The deadly crane collapse last month has New Yorkers that much more aware of the construction in their neighborhoods. “Maybe it’s time the city stop putting up 50-story luxury high-rises on every inch of space,” wrote one poster on Urbanbaby.com. But if the market’s calming down and leveling out, how come there seems to be more construction than ever?
First off, you’re not imagining things: There really are more buildings going up now. According to a Department of Buildings spokesperson, there’s been “a significant jump in the number of jobs filed for residential-building permits between January and February.” For all five boroughs, the DOB has received notifications—meaning that excavation’s starting within days—for 298 jobs, noticeably up from the year before. Brooklyn saw an increase of more than 20 percent. (The actual number of permits has fallen a bit, but that appears to be a paperwork lag.)
Why? A tax program known as the 421(a) abatement is set to expire—at least in its current form—this summer, and developers are rushing to get started before the deadline. “There’s been a big race in the last year to get foundations in the ground,” confirms developer Kyle Ransford of Halcyon Asset Management. The law works this way: If a developer builds low-income units in an eligible area—say, Greenpoint—he or she will receive five tax-abatement certificates per unit that can be applied elsewhere. Developers can sell their certificates to high-end builders—according to Steven Spinola, president of the Real Estate Board of New York, they usually charge $12,000 to $24,000 apiece—or use them in prime spots like Tribeca, where demand is high and buyers are responsive to lower property taxes.
Though lobbyists got the law extended last year, the battle seems tepid at best these days. Critics say the 421(a) initiative subsidizes condos that are far too expensive for many New Yorkers. “With the price levels the city has reached, it became viewed as an abatement for the rich,” explains appraiser Jonathan Miller. He predicts construction will slow down after the deadline, stabilizing new-development supply. With fewer units on the market, prices could rise if demand remains steady. That is, if Wall Street and the weak dollar—what Miller dubs “wild cards” of the market—don’t do huge damage. “Every day we’re waiting for the shoe to drop,” he says. “And it does—but there seems to be an endless supply of shoes, at least in New York.”