Developers in one of the toughest regions in the country to build housing are facing a new attack.

In an effort to combat the housing crisis, local industrial development agencies across New York — which grant taxpayer funding to boost job-creating developments — have ramped up the amount of financial incentives distributed to developers.

But on Long Island, where layers of restrictions add to already high construction costs, opposition to the tax breaks is spreading.

“One of the reasons why you see new development on the multifamily side is because of what the IDAs have done,” Heatherwood President Christopher Capece said onstage Wednesday at Bisnow’s Long Island Real Estate Conference.

“So it's actually very scary that you're hearing some of the IDA boards talk on the dais, in public, about removing housing from their charter.”

Between 2012 and 2021, Long Island permitted seven housing units per 1,000 residents, according to a report by the Long Island Regional Economic Development Council.

That compares with 13 units per 1,000 residents in the Lower Hudson Valley and 16 in Connecticut’s suburbs. Long Island also trails other major suburban markets, including Boston and San Francisco, which permitted 23 and 27 units per 1,000 residents, respectively. Outside Washington, D.C., Maryland permitted 30 units per 1,000 residents and Virginia 39.

The gap for multifamily is even more extreme at 2.3 units per 1,000 residents, since zoning prohibits apartments on 96% of land in Nassau and Suffolk counties — whereas 89% of land allows single-family housing on an as of right basis. 

High housing costs have caused an exodus, with Long Island losing 98,000 residents ages 35 to 54 between 2012 and 2021, according to the report. Job growth was 2%, compared to 12% across the U.S.

“That is our prime working class,” Empire State Development Long Island Regional Director Cara Longworth said at the event, held at the Garden City Hotel. “That's a working class of people who are not able to find housing.”

Longworth said the housing shortage’s impact on the workforce is why the state’s economic agencies are investing more in the sector. 

In 2023, Gov. Kathy Hochul signed an executive order directing authorities to prioritize the allocation of funds to localities that promote housing construction. She has since added other incentives for developers building housing and infrastructure. 

The state’s 107 IDAs have acted on Hochul’s directives by reducing cost burdens through payment in lieu of taxes agreements. 

That’s especially vital for Nassau and Suffolk counties, where property taxes are respectively 23 and 18 times the median for all counties outside of New York City. Long Island’s eight IDAs have provided $213M of PILOTs in 2024, up from $167M in 2019, according to the most recent state data available. 

“It's not a gift. It's an investment. It's an incentive to allow us to attract capital into our region,” Tritec Development Group principal Kevin Law said. “Without the IDAs, projects don't move forward.”

While IDAs don't have the ability to grant zoning changes, they can give developers the political backing needed in a region where new development is especially contentious. 

A 146-unit East Northport affordable housing project, which was first proposed in 1978, took more than 40 years to complete. The town’s refusal to rezone the lot from single-family to multifamily use became the subject of a Supreme Court decision, which held that the zoning ordinances perpetuated segregation. 

Even so, the project did not get final approval until 2022. The D&F Development Group stepped in the year before. 

Developers onstage agreed that rental units and multifamily developments continue to have a negative connotation on Long Island. Community backlash is expected, even if it’s from a small but loud group of people. 

“All the items that have been mentioned are translated into time, and time translates into money for us, and that unfortunately then is passed on to the consumer,” D&F Development principal Peter Florey said. “How do we get our projects done more quickly? How do we add a little bit more certainty into the process?”

Tax incentives can be an answer to those questions, developers said. 

But opponents argue that IDAs do not have the power to provide housing subsidies under the state constitution. Advocacy groups have also raised concerns about oversight and transparency, claiming that the system is ripe for abuse. 

The claims were central in a 2021 lawsuit against the Babylon IDA, which challenged the financial assistance the agency granted to an affordable senior housing project in Wyandanch. 

Earlier this year, a New York Supreme Court Appellate Division judge ruled that the IDA had the authority to provide the tax benefits since the project would promote employment opportunities and improve the town’s economic welfare. Without the assistance, the developer said it would abandon the project. 

An October report by Reinvent Albany found that only about one-quarter of units built with the support of IDAs are below-market, raising questions over whether the investments align with the state’s housing objectives.

In the affluent Long Island enclave of Brookhaven, developers seeking IDA tax benefits must reserve 10% of rental units for households earning 80% or less of area median income and another 10% for households earning 120% or less of AMI. But a July 2025 report commissioned by the Brookhaven IDA found that, in a prototype project, the rents allowed under the 120% AMI threshold were actually higher than prevailing market rents, meaning the requirement provided no pricing benefit to tenants.

At the same time, the report found that the IDA incentives were critical to the project's economics. A 15-year PILOT would reduce operating costs by nearly $8.5M. The savings would allow the developer to secure financing that otherwise would not be available.

In a follow-up report published in March, the IDA revealed that PILOT agreements are a decisive factor in luxury rental developments, too. Even without affordable housing requirements, the projects remain dependent on the IDA’s support.

But housing projects deliver more economic benefits than just a roof over residents’ heads, developers said during Bisnow’s event. 

A 6-acre Long Beach parcel sat vacant for decades, bogged down by litigation and the Nassau IDA’s 2016 denial of $109M in tax breaks to the development. 

The site eventually sold to a joint venture of B2K Development and Harrison Street. In 2021, the 438-unit project, known as the Superblock, finally broke ground. The IDA had reversed course a year prior, approving a PILOT agreement worth $200M, along with $50M in other tax abatements.

The Superblock was a main reason that Moody’s upgraded Long Beach’s credit rating to Baa1 in 2023. The score is still considered medium to lower medium, but it was a massive improvement to the city’s rating two years prior, when it sat just one step above junk bond status. 

“Long Beach has seen tremendous growth around our development,” B2K principal and President of Construction Jon Weiss said. “Because of that, we have many new retailers on the boardwalk that have brought dozens of permanent jobs.”

“There's this misunderstanding that the IDA is writing us a check,” Weiss added. “It's not.”