is just one tool to boost housing.

The city, he said, is eyeing several other neighborhood zoning proposals to unlock more housing opportunity.

He also said the state’s extension of 485-x’s predecessor — 421-a — could allow for 70,000 units to be preserved.

The concern, he said, was that 421-a required construction to be completed for eligible projects by June 2026. The new rules extend the deadline to 2031.

But like how Tigani says it will take time to see if 485-x is successful, it takes time for buildings to go up.

It will also take time to see if the city portion of the initiative to increase housing will survive a court challenge.

In lower Manhattan this week, arguments were heard in a lawsuit brought by a bevy of plaintiffs — mainly republican city leaders and civic groups in Queens and on Staten Island — that argue City of Yes is illegal.

In court filings, the plaintiffs said the city skirted local and state environmental review processes in the passage of the zoning overhaul, and it calls for the law to be “annulled and vacated.”

“The rezoning represented a wholesale departure from longstanding public policy
that respects open space, air and light, stress on infrastructure and the neighborhood character of vast areas of New York City’s low-density communities,” reads part of the more than 60-page lawsuit filed this spring.

In an amicus brief filed recently in support of City of Yes by more than two dozen local and state lawmakers, it argued the legislation “is a data-based approach that was lawfully enacted after extensive community engagement, years of research, and interagency collaboration.”