Why Real Estate Could Be A Speed Bump On Mamdani's Road To Universal Childcare

In a city where daycare costs an average of $26K a year, it's little wonder that a candidate promising universal childcare stormed to an election victory last year. 

But even after Gov. Kathy Hochul and Mayor Zohran Mamdani last week announced a $4.5B plan in the coming year to bring that vision closer to reality, one critical issue remains: where those kids will go.

The announcement came a month after the state revived and expanded New York City’s childcare center property tax abatement, an incentive that has gone largely untouched by landlords since launching in 2023.

“There's a lot of new facilities, and they don't have the abatement,” said Ben Williams, a property tax expert at Rosenberg & Estis. “Why wouldn't you apply for the abatement if the city is going to give an abatement? Landlords just don't know about it.” 

Childcare facilities are unevenly distributed throughout the five boroughs. Although there is a surplus of more than 10,000 seats for 3-year-olds, parents commonly find themselves on yearlong waitlists, according to an analysis by Gothamist. In the 2023-2024 school year, Bath Beach in Brooklyn had 633 applicants for 234 seats, while the Upper East Side had hundreds of empty seats.

There is no central data source for newly permitted or open facilities, nor is there a way for brokers to easily pinpoint community space for childcare centers. That can cause operators to search for pricey retail space, forcing up tuition.

Demand will likely only increase under the city’s universal childcare push. Hochul and Mamdani's plan would fund a free program for all 2-year-olds in the city. 

The five-year property tax abatement enacted last year aims to increase the number of seats citywide. Landlords that create or expand facilities can offset up to $350K in taxes regardless of location. Those in childcare deserts — areas where there is a disproportionate ratio of children younger than 5 to available seats — can receive as much as $750K.

The change is a major increase from the existing limits of $100K for typical buildings and $250K for those in deserts. Under the previous program, which applied to projects completed on or after April 1, 2022, there were only 47 beneficiaries. That is a total of roughly $1M in abatements for the creation of approximately 3,500 childcare seats, according to Rosenberg & Estis. 

“Within a week after the state passed the [updated] law and my firm sent a client alert about the program, I got half a dozen inquiries,” Williams said.

But to meet universal demand, the city would need 68,500 seats for 3-year-olds in preschool, known as 3-K — 16,000 more than what exists, according to a 2025 report by the Office of the NYC Comptroller. Plus, approximately 96,000 3-K and pre-K slots don't have full-day or full-year options, another issue that may need to be addressed.

The report doesn't include numbers for 2-year-olds. The comptroller found that, as of September 2024, approximately 31,600 out of 108,000, or just 29%, of infants and toddlers who were potentially eligible on the basis of income received subsidized childcare.

The annual cost of any form of childcare has increased by at least $4K since 2019, but care for children 2 or younger has remained the most expensive due to lower staffing ratios and smaller class sizes, according to the comptroller. That sector would be most impacted by the city and state’s proposal.

The state has already provided more than $8.6B for childcare under Hochul, most of which has been given out in the form of vouchers for families. About $150M was allocated for the creation of new centers.

But the issue goes beyond funding. Childcare facilities are treated as community facility uses under zoning laws, and for those serving younger children, the space is required to be on the ground floor. Sourcing eligible locations is the biggest headache for operators, brokers said.

“It's not a financial problem, in my opinion. It's a discovery problem,” Verada co-founder and Managing Partner Nathaniel Mallon said. 

His brokerage launched a petition late last year calling for the Department of Buildings to create ways to find community facility space to make the process easier. Mallon has also met with officials from DOB and City Planning, asking for a search filter on DOB Now, the city’s real estate platform for building permits and applications, he said.

“Unless you raise your tuition to over 50 grand a year, you’re pretty much capped at paying $70, $75 a foot,” Mallon said. “In North Brooklyn, Manhattan and Western Queens, the average retail rent there is higher. You just can't make it work.”

In the fourth quarter, the citywide retail vacancy was 4.2% and average asking rent was $55.16 per SF, according to a Matthews report. But in prime shopping corridors, asking rents surged to an average of $574 per SF, and available space is at its lowest point in at least eight years, according to JLL. 

Even if a tenant does find an affordable location, it can take time to build it out and secure necessary licensing, such as from the Office of Children and Family Services and the Department of Health and Mental Hygiene. 

“For landlords, the bill helps reframe childcare centers as a viable, creditworthy use, particularly in underutilized retail, community facility, or former office spaces,” Open Impact Real Estate co-founder Lindsay Ornstein said in an email. “However, success will require landlords to partner closely with operators and remain flexible on timing, as licensing, approvals, and public funding introduce longer and less predictable pre-opening periods.”

The trade-off for landlords can be a long-term, stable lease in space that may otherwise remain vacant, Ornstein added. Daycares don't require the same visibility as storefronts, allowing them to be more flexible on location.

That is the case with Buckle My Shoe Preschool, which has been a tenant with GFP Real Estate for more than 30 years, including at 40 Worth St. in Tribeca. In 2023, it opened another 7K SF daycare at the base of the 80 Eighth Ave. office building in Chelsea.

“In order to start a school, it is very cost-prohibitive. It could easily cost you a couple million dollars,” Buckle My Shoe Executive Director Linda Ensko said. “On top of that, you have to wait, and the waiting is not as much with the Health Department as with the Buildings Department.” 

Ensko said delays in receiving a certificate of occupancy pushed the school’s newest location's opening date from September to November. In addition to working with the daycare, GFP paid to build out the space. 

“We were lucky, because it could go for six months or more, and meanwhile, you're paying rent on a space, but you have no income,” Ensko said. “Everything depends on your landlord.”

As part of the lease, GFP provided the preschool with discounted rent in exchange for the children of its office tenants receiving half off of tuition. Similarly, at Tioga Downs, an upstate casino and resort, GFP offers childcare to employees at a reduced cost. 

“It's clearly an amenity, but it's an expensive amenity,” GFP Chairman Jeffrey Gural said. 

The tax abatement could solve for some of those costs, he said. But Mallon thinks there could be an easier — and cheaper — fix for the city.

“Until a community facility space is visible, childcare expansion will remain slow, expensive and more uneven than necessary,” Mallon said.