Residential Remodeling Market Report: New York City Outlook 2023-2025

The New York City residential remodeling market is a dynamic and complex sector, fundamentally shaped by the city’s dense urban fabric and persistent housing challenges. Analysis of recent trends reveals a market overwhelmingly dominated by alteration projects, which have consistently constituted an average of 95% of all permitted construction activity since 2010.¹ This underscores the central and indispensable role of remodeling in the city’s housing supply dynamics.

Despite impressive net housing unit additions in 2023 (30,170 units) and 2024 (37,690 units), new permitting activity for both overall construction and new dwelling units experienced notable declines in 2023 and 2024, signaling a potential slowdown in the future project pipeline.¹ Residential construction spending reached a record high of $22.8 billion in 2023, a figure partly inflated by rising material costs and a strategic rush to initiate projects before the 421-a tax abatement program expired.¹ However, this spending is estimated to have sharply declined by 16% in 2024, primarily due to the absence of this critical incentive.¹

A severely tight housing market, evidenced by a critically low 1.41% rental vacancy rate and 9.2% of all rental housing considered overcrowded as of 2023, continues to underpin strong underlying demand for housing solutions, including the expansion and improvement of existing units.¹ Geographically, Brooklyn consistently demonstrates stronger permitting activity and the largest proportional increase in average building size, positioning it as a key growth engine for residential alterations, in contrast to Manhattan, which saw its permitting levels fall significantly below pre-pandemic levels.¹

Persistent challenges facing the market include elevated construction material costs, which increased by 40.8% nationally from 2019 to 2023, and rising interest rates, both of which collectively increase project feasibility hurdles and dampen investment.¹ Furthermore, the construction industry’s capacity is a growing concern, with employment remaining below pre-pandemic levels and a 3% decrease in the number of construction firms in 2024, marking the first annual decline since 2011.¹

The residential remodeling market in NYC is poised for a period of adjustment. Forecasts indicate a potential decrease in overall construction spending in 2025, suggesting a challenging environment. The market will likely continue to emphasize the optimization of existing housing stock, driven by inherent demand, but constrained by policy gaps and economic pressures.

II. Introduction to NYC’s Residential Remodeling Landscape

Defining Residential Remodeling in NYC

This report meticulously addresses “residential remodeling” within the distinctive context of New York City’s built environment. Unlike less dense areas where new ground-up construction often dominates, NYC’s residential market is fundamentally characterized by a pervasive focus on alterations, renovations, and conversions of existing structures. This encompasses a broad spectrum of activities, ranging from interior upgrades and reconfiguring existing spaces to adding dwelling units within established buildings or converting non-residential properties into residential use.

A foundational data point supporting this characterization is that alteration projects have consistently constituted the vast majority of permitted activity, averaging 95% of yearly permitted jobs since 2010.¹ This statistic is paramount, immediately framing the scope of this report to focus almost exclusively on activities related to modifying existing residential or convertible properties. This overwhelming dominance of alteration permits signifies that NYC’s mature, dense urban environment inherently prioritizes optimizing and densifying its existing building stock over extensive new construction on undeveloped land. The city’s severe land scarcity means that new construction often necessitates costly demolitions, complex zoning changes, or development on challenging sites. Alterations, conversely, allow for increasing density—for instance, by subdividing large apartments or converting commercial spaces to residential—improving the quality of existing units, or adapting older buildings to modern needs, all within the existing urban fabric. This approach is often more efficient and feasible in a highly developed city. Consequently, the NYC residential construction market is, in essence, the residential remodeling market, profoundly shaping investment strategies, contractor specializations, and policy considerations, as the primary avenue for housing growth and improvement is through modifications to existing structures.

Overview of the Broader NYC Housing Market

The residential remodeling market in NYC operates within the context of one of the nation’s most constrained and competitive housing landscapes. This underlying market tightness is a fundamental driver for both new construction and, critically, the extensive remodeling of existing properties. As of the 2023 NYC Housing and Vacancy Survey (HVS), the Citywide net rental vacancy rate stood at a critically low 1.41%.³ Furthermore, the survey indicated that 9.2% of all rental housing was considered overcrowded.³ These figures collectively illustrate an extreme housing scarcity, which generates immense pressure on the existing housing stock and drives demand for any available housing solution, including the creation of new units through alterations or the improvement of current living conditions.¹

