Insights
Above 100 units, 485-x adds a construction wage floor, owner-signed certified payroll and joint liability. Here is what that means, and how to keep the exemption.
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KEY TAKEAWAYS
Under 485-x, a rental project of 100 units or more must pay construction workers at least $42.03 an hour (from July 1, 2026), and up to $76.12 in Zone A for buildings of 150 units or more.
The owner, not just the contractor, signs certified payroll under penalty of perjury and is jointly liable for any underpayment. Three violations in five years can cost the entire exemption.
The market has priced this in: 95 percent of new apartment buildings filed in Q2 2025 stayed under 100 units.
For projects that cross the line, wage compliance is a construction-phase controls problem. It belongs with the owner’s construction manager from day one.
Why this matters now
485-x, the Affordable Neighborhoods for New Yorkers tax incentive, replaced 421-a in 2024. For most rental developers it is the difference between a project that pencils and one that does not. The benefit is long: up to 40 years of full exemption for the largest projects.
What has changed in 2026 is enforcement. The NYC Comptroller finalized its construction wage rules this year. The rules set out what owners must record, who is liable and what happens when a site falls short. A wage floor that once lived in a statute now has paperwork, hearings and penalties attached.
The market has drawn its own line at 99 units
Developers responded to the wage threshold before the rules were final. In the second quarter of 2025, 150 of the 158 new apartment buildings filed in New York City had fewer than 100 units (Exhibit 1). Twenty-eight 99-unit projects were filed over the preceding four quarters, more than double the 13 filed from 2008 until 485-x passed.
Staying under 100 units is a rational choice for many sites. It is not free. For example, a 99-unit building on a site zoned for 180 units leaves density, revenue and housing on the table. For land bought at a price that assumed full build-out, the smaller project may not pencil either. As land costs rise and City of Yes adds zoning capacity, more owners will run the numbers on crossing the line.
What crossing 100 units actually adds
Three obligations arrive together once a project reaches 100 units (Exhibit 2).
A wage floor. Every construction worker on site must earn at least the minimum hourly rate. The rate rises 2.5 percent every July 1. For buildings of 150 units or more in Zone A or Zone B, the floor is the lesser of a dollar figure or a share of the prevailing wage for the trade.
Owner-signed records. The owner must keep certified payroll reports for the site, listing each worker, trade, hours and rate. An officer or principal of the owner signs each report under penalty of perjury. Daily sign-in logs and weekly payroll records sit behind them, and every contractor must hand its records to the owner within 30 days of its first payroll and every 30 days after. Records are kept for six years after completion.
Shared liability. The applicant, the owner and the construction employer are jointly liable for violations. Underpayments carry interest and civil penalties of up to 25 percent. After two violations the Comptroller sends notice and publishes the violator’s name. After three within five years, the benefit can be terminated and recaptured with interest.
Where projects get into trouble
The wage floor itself is rarely the problem, since many trades on a large site already pay above it. The exposure sits in the lower tiers: a laborer sub of a sub, a cleanup crew, a delivery-and-hoisting outfit brought in for two weeks. These are the workers least likely to appear in a general contractor’s payroll package, and the ones a Comptroller investigation is most likely to find.
The second failure point is timing. Owners must notify the Comptroller at least three months before construction starts. A missed notice or a late first payroll submission starts the project on the back foot before a shovel goes in the ground.
The M/WBE line applies at every size
Every 485-x rental project, whatever its size, must show reasonable efforts to spend 25 percent of applicable design and construction costs with certified M/WBE firms. HPD asks for a sworn affidavit listing each M/WBE contract by firm, amount and commodity code. If the goal is not met, the owner must document the outreach: timely requests to the Department of Small Business Services, notice of specific opportunities, pre-bid meetings and responses to inquiries.
Professional services count toward the goal. Construction management, resident engineering and inspection contracts with a certified firm build participation from the first month of design. They do not wait for the trade buyout.
Three moves for owners above the line
Put wage compliance in the CM’s scope, in writing. Make collection and review of certified payroll, sign-in log reconciliation and lower-tier tracking a named deliverable. Review it before the principal signs, not after.
Flow the rules down before buyout. Every trade contract should require 485-x wage rates, records within 30 days of first payroll and access for audit. A clause added after award is a change order.
Count M/WBE participation from design. Engage certified professional-services firms early and track spend monthly. A documented 25 percent is far easier to show than a reasonable-efforts narrative after the fact.
How SRE can help
SRE Engineering is a Hispanic woman-owned, M/WBE-certified construction management firm in New York City. We have spent decades delivering public work where certified payroll, field verification and documented compliance are routine. We bring the same controls to private developers using 485-x, and our fees count toward your M/WBE goal.
This article is a summary for planning purposes, not legal or tax advice. Confirm requirements with HPD, the Comptroller and your counsel.
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