Bob, Knakal, recognized as the Top Commercial Real Estate Broker in NYC, discusses the 485x Multi Family Tax Abatement Program with key facts detailing the affect on Housing in New York.
-- In a city gripped by an unprecedented housing crisis, leading commercial real estate broker Bob Knakal is calling out the 485x tax abatement program as a well-intentioned policy that has fundamentally missed the mark. Instead of jumpstarting multifamily development, 485x has stalled it—buried under layers of wage mandates, inefficiencies, and political compromise.
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“New York’s housing crisis has one solution: more supply,” said Bob Knakal, Chairman of New York Investment Sales at JLL and co-founder of BKREA. “But instead of incentivizing that supply, 485x discourages it. The economics don’t work, and developers are walking away.”
Knakal points to a stark reality seen during the pandemic. As residents exited the city and vacancies soared, rents in Manhattan dropped by 30%. No policy, no subsidy, and no government program has ever replicated that kind of rent relief. “It was a pure function of supply. When more units were available, prices adjusted. That’s the market working exactly as it should,” he said.
The 485x program, intended as a replacement for the previously successful 421a tax abatement, has become a symbol of government overreach. It imposes prevailing wage requirements that can reach up to $72.45 per hour for certain projects, effectively making large-scale developments economically unfeasible. Developers, facing these constraints, are now intentionally building under 100 units to avoid excessive wage requirements. Every single one of the 23 applications submitted under 485x so far has been for 99 units or fewer.
The result is a sharp and alarming drop in development activity in the rental apartment sector. In Manhattan, south of 96th Street, buildable land sales for rental housing have plummeted from 1.6 million square feet to just 38,000 since 421a expired. According to Knakal, “That’s not a slowdown. That’s a near-complete collapse. Without real incentives, the private sector won’t build. And when that happens, everyone loses - developers, construction workers and, most importantly, tenants.”
Critics of tax abatements often refer to them as corporate giveaways, but Knakal counters that this view is shortsighted. “Without them, nothing gets built. This isn’t about handouts—it’s about aligning policy with economic reality. Developers aren’t going to lose money just to fill a political talking point. They’ll simply do something else.”
There is, however, one bright spot. The 467M tax incentive program, which supports the conversion of commercial buildings to residential use, is gaining traction. Unlike 485x, it offers developers a compelling tax incentive. It includes no taxes during construction and a 90% tax reduction for 35 years, making such conversions financially viable and helping to address the city’s desperate housing shortage.
With office vacancy rates high and residential vacancies at a dangerously low 1.4%, the opportunity for transformation is clear. But Bob Knakal warns that time is running out. “We need more housing, and we need it fast. If policymakers are serious about solving the crisis, they need to bring back real incentives that reflect the cost of building in New York.”
He adds, “We’ve done this before. We know what works. It’s time to stop pretending otherwise. Bring back smart, workable policies, and let the private sector do what it does best—build.”
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