A real estate trade group is blaming an expired residential tax exemption in New York City for leading to four straight quarters with fewer than 10 filings for large-scale multifamily projects.

In the fourth quarter, there were just nine permit filings for multifamily projects with more than 100 proposed units in the most-populous U.S. city, according to a report from the Real Estate Board of New York.

The deflated amount of construction comes at a time when the vacancy rate has hit a historic low, making renting more expensive for tenants.

“This data makes clear that New York City is not building the kind of multifamily rental housing needed to address our worsening supply crisis,” Zachary Steinberg, REBNY’s senior vice president of policy, said in a statement.

The total proposed construction square footage in the fourth quarter fell to 6.2 million, a 58% decrease from the same time in 2022 and 16% lower than the overall average since 2008, according to the study.

Only two project filings in the past quarter were greater than 300,000 square feet, accounting for 12% of the total square feet proposed. In the fourth quarter of 2022, 10 project filings were greater than 300,000 square feet, and since 2008 projects above that threshold have accounted for 25% of total quarterly square feet on average.

While the number of large projects filings is declining, filings for smaller residential projects with one to three units has expanded. Over the final quarter of 2023, a record-high 568 new projects were filed, mostly in Staten Island, pushing the overall number of filings up to 728, a 73% increase year over year and 48% over the historical average.

According to REBNY, the increase can probably be attributed to Local Law 154 of 2021, a measure that puts carbon dioxide limits on new construction effectively requiring buildings with start dates in 2024 and beyond to be completely electric.

“While spikes in new building filings are certainly encouraging, this report makes it abundantly clear that we are still well behind pre-COVID levels of construction as we continue to lag in our ability to meaningfully address the housing crisis,” Gary LaBarbera, president of the Building and Construction Trades Council of Greater New York, said in a statement.

The report comes just days after the New York City Department of Housing Preservation and Development released the results of its Housing and Vacancy Survey that found rental vacancy rates in the city have dropped to just 1.4%, the lowest level recorded by city since measurements began in 1968. In 2021, the last time the city conducted the survey, the vacancy rate was more than 4.5%.

“The demand to live in our city is far outpacing our ability to build housing,” Mayor Eric Adams said of the survey.

The supply squeeze has driven up rental costs in the city, with renters earning less than $70,000 annually — New York’s median household income — spending 54% of their pay on rent.

REBNY has previously estimated 560,000 new housing units would be needed in the city by 2030, but a representative from the organization told CoStar News that multifamily housing production “fell off a cliff” when the 421-a tax exemption for residential projects expired in mid-2022. In the 10 years before the projected end, roughly 117,000 units were built under the program, a New York University study found.

According to CoStar analysis, large projects in the city have been hobbled by hefty acquisition and construction fees, along with a lack of incentives, including tax-friendly programs. Big developments are now also required to set aside up to a quarter of all units for affordable housing under mandatory inclusionary rules.

While New York officials, including Gov. Kathy Hochul and Mayor Adams, have said they are working to replace the 421-a program and have committed to making office-to-apartment conversions easier, REBNY would like to see more. In addition to these incentives, the organization is pushing for assistance for owners of rent-regulated apartments to invest in dilapidated units, expanded access to housing vouchers, and granting the city powers to rezone properties to higher residential density.

“Without policies in place to spur greater rental housing construction, one cannot expect this problem to fix itself,” Steinberg said.