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Is Construction In Queens Slowing Down With Less Permit Applications?

Since the New York City construction boom of 2014, there has been a noticeable drop in the number of building permit applications being filed. Overall throughout New York City, the number of applications dropped by half from 2014 to 2015, and then by 38 percent from 2015 to 2016. Those are some pretty startling numbers, but it becomes even more startling when you realize that these drops are affecting Queens as well.

Queens was the only borough to see a rise in the number of permit applications from 2014 to 2015. The rise was slight, but there was still hope that the 2014 boom was happening in Queens. If that were the case, it would have meant more projects and more money being poured into Queens to capitalize on the momentum.

However, from 2015 to 2016, the number of permit applications in Queens dropped from 9,591 to 5,981. While that is not a 50 percent drop, it is still enough of a drop to put Queens in the same category as the other five boroughs as being part of an overall slump in land development. This includes residential construction as well as commercial development, and both types of construction are struggling in all of the boroughs.

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What Has Caused The Permit Application Decline?

In some instances, there are no explanations as to what is going on with the slowdown in land development. But it is telling that some of the projects that were approved in 2015 and earlier still sit half done and almost abandoned. Developers are less likely to apply for permits when the projects they are working on have hit financial snags.

Some observers think that the New York City development market, in general, is due to plateau for a while and that these drops in applications should be expected. When there is a rush on land development like what happened up to 2014, there has to be a period where things “level off” and developers start reassessing the market. Some developers have warned that the luxury condo market is starting to bottom out, and that is bad news for luxury residential construction in all of the boroughs.

Many developers have gone on record stating that Mayor Bill de Blasio’s plans for land development in all five boroughs are not clear, and the lack of direction from city hall has hampered progress. When de Blasio first announced his desire to add tens of thousands of affordable housing units to New York City over the course of a decade, developers applied for permits at rapid rates. But as city incentives and tax abatements have started to expire, it is expected that construction momentum will slow down.

The Effects Of The 421-a Tax Program Expiration

On January 15, 2016, the 421-a tax abatement program expired. This was a program that had been in place for decades, and Mayor de Blasio leaned heavily on the 421-a program to act as an incentive for developers to build affordable housing.

The 421-a program waived taxes on all building materials and offered years of tax-free operations for residential construction that included a certain percentage of affordable housing. Since developers were allowed to mix in luxury condos and commercial space with the affordable housing, the building permits went flying out the door. But when the 421-a program expired in 2016, the drop in permit applications was more than noticeable; it became a concern.

The sticking point for the 421-a was that the state and labor unions could not agree on a prevailing wage that would be paid to workers who worked on 421-a projects. In November 2016, it was announced that an agreement had been reached and $2 billion in 421-a funds would be released and the tax abatement program would be reinstated. At that point, Queens stood to benefit significantly as there were several affordable housing projects being designated for neighborhoods in Queens.

However, at this point, there has been no movement on reinstating 421-a. No laws have been passed and nothing has really been said. In the meantime, Queens has been home to some of the largest residential development projects in its history. A 921-unit development and a 774-unit development have been announced, with the 774-unit standing at 984 feet tall. That would make it the tallest building in Queens. All of this residential development is being done without help from the anticipated 421-a program. If 421-a ever does get back on track, it is expected that there will be several large-scale residential construction projects announced for Queens.

NYC Boroughs Are Running Out Of Land

At the moment, Queens is one of only three places in the New York City area that is legally allowed to accept new burials. Manhattan has started to run into problems with its prime real estate market as there is a noticeable shortage of quality land left for development. Developers in Manhattan are being forced to consider redeveloping commercial or residential property with existing structures as opposed to being able to build on an open lot.

When the prime real estate in a city runs out, the number of permit applications start to fall off for development. The reason is that the land that is left is simply not desirable enough for developers to use. There have been permit applications submitted for land in the outlying areas of Queens and the other boroughs, but those permits are few and far between.

Developers want their projects to be near public transportation, schools, and essential businesses such as grocery stores, but all of that land has already been developed. The key to a successful development is to sell as many units as possible before the building is built. When the only pieces of real estate available are blocks away from any essential services or transportation, no one is going to buy a unit in any buildings put on those properties. That causes the number of development applications to drop, and the number will drop sharply as prime real estate becomes harder to find.

The Future Of Queens Development

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Is the drop in permit applications just part of a cycle, or is it the natural reaction to years of excessive development? Will the return of the 421-a tax abatement program spur development again, or is city hall sending too many mixed signals for developers to get excited about the future of commercial and residential construction in New York City?

Queens has a few extremely large residential construction projects that are happening in 2017, but the funnel for future projects is looking a little dry. Right now, Queens is not a prime destination for luxury apartments, so the backlash from saturating the luxury condo market is not going to hit Queens too hard. But the loss of the 421-a tax abatement was tough on Queens as several neighborhoods throughout Queens were designated for affordable housing development.

Another question Queens faces is whether or not the borough continues to allow real estate to be used for burials, or does that real estate get rezoned for development? With all of New York City looking to Queens for burying their dearly departed, the borough faces the very real risk of not having enough prime real estate available when the demand for building permits rises again.

For now, Queens is riding a wave of development that will see its skyline change for the better. The long-term questions surrounding new construction in Queens are slowly being addressed by the city and the state. Only time will tell if Queens will once again survive a downturn in development.

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