The critically low vacancy rate and high levels of overcrowding directly fuel demand for residential remodeling, extending beyond mere aesthetic upgrades to encompass functional expansion and densification. When housing supply is severely limited and prices are high, residents are less likely to relocate. Instead, they seek solutions within their current living situations. This often involves remodeling to add space—such as converting a basement, adding a bedroom, or reconfiguring layouts for remote work—improving functionality, or upgrading outdated features to enhance long-term livability. For investors, the high demand and low vacancy make it economically attractive to create new dwelling units through alterations, such as subdividing large apartments or converting commercial or industrial spaces, rather than pursuing entirely new construction, which is constrained by land availability and regulatory complexities. Overcrowding, in particular, directly drives the need for more space, pushing demand for alterations that increase square footage or unit count. This means residential remodeling in NYC is not merely a discretionary expenditure but a crucial mechanism for addressing the city’s housing crisis, effectively acting as a form of “supply creation” and quality improvement within the existing urban fabric.

III. Current State of Residential Remodeling Activity (2023-2025)

Permitting Trends: Alterations vs. New Construction

While New York City has achieved record net housing unit production in recent years, the trajectory of new permitting activity, particularly for alterations, presents a more complex and concerning picture, suggesting a potential slowdown in the pipeline for future projects. The recovery from the pandemic saw a rapid 27.5% increase in permits in 2021 and 2022, reaching 182,193 permits in 2022, a level just 0.2% short of the record 2018 level.¹ This surge occurred in the year the 421-a tax abatement program for affordable housing units expired.¹ However, the number of permits subsequently declined in 2023 and 2024, indicating that a return to pre-pandemic (2010 to 2019) growth trends, which averaged 4.5% annually, has not yet occurred.¹ Specifically, filing and permit numbers fell significantly in 2023, raising questions about the city’s ability to meet its housing goals, with numbers improving in 2024 but still lagging pre-pandemic levels.² Permits for new dwelling units issued in NYC in 2024 decreased by 4.8% from the prior year, totaling 15,626.³ Alteration projects consistently constitute the majority of permitted activity, averaging 95% of yearly permitted jobs since 2010.¹ Permitting activity serves as a leading indicator for future construction and remodeling work; thus, a decline in permits suggests a shrinking pipeline of new projects, which will eventually translate into fewer completed units and less remodeling activity.

The sharp decline in overall permits in 2023 and 2024, following a robust surge in 2022, strongly suggests a “pull-forward” effect driven by the impending expiration of the 421-a tax abatement program. Developers likely rushed to secure permits before the June 2022 deadline, artificially inflating activity in 2022 and potentially boosting completions in 2023-2024. The subsequent decline indicates a genuine slowdown in new project initiations due to the absence of this significant incentive, which will inevitably impact future residential remodeling and new unit additions.

Residential Construction Spending

Residential construction spending in NYC demonstrated a strong recovery post-pandemic, reaching a record high in 2023. Construction spending in the city reached $68.2 billion in 2023, exceeding the pre-pandemic peak in 2019 by 10%.¹ Residential construction spending fully recovered from the pandemic by 2023, surpassing its 2019 level by 17.6% to reach $22.8 billion.¹ This growth reflected a high demand for housing amid a very low rental vacancy rate.¹ However, this growth was partly influenced by rising costs, as the construction materials price index increased by 40.8% nationally from 2019 to 2023, significantly faster than the 19.2% rise in the all-items price index during the same period.¹ The New York Building Congress (NYBC) estimated residential spending to have declined sharply by 16% in 2024.¹ This decline is partly attributed to the expiration of the 421-a tax abatement program in June 2022, as developers likely rushed to start projects before the program’s expiration, which may have boosted spending levels in 2023.¹ After 2023, the NYBC estimated overall spending stalled in 2024, increasing by just 0.9% to $68.9 billion, partly due to elevated interest rates.¹ The NYBC’s October 2024 forecast expected overall spending to decrease by 6.9% in 2025 and then recover somewhat to reach $65.5 billion in 2026.¹ Spending figures provide a financial measure of market activity, and the sharp decline estimated for 2024 residential spending is a critical indicator of market contraction, directly attributable to policy changes and economic factors.

