Using Condo Structures To Go Beyond 99-Units with 485-x
The market's response to the 485-x tax abatement for new buildings was swift and predictable. Developers pivoted toward building projects with fewer than 100 units to avoid prevailing wage requirements imposed by the law on larger builds. Journalists have poked fun at this oddity: would-be 450-unit buildings are now being chopped into several, identical 99-unit properties instead. Working within the confines of 485-x, is there a better way, here?
One approach is to truncate larger buildings into smaller tax lots. In recent cycles, condominium declarations and tax lot subdivisions have been associated with mixing retail and residential or selling off affordable rental units to nonprofits. Under 485-x, multiple condo units on a single zoning lot can be used to segment program eligibility, isolate tax exposure, and recapture scale benefits without forfeiting flexibility. This might enable developers to centralize their cores, mechanicals, lobbies, roof systems, egress, and other components, which could lead to significant savings.
How Tax Lots Work
In New York City, the zoning lot is the area where builders are allowed to build, as defined by the city's zoning rules. Within that space, there can be multiple tax lots. These tax lots are the individual components that determine property taxes and eligibility for programs like 485-x. Through a condominium declaration filed with the Attorney General and the Department of Finance, a developer can subdivide a single building into multiple "condo units," each of which gets its own tax lot. That means each tax lot can be treated differently and independently for tax purposes.
Here's how this might work on a 180,000 SF project:
Condo Unit A: 99-unit rental apartments using 485-x benefits.
Condo Unit B: 30,000 square feet of street-level retail using Industrial & Commercial Abatement Program (ICAP) benefits.
This structure delivers multiple wins simultaneously. First, it ensures the residential portion of the project remains eligible for the full 485-x benefits. Second, it ensures that the commercial floor area ratio (FAR) exceeding the 12% rule is carved out, and any resulting abatement reduction affects only Condo B, the commercial unit. Third, the two-condo approach opens the door to a retail condo sale or ICAP eligibility, which can reduce taxes. This multi-tax-lot approach sets the groundwork for easier recapitalization events later (e.g., partial condo selloff).
Even more interesting is creating multiple residential condo units in the same building. Nothing in the 485-x rules prevents developers from creating two residential condo units in the same building that contain dozens of individual apartments.
"15. Multiple tax lots. If an eligible site contains multiple tax lots,
an application may be submitted with respect to one or more of such tax
lots. The agency shall determine eligibility for ANNY Program benefits
based upon the tax lots included in such application and benefits for
each multiple dwelling shall be based upon the completion date of such
multiple dwelling," (New York State Senate. (n.d.). Real Property Tax Law § 485-x. )
This opens up some smart possibilities:
Rental Building:
Condo Unit A: 99 apartments with 485-x benefits and 20% affordable units
Condo Unit B: 50 apartments staying out of 485-x, market-rate and fully taxed
Total of 149 units
Why choose to have some units skip the tax benefits? Because it limits the affordable housing requirements and prevailing wage costs to just a portion of the building. The market-rate units generate unrestricted income, and developers can finance and operate each condo separately. The fact that developers opt to make some of their units fully taxed (no abatement to avoid prevailing wage requirements) underscores the law's financial shortcomings.
Rental and Condo Building
Condo Unit A: 99 rental apartments using 485-x benefits.
Condo Unit B: Top 30 floors designed as 40 condos for sale.
A total of 139 units
This hybrid approach enables the developer to use the 485-x rental condo to anchor the capital stack, securing both construction and long-term financing. On the other hand, the condo-for-sale portion enables developers to sell condos at premium prices without affordability restrictions or rent stabilization rules.
Tax lot design is not novel and has been done many times before. Significant developments like Waterline Square, where multiple uses were stacked under a single roof – each with distinct tax and ownership structures. The city's own housing agency (HPD) allows applications for "one or more" tax lots on a single site—they're essentially encouraging this approach.
Why This Beats Building Multiple Small Buildings
Building several buildings requires duplicating many systems that developers would otherwise house under one roof. Each building needs its own lobbies, elevators, heating and cooling systems, roof equipment, and fire safety systems. Besides costing more money to purchase and build, these duplicate systems take away revenue-generating space that property managers could lease to tenants. By contrast, a single, larger building avoids many of these redundancies. Singular structures offer optimal layouts and reduce material costs. Operationally, they are also easier to maintain and manage.
Investors are taking note of these 99-unit buildings. Debt and equity providers are questioning why they're being asked to fund projects with segmented pads when a single building would work better and be more cost-effective. Developers must awkwardly explain that the net costs of construction are lower with redundancies and reduced labor costs than they are with no redundancies and prevailing wages.
The trend of 99-unit buildings has taken hold and is likely to persist in the market for some time. The cost efficiencies from doing so are hard to ignore. On the other hand, there comes a time when duplicating building systems becomes costly, and that may be an opportunity to consider alternatives to 99-unit properties. Condo declarations and tax lot structuring offer developers a legal and scalable approach to building larger residential buildings while maintaining tax efficiency. By separating uses and assigning tax treatment at the lot level, projects can unlock mixed-income feasibility, ICAP compatibility, and long-term net operating income (NOI) growth.
Curious whether your development site is better suited for a 99-unit structure or for something larger? Want to know your land’s value?
Reach out to me at rs@sinclairrealtyco.com for an initial review. We’ll help you evaluate the land and understand how to maximize value.
I am bullish on NYC Multifamily.
Best Regards,
Romain Sinclair
646 326 2220
Sources
New York City Department of Housing Preservation and Development. (2024). Final rules for RPTL §485-x tax exemption program. https://www.nyc.gov/assets/hpd/downloads/pdfs/about/rptl485-xfinal-rules.pdf
New York State Senate. (n.d.). Real Property Tax Law § 485-x. https://www.nysenate.gov/legislation/laws/RPT/485-X
New York City Department of Buildings. (n.d.). Building applications & permits. https://www.nyc.gov/site/buildings/dob/building-applications-permits.page
Bisnow. (2024, December 14). Why 99 could be the new magic number for NYC apartment projects. https://www.bisnow.com/new-york/news/multifamily/why-99-could-be-the-new-magic-number-for-nyc-apartment-projects-126891
The Real Deal. (2025, May 21). NYC apartment project filings up—but shrink to 99 units. https://therealdeal.com/new-york/2025/05/21/nyc-apartment-project-filings-up-but-shrink-to-99-units/
The Real Deal. (2025, April 30). New York City stuck with failed 485-x for years to come. https://therealdeal.com/new-york/2025/04/30/new-york-city-stuck-with-failed-485x-for-years-to-come/
The Real Deal. (2025, March 22). Developers adapt to 485-x and a CMBS rebound. https://therealdeal.com/new-york/2025/03/22/developers-adapt-to-485x-and-a-cmbs-rebound/
The Real Deal. (2025, March 21). The era of 99-unit buildings has arrived. https://therealdeal.com/new-york/2025/03/21/the-era-of-99-unit-buildings-has-arrived/