A 25% tariff on steel imports, a 14.5% duty on Canadian lumber, and a city where union construction labor already runs $80 to $120 per hour: that combination has pushed new residential construction costs in New York City to roughly $450 to $600 per square foot, among the highest anywhere in the world. For buyers watching Manhattan condo medians climb from $1.46 million in early 2024 to $1.69 million by Q1 2025, the tariff story is a big part of the explanation.
In 25 years of selling real estate across all five boroughs, I have watched construction cycles tighten and loosen with policy changes. What is different right now is that multiple cost pressures arrived simultaneously, and the relief valve that would normally bring new supply online does not exist in the same form it once did.
What Tariffs Add to a New Building's Budget
| Material / Category | Tariff Rate | Cost Impact |
|---|---|---|
| Structural Steel (Chinese and global) | 25% | High |
| Aluminum (curtain walls, windows) | 25% | High |
| Canadian Softwood Lumber | 14.5% | Moderate |
| Imported Kitchen and Bath Fixtures | 10 to 25% | Moderate |
| Total Burden on NYC Construction | 5 to 9.6% | ~$4.5B annually |
The 421-a Gap
The 421-a tax abatement expired in June 2022. Its replacement, 485-x, has moved slowly through implementation. The result is a multi-year gap where the economics of building affordable or mid-market new construction simply do not pencil out without public subsidy. That gap shows up directly in the inventory numbers buyers see today.
New Construction in NYC
New development listings across Manhattan, Brooklyn, and Queens
261 W 28th Street #10D
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Listing information provided courtesy of the Real Estate Board of New York's Residential Listing Service (RLS). Information is deemed reliable but not guaranteed. Sale listings verified. ©2026 REBNY. RLS data displayed by Keller Williams NYC.
Inventory Is Not Recovering
Total NYC inventory stood at 14,887 homes in March 2025, only 2.8% above March 2024. Given demand (sales volume rose 9.5%, DOM fell from 67.5 to 60 days), that figure should be climbing faster. It is not, because the pipeline is constrained.
The NYC DOB issued roughly 34,000 new building permits in 2024, down from prior peak years. The average path from permit to occupancy runs three to five years. The projects that would relieve 2026 demand needed to break ground in 2022 or 2023. Many did not.
What This Means for Buyers
Resale properties, particularly co-ops and older condos, are often priced below what it would cost to replicate the building today. That gap between replacement cost and resale value is wider now than at any point in the last decade.
Buyers in Brooklyn and Upper Manhattan are finding that pre-war co-ops offer square footage at prices new construction cannot match.
Thinking About Buying New Construction?
Milton Coste has represented buyers across new developments in Manhattan, Brooklyn, Queens, and Upper Manhattan for 25+ years.
Schedule a Free ConsultationFor buyers searching new developments across NYC, the supply constraint means new projects reaching completion are priced at a premium because every input cost is elevated. The forces keeping prices elevated are structural, not temporary.
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