New York City is already falling behind on its housing development goals after a strong start to 2026, according to a new report from the Real Estate Board of New York.

Developers filed plans for 172 new apartment buildings between April and June, spanning 8,064 units, 52% fewer than the first quarter and less than half the 17,500-unit pace the city says is needed to mitigate the housing crisis.

The decline comes as the sites that carry benefits from the now-expired 421-a tax break become scarcer, according to REBNY's latest quarterly report on construction filings.

“The decline in proposed construction this quarter is a warning sign that New York has not yet created the conditions and incentives needed,” REBNY Executive Vice President of Public Policy Basha Gerhards said in a statement.

Developers proposed 9.2M SF of new buildings during Q2, 56% below Q1 totals, according to REBNY. While 89% of those developments were for multifamily projects, roughly 18% of that square footage is Extell Development’s 1.6M SF supertall redevelopment of the former Disney campus on the Upper West Side.  

That decline comes as developers are shifting toward buildings with fewer apartments. Just nine of the 172 proposed projects had 100 or more apartments, while the remaining 153 are set to add 99 units or fewer. That pattern holds from Q1, when more than 90% of proposals were for buildings with no more than 99 units.

Developers have been pivoting to smaller projects for almost two years since the state added higher construction wage requirements for major projects under the tax incentive 485-x, the replacement for the 421-a program.

The city needs to build 700,000 new homes within a decade to address the current housing shortage, the Mamdani administration announced last week. The city has a 1.4% apartment vacancy rate, while median rents continue to break new records, soaring above $5,000 a month in Manhattan in July.

But REBNY’s numbers indicate that overall housing development is dropping off as the final sites vested in the 421-a program get snapped up, leaving developers with little choice other than to rely on 485-x or stop building altogether, the landlord group said.

Even with developers planning larger units as they try to squeeze value out of smaller apartments, they aren’t managing to make up the lost square footage, according to REBNY. 

“Policymakers need to look at the data and examine whether 485-x is supporting enough new housing development,” Gerhards said. “The volatility of the City’s housing pipeline and the concentration of projects at exactly 99 units, alongside the drop in larger projects, raises serious concerns.”