Long Island IDA Housing Tax Breaks Face Mounting Opposition as Supply Gap Widens

Why Long Island's Reliance on IDA Tax Breaks Is Under Attack

Long Island builders have increasingly come to depend on local industrial development agencies to make housing projects work, but that support is now under political and legal pressure. At Bisnow's Long Island Real Estate Conference, developers said IDA tax breaks are the main reason new multifamily construction reaches the region, and some IDA boards are now publicly discussing removing housing from their charters.

The stakes are steep because Long Island already builds far less housing than nearby suburban markets. Between 2012 and 2021, the region permitted seven housing units per 1,000 residents, compared with 13 in the Lower Hudson Valley, 16 in Connecticut's suburbs, 23 in Boston and 27 in San Francisco. Multifamily permitting was even weaker, at 2.3 units per 1,000 residents, because zoning prohibits apartments on 96% of Nassau and Suffolk county land.

The shortage has economic consequences. Long Island lost 98,000 residents aged 35 to 54 during the same period, while job growth was 2% against a 12% national average. State officials, led by Gov. Kathy Hochul's 2023 executive order to prioritize funding for localities that promote housing construction, have pushed IDAs to offset costs through payment-in-lieu-of-taxes agreements. That aid has grown: Long Island's eight IDAs provided $213M of PILOTs in 2024, up from $167M in 2019.

The dispute is not only political. Opponents say IDAs lack constitutional authority to subsidize housing and argue the system lacks transparency. A lawsuit against the Babylon IDA produced an appellate ruling earlier this year that the agency could grant tax benefits to an affordable senior housing project because the project would improve employment and economic welfare. That decision has not ended the broader debate over how far IDA support should go.

What the IDA Fight Means for Long Island's Housing Pipeline

How IDAs Became Long Island's De Facto Housing Finance Tool

With zoning closed to apartments on 96% of Nassau and Suffolk land and property taxes roughly 23 and 18 times the median for counties outside New York City, developers say a payment-in-lieu-of-taxes agreement is often the difference between a viable project and no project. Heatherwood President Christopher Capece said the multifamily pipeline exists 'because of what the IDAs have done,' while Tritec Development Group principal Kevin Law called the aid an investment needed to attract capital. IDAs cannot change zoning, but they can provide political backing in a region where rental development remains contentious.

Babylon's Court Win Gives Cover, but Not Certainty

The legal challenge has produced a favorable precedent, but not a settled environment. Earlier this year, a New York Supreme Court Appellate Division judge ruled the Babylon IDA had authority to assist an affordable senior housing project in Wyandanch because it would promote employment and economic welfare. The developer had said it would abandon the project without the assistance. That ruling addresses the constitutional question in that case, but it does not stop advocacy groups from pressing broader oversight and transparency complaints, nor does it prevent IDA boards from limiting housing support themselves.

Affordability Rules Are Not Always Producing Below-Market Rents

A Reinvent Albany report in October found only about one-quarter of IDA-supported units were below market, raising questions about alignment with state housing goals. Brookhaven's own commissioned report, published in July 2025, found that in a prototype project the rents allowed under its 120% area median income threshold were actually higher than prevailing market rents, meaning that requirement gave tenants no pricing benefit. At the same time, the report found the incentive drive was decisive: a 15-year PILOT would cut operating costs by nearly $8.5M and unlock financing. A follow-up report in March found even luxury rental projects remain dependent on IDA support.

What a Retreat Would Mean for the Region

Removing housing from IDA charters would hit a market already losing middle-age workers. Cara Longworth, Empire State Development's Long Island regional director, said the lost 98,000 residents aged 35 to 54 are the prime working-class households unable to find housing. The broader economic benefit can be seen in Long Beach, where B2K Development and Harrison Street's 438-unit Superblock, supported by a $200M PILOT and $50M in other abatements, was a main reason Moody's upgraded the city's credit rating to Baa1 in 2023. B2K principal Jon Weiss says the project brought new retailers and dozens of permanent jobs. Strip away the incentives and developers argue the pipeline, the jobs and the tax base would not follow.

Next Steps for Developers, IDA Boards and Municipalities

The IDA debate leaves developers, boards and municipalities with shared exposure. The near-term decisions will depend on how each side prices the value of the incentives and the evidence of their broader economic return.

• For developers and capital partners: Underwrite a project's PILOT separately. Brookhaven's prototype found a 15-year PILOT cut operating costs by nearly $8.5M and made financing possible, so losing that subsidy can erase project economics even in luxury rentals.
• For IDA boards considering charter changes: Weigh the credit and employment evidence from Long Beach's Superblock, where a $200M PILOT and $50M in other abatements were cited as a main reason for Moody's Baa1 upgrade in 2023, and where new retailers brought dozens of permanent jobs.
• For municipalities: Do not treat tax breaks alone as a substitute for land-use reform. The East Northport project first proposed in 1978 needed a Supreme Court decision on zoning and did not gain final approval until 2022; IDAs cannot grant zoning changes.
• For developers negotiating new PILOTs: Expect affordability scrutiny to harden after the Reinvent Albany finding that only about one-quarter of IDA-supported units were below market and the Brookhaven finding that 120% AMI rents exceeded market. Prepare to document tenant-level pricing benefits, not just job claims.