Developers Game 99-Unit Loophole, Dodging Wages and Affordable Housing Mandates Across Boroughs

New York’s surfeit of 99-unit apartment buildings exposes a patchwork of policy loopholes and the deep contradictions at the heart of the city’s approach to housing affordability.

From Coney Island to the South Bronx, a peculiarly precise number now dots the city’s streetscape: 99. Over the past two years, permits for more than 150 new buildings, each comprising exactly 99 flats, have been filed across New York’s boroughs. Despite their disparate locations and facades, this precise uniformity is not a newly fashionable abstraction in urban design, but rather a briskly rational response to the city’s legislative architecture.

The proliferation of these 99-unit projects is no marketplace accident. Under current local law, developments with 100 units or more are subject to stricter requirements: they must pay construction workers a higher minimum wage and set aside a greater fraction of units as “affordable” under city mandates. A tax break—too alluring to ignore—specifically incentivizes residential construction, but the regulatory burden intensifies for that fateful hundredth dwelling. Unsurprisingly, developers have displayed an uncanny knack for arithmetic, halting progress just short of the regulatory Rubicon.

The practical results are plain: a city grappling with a chronic housing shortage and spiralling rent now finds developers, emboldened by policy structure, clustering near this 99-unit threshold. Some projects even share lots and façades—seeming, to the casual passerby, a much larger single building—while quietly retaining their formal independence on the books. According to city data, a paltry 1% of new developments registering for the tax break bother to tiptoe over the 100-unit mark.

All this bodes poorly for the city’s well-intentioned housing goals. The need is immense: more than 70,000 New Yorkers were reported homeless last year, and the vacancy rate for affordable rentals remains stubbornly below 2%. Yet these 99-apartment “solutions” result in fewer regulated units at affordable rates. Each near-century building sidesteps the obligation to deliver more for those truly bruised by the city’s housing crunch.

Labour leaders contend that this behaviour is hardly innocent. Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York, decries the trend as “a scam.” He claims that both workers—denied fair wages—and tenants—denied affordable housing—are the real losers. Mr LaBarbera’s complaint to officials earlier this year appears well founded in arithmetic, if nothing else: splitting a large project into digestible, regulation-light morsels benefits everyone except the intended beneficiaries.

Developers, for their part, are unruffled. They argue that the city’s legislative framework offers them little choice but to take the route of least resistance. “It feels very counter to the overall goal of what we’re trying to achieve here,” admits Justin Pelsinger of Charney Companies, albeit whose firm does not practise this precise subdivision. Rational actors, when confronted with burdensome incremental costs at an arbitrary cut-off, will inevitably try to skirt the barrier.

The implications for New York are bleakly ironic. A patchwork set of incentives—perhaps originally crafted with an eye towards balance—now puts a ceiling, quite literally, on the scale of private housing solutions. Gotham’s regulatory regime, intended to wring more value from boom-time construction, instead leaves size capped, affordable components anaemic, and labour protections more often evaded than enforced. Critics within City Hall, HPD, and housing advocacy groups now regard this “99 syndrome” as a case study in the law of unintended consequences.

National context, international lessons

New York is hardly alone in its regulatory contortions. In San Francisco, Boston, and other American cities, thresholds for wage or affordability triggers exert similar gravitational pulls. Developers across the country brandish blueprints engineered to stop just shy of these lines, depriving desperate renters of marginal units that, collectively, add up to an imposing absence. European capitals have fared somewhat better; in Berlin and Vienna, more graduated requirements and robust public sector participation in housing construction have mitigated the perverse incentives so plain in New York.

Yet the United States, with its penchant for tax expenditures over public construction, portends more of these quirks. Efforts at the federal level to reform the Low-Income Housing Tax Credit have so far proved fitful, leaving local governments to tweak imperfect formulas. Albany and City Hall have both floated amendments to address the 99-unit loophole, but proposals have yet to muster political will. Whether this current flurry of arithmetical legerdemain will finally jolt lawmakers into action remains, as so often in New York, an open question.

We reckon that real solutions will require a blend of tighter drafting and broader ambition. The city could institute graduated requirements, smoothing the regulatory step-function that disincentivises bigger buildings. Coupling labour standards and affordability mandates with properly scaled tax relief could forestall the temptation to build to the letter, if not the spirit, of the law. More daringly, New York might look again to direct public investment—not just carrot-and-stick policies nudging the private sector, but gleaming city-backed blocks capable of accommodating those left out of the current housing calculus.

For now, though, the 99-unit phenomenon stands as a modest monument to the limits of incremental reform. New York’s clever developers have crammed the city’s gnawing needs into legal boxes, producing buildings numerically identical but functionally puny in their social impact. As always, the losers are those for whom shelter is neither speculative asset nor chess-piece, but basic necessity.

It may yet fall to policymakers, perhaps prodded by persistent journalism and the city’s own inexorable arithmetic, to fold this loophole shut, and let ambition, rather than technical expedience, set the size of the city’s future homes.■