The “record high” residential construction spending of $22.8 billion in 2023 must be interpreted with caution, as it was “partly due to rising costs”.¹ This implies that the actual volume of physical construction or remodeling work completed might not have increased proportionally to the dollar value, or could even have decreased in real terms. The substantial 40.8% increase in the national construction materials price index from 2019 to 2023 means that for any given budget, less physical work can be accomplished. This directly impacts homeowners’ ability to undertake extensive renovations, potentially forcing them to scale back plans or defer projects. For developers engaged in large-scale alterations to create new units, increased material costs reduce profit margins, making projects less attractive. The subsequent estimated 16% decline in residential spending in 2024 confirms a more fundamental slowdown in the market’s underlying activity, exacerbated by the absence of the 421-a incentive and further compounded by elevated interest rates.¹ Elevated interest rates increase the cost of borrowing for both developers (construction loans) and homeowners (home equity loans or refinancing for renovation funds), further dampening demand and making projects less financially viable. This combination creates a “cost-push” effect on the market, where higher prices reflect inflation rather than increased activity. The market may therefore see a shift towards more essential, smaller-scale, or high-ROI remodeling projects, while discretionary renovations or projects aimed at adding new units become less viable.

Housing Unit Alterations and Completions

Despite the observed decline in new permits, New York City has continued to see significant net gains in housing units, including a notable contribution from alterations, highlighting the ongoing impact of previously permitted projects. Between 2020 and 2023, net new housing unit production citywide grew about 40%, with 2023 seeing the largest annual growth since 2018, adding 30,170 net units.² In 2024, the city’s housing production hit another record, growing a further 25% over the year to reach nearly 38,000 net units.² The city’s total housing supply grew a further one percent in 2024 compared to 2023, reaching about 3.76 million units, the highest annual rate of growth since 1965.²

The number of housing units in new buildings completed in 2024 increased by 21.5% from the prior year, to 33,974.³ Crucially for the remodeling market, in 2024, there was a net gain of 4,067 residential Class A units via alterations, though this was partially offset by a loss of 305 residential Class A units through demolitions.³ This data distinguishes between permits (a forward-looking indicator) and actual unit additions/completions (current market outcomes). The net gain from alterations directly quantifies the remodeling market’s significant contribution to the overall housing supply.

There is a critical discrepancy between the decline in permits issued for new dwelling units in 2024 (-4.8%) ³ and the significant increase in units completed in new buildings in 2024 (+21.5%) ³, alongside record net unit additions overall.² This indicates a strong pipeline of projects from previous years, likely spurred by the 421-a expiration rush in 2022, now reaching completion, effectively masking a slowdown in new project starts. Construction projects, especially in NYC, have a substantial lead time from permitting to completion. The surge in permits in 2022, driven by the impending 421-a expiration, created a backlog of projects that are now coming to fruition in 2023 and 2024. Therefore, the current high completion rates and net unit additions are a reflection of past permitting activity. The decline in new permits in 2023 and 2024 is a more accurate indicator of the future pipeline, suggesting that the pace of completions and net unit additions will likely slow down in the coming years unless new incentives emerge. The 4,067 net gain in Class A units via alterations in 2024 explicitly highlights how remodeling contributes to housing supply. While NYC is currently experiencing a positive surge in housing unit growth, this momentum may not be sustainable if the trend of declining new permitting activity persists. The market’s reliance on alterations for net unit gains underscores the critical importance of this segment for addressing housing supply challenges, even as the overall pipeline for new starts shrinks.

Table: NYC Residential Construction Activity & Housing Supply (2020-2025)

Metric	2020	2023	2024	2025 (Est.)
Net New Housing Unit Production	N/A	30,170	37,690	N/A
Total Housing Units (Jan 1)	N/A	3.72M	3.76M	N/A
Permits for New Dwelling Units	N/A	16,394	15,626	N/A
Housing Units Completed in New Bldgs	N/A	27,962	33,974	N/A
Net Gain via Alterations (Class A)	N/A	N/A	4,067	N/A
Residential Construction Spending	N/A	$22.8B	$19.15B	$17.83B
Share of Alteration Permits (Avg. since 2010)	N/A	N/A	95%	N/A
Share of Residential Permits (2021-2024)	N/A	N/A	64.2%	N/A

Note: 2024 Residential Construction Spending is estimated as a 16% decline from $22.8B in 2023. 2025 Residential Construction Spending is estimated as a 6.9% decline from 2024 overall spending, applied proportionally.

