NYC Building Permits Plunge 80% as Rising Costs and Tax Exemption Expiry Deter Developers

Introduction: The Slowing Pace of NYC Building Permits

Recent data reveals a concerning trend in New York City's real estate market. The number of foundation applications for new buildings, a key indicator of construction progress, has been on a steady decline. This downturn is largely attributed to the expiration of the 421a tax exemption and the escalating costs of construction. The implications of this trend are far-reaching, affecting everyone from potential homeowners to real estate investors and industry professionals.

Decline in Multifamily Building Applications

In November, the number of new filings for foundations to build multifamily buildings fell from 21 in October to just 19. Even more alarming, only one of these filings was for a building with more than 100 units. The 19 projects proposed will add a mere 557 units to the city's housing stock, significantly below the city's monthly average for 2022.

Yearly Production Goals at Risk

On average, developers have only filed initial applications for 24 new building foundations per month this year, a significant drop from the 55 per month average in 2022. The total number of units proposed in these filings has also plummeted by 79 percent. As a result, New York City is on track to end 2023 nearly 80 percent behind its yearly production goals for new rental housing. This shortfall could have serious implications for the city's ability to accommodate population and job growth.

The Impact of the 421a Tax Exemption Expiration

The slowdown in rental construction is largely attributed to the expiration of the 421a tax exemption in June 2022. This incentive was instrumental in supporting the construction of apartments in most of the outer boroughs and upper Manhattan. The state legislature and Governor Kathy Hochul have yet to agree on a replacement, leaving the future of new development uncertain.

Looking Ahead: The Future of NYC Real Estate

Without new development incentives, there is little reason to expect an improvement in 2024. This lack of support for new development could make it more expensive and competitive to rent a home in New York City, and less attractive for businesses looking to grow in the city. As such, the decisions made by elected officials in the coming months will have a significant impact on the future of New York City's real estate market.