Sources: 1

IV. Key Drivers and Influencing Factors

Housing Supply and Demand Dynamics

The persistent and severe imbalance between housing supply and demand in NYC remains the most fundamental underlying driver for residential remodeling, compelling both residents and developers to optimize existing properties. As of the 2023 NYC Housing and Vacancy Survey, the Citywide net rental vacancy rate was a critically low 1.41%, with 9.2% of all rental housing considered overcrowded.³ This acute scarcity creates inherent pressure for all forms of housing solutions, making remodeling an essential strategy for both increasing supply and improving existing living conditions. Residential construction spending in 2023 reflected this high demand for housing amid the very low rental vacancy rate.¹ While the total number of housing units in NYC exceeded 3.7 million in 2023, growing 9% since 2010, and reached 3.76 million in 2024, indicating continued, albeit slow, growth in overall stock ², the market remains severely tight.

Despite the critically low vacancy rate and rising median sale prices in NYC (up 3.4% year-over-year to $881,252 in June 2025) ⁴, the market is characterized as a “Buyer’s Market” by some analyses.⁴ This classification, alongside homes staying on the market longer (an average of 99 days in June 2025, up 3.8% year-over-year) ⁴, reveals a market paradox. This suggests that while underlying demand is immense, high prices and elevated interest rates are creating significant affordability barriers, slowing down transactions despite the scarcity. A “buyer’s market” typically implies an oversupply leading to price drops; however, in NYC, the absolute supply is extremely low. The “buyer’s market” designation likely refers to the pace of sales and the negotiating power within the existing, highly-priced inventory. High sale prices, coupled with elevated interest rates, make homeownership less accessible and more expensive. This leads to fewer transactions, longer days on market, and potentially more homes selling “at” or “under” asking as buyers push back. For existing homeowners, this environment makes moving less appealing and more costly due to higher mortgage rates on a new purchase and high transaction costs. This dynamic strongly incentivizes existing homeowners to invest in their current residences. Instead of buying a new, more expensive home, they opt for significant renovations, such as adding space, upgrading kitchens/baths, or improving energy efficiency, to better suit their needs and enhance long-term livability. This directly reinforces and sustains demand for the residential remodeling market, even in a challenging sales environment.

Economic Factors

The broader economic environment, particularly concerning construction costs and financing, represents significant headwinds for the residential remodeling market. The increase in construction spending is partly due to the large rise in construction costs; from 2019 to 2023, the national construction materials price index increased by 40.8%, significantly faster than the 19.2% rise in the all-items price index during the same period.¹ Additionally, elevated interest rates are cited as a reason for overall construction spending stalling in 2024.¹ These factors directly impact the financial viability of remodeling projects for both homeowners and developers, influencing project scope, timing, and overall market volume.

The substantial 40.8% increase in the national construction materials price index from 2019 to 2023 indicates that even if residential spending figures appear high, the volume of actual physical remodeling work may be stagnant or even declining in real terms. This cost inflation, when combined with elevated interest rates, creates a significant financial burden on project feasibility. Higher material costs mean that for any given budget, less physical work can be accomplished. This directly impacts homeowners’ ability to undertake extensive renovations, potentially forcing them to scale back plans or defer projects. For developers engaged in large-scale alterations to create new units, increased material costs reduce profit margins, making projects less attractive. Elevated interest rates increase the cost of borrowing for both developers (construction loans) and homeowners (home equity loans or refinancing for renovation funds), further dampening demand and making projects less financially viable. This combination creates a “cost-push” effect on the market, where higher prices reflect inflation rather than increased activity. The market may therefore see a shift towards more essential, smaller-scale, or high-ROI remodeling projects, while discretionary or large-scale, unit-adding alterations become less common. This cost pressure could also lead to increased demand for more efficient or cost-effective materials and construction methods.

Policy and Regulatory Environment

Government tax abatement programs have historically been powerful catalysts for residential development and significant alterations in NYC, and their expiration has had a profound and immediate impact on market activity. The NYBC estimated residential spending to have declined by 16% in 2024, a decline partly attributed to the expiration of the 421-a tax abatement program in June 2022.¹ Developers likely rushed to start projects before the program’s expiration, which may have boosted spending levels in 2023.¹ In 2022, residential construction permitting rose to its highest level since 2010 amid the expiration of the 421-a program.¹ Furthermore, the number of housing units newly receiving J-51 abatements and exemptions decreased by 12.3% in 2024, to 9,567.³ These incentives directly influence the financial feasibility and attractiveness of large-scale residential projects, including those involving substantial alterations to create new units or rehabilitate existing ones.

The expiration of the 421-a tax abatement program in June 2022 not only caused a “pull-forward” effect that artificially boosted residential permitting in 2022 and spending in 2023, but its absence has now created a significant policy vacuum. This vacuum, coupled with the decline in J-51 abatements, is actively depressing large-scale residential development and significant alteration projects aimed at increasing housing supply. This highlights the market’s high dependency on such incentives for major investment. Tax abatements like 421-a and J-51 are crucial financial mechanisms that reduce the cost burden for developers, making large-scale projects, including substantial alterations that create or preserve affordable housing units, financially viable. Their removal or reduction significantly increases project costs and reduces profitability, leading developers to defer or abandon such initiatives. The “rush” observed before 421-a’s expiration demonstrates the market’s sensitivity and reliance on these incentives. Without a successor program or alternative robust incentives, the pace of large-scale residential alterations aimed at increasing housing stock is likely to remain subdued, exacerbating the existing housing supply crisis. The market is at a crossroads where significant residential remodeling projects, especially those adding units, face substantial headwinds without renewed or alternative policy support. This could shift the focus of the remodeling market more towards owner-occupied, smaller-scale renovations that are less dependent on developer incentives and more on individual homeowner needs and financing.

Construction Industry Health

The overall health and capacity of the construction sector, encompassing employment levels and the number of active firms, directly impact the ability to execute residential remodeling projects efficiently and cost-effectively. As of 2024, construction employment in New York State remained 4% (16,300 jobs) below its 2019 level, marking the second-lowest recovery rate among all states, in sharp contrast to the nation.¹ Furthermore, the number of construction firms in the city decreased by 3% (479 firms) in 2024, representing the first annual decline since 2011.¹ A shrinking workforce and a reduction in the number of active firms indicate diminished industry capacity, which can lead to increased labor costs, extended project timelines, and potential quality issues due to reduced competition or skilled labor shortages.

The persistent decline in construction employment and the first annual decrease in the number of construction firms since 2011 in 2024 signal a contraction in the industry’s ability to meet demand. This is particularly concerning given the high underlying demand for housing and remodeling in NYC. A smaller workforce and fewer operational firms inevitably lead to a reduced supply of contractors available to undertake remodeling projects. In a market with high demand, driven by low vacancy and overcrowding, this supply constraint will naturally drive up labor costs due to scarcity and extend project completion times due to fewer available crews. It can also lead to a decline in project quality if demand forces less experienced or less reputable firms into the market. This creates a bottleneck that limits the actual volume of remodeling work that can be performed, regardless of the underlying demand. Even if homeowners and developers are willing to invest in remodeling, the industry’s constrained capacity could become a significant limiting factor, leading to higher prices, longer waits, and potential frustration for clients. This also highlights a need for workforce development initiatives within the construction sector.

Table: Key NYC Housing Market & Construction Industry Indicators (2023-2025)

Metric	Value (2023/2024)	Implication for Remodeling Market	Source
Citywide Net Rental Vacancy Rate	1.41% (2023)	Extreme housing scarcity drives demand for existing unit optimization.	3
% of Rental Housing Overcrowded	9.2% (2023)	Direct need for space expansion and reconfigurations.	3
Median Sale Price (NYC, Jun 2025)	$881,252 (+3.4% YoY)	High cost of new homes incentivizes renovation over relocation.	4
Median Days on Market (NYC, Jun 2025)	99 days (+3.8% YoY)	Slower sales may encourage homeowners to stay and improve.	4
Construction Materials Price Index Change	+40.8% (2019-2023)	Increases project costs, potentially reducing project scope/volume.	1
Residential Spending Change (2024 est.)	-16%	Significant contraction due to policy changes and costs.	1
J-51 Abatement Change (2024)	-12.3%	Reduced incentives for rehabilitation and unit preservation.	3
Construction Employment vs. Pre-pandemic	Below (2024)	Labor shortages, increased costs, extended timelines.	1
Change in Number of Construction Firms	-3% (2024)	Diminished industry capacity, reduced competition.	1

V. Geographic Analysis: Borough-Specific Insights

Variations in Housing Unit Growth and Permitting Activity

Residential remodeling and housing unit growth are not uniform across New York City’s five boroughs. Distinct patterns of development and permitting activity highlight differing market dynamics and opportunities. In 2023, Brooklyn accounted for 30% of the total number of housing units, with over 1.1 million units, followed by Manhattan at 25%.² From 2010 to 2024, Brooklyn experienced the highest percentage change in housing units at 11.4%, followed by the Bronx (10.3%), Manhattan (7.9%), Queens (7.5%), and Staten Island (4.0%).² Within the city, permitting continues to be stronger in Brooklyn than in other boroughs.²

In stark contrast, Manhattan was the only borough in 2024 with permitting levels below 2019 levels, at only 80.6%.¹ As a result, Manhattan’s share of the city’s total permitting activity declined from 43.6% in 2019 to 35.3% in 2024.¹ Furthermore, by borough, the largest proportional increase in average building size during 2024 was observed in Brooklyn, with a 13.1% increase (from 24.2 units to 27.3 units).³ Understanding these borough-specific trends is essential for targeted investment, development, and operational strategies within the highly localized NYC remodeling sector.

Brooklyn’s consistent strength in permitting and the largest proportional increase in average building size in 2024 strongly suggest that it is the primary engine for residential growth and large-scale alterations that add dwelling units in NYC. This contrasts sharply with Manhattan’s significant decline in permitting activity, where levels in 2024 remained substantially below 2019 figures, indicating a fundamental shift in development focus away from the borough or a saturation point for certain types of projects. Brooklyn’s growth in average building size, coupled with robust permitting, points to a focus on multi-unit alterations, conversions of existing structures, or vertical expansions that increase the number of dwelling units. This aligns with its higher overall housing unit growth rate. Manhattan’s decline in permitting, despite its existing density and high property values, could indicate that large-scale alterations for unit creation are less feasible or less incentivized, perhaps due to extremely high costs, stricter regulatory hurdles for density increases, or a market saturation for certain types of development. The shift in the share of the city’s total permitting activity away from Manhattan further supports this rebalancing of development focus. Developers and contractors focused on adding new residential units through alterations should strategically prioritize Brooklyn and other outer boroughs that demonstrate similar growth trajectories. Manhattan’s residential remodeling market may be more geared towards high-end, internal renovations and upgrades of existing luxury units rather than increasing unit count, reflecting a different demand profile.

Neighborhood-Level Growth and Remodeling Potential

Within the boroughs, specific neighborhoods have experienced exceptional housing unit growth, indicating concentrated areas of intense development and significant remodeling potential. Between 2010 and 2023, Long Island City, Sunnyside, and Woodside in Queens experienced nearly 42% growth, the largest change in any neighborhood, reaching about 66,700 total units.² Downtown Brooklyn and Fort Greene followed, with more than 38% growth, reaching almost 72,000 total units.² Including housing units completed in 2024, Downtown Brooklyn and Fort Greene, as well as Williamsburg and Greenpoint, exceeded 40% growth since 2010, and Long Island City, Sunnyside, and Woodside exceeded 45% growth.² These high-growth neighborhoods represent prime micro-markets for residential remodeling, both for adding new units through conversions and for upgrading existing housing stock to meet the demands of new residents.

The exceptional housing unit growth rates in specific neighborhoods like Long Island City, Sunnyside, Woodside, Downtown Brooklyn, Fort Greene, Williamsburg, and Greenpoint, all exceeding 40% since 2010, are strong indicators of concentrated investment and development activity.² This growth, particularly in already built-up urban areas, is highly indicative of significant residential remodeling activities, including adaptive reuse of industrial or commercial buildings, subdivision of larger residential units, and extensive renovations to accommodate new populations and modern living standards. In dense urban environments, such rapid housing unit growth often cannot be achieved solely through new ground-up construction due to limited land. Instead, it typically involves extensive residential remodeling, such as converting former industrial, commercial, or institutional buildings into residential lofts or apartments; adding floors to existing residential buildings; subdividing large single-family homes or multi-family units into a greater number of smaller units; or modernizing and expanding existing units to attract new residents. These are all forms of significant alteration projects. These neighborhoods therefore represent highly concentrated opportunities for residential remodeling firms, particularly those specializing in conversions, multi-family alterations, and high-density residential upgrades. They are areas where demand for housing is robust enough to support significant investment in transforming existing structures.

Table: NYC Housing Unit Growth & Permitting Activity by Borough (2010-2024)

Borough	Total Housing Units (Jan 1, 2010)	Total Housing Units (Jan 1, 2024)	% Change (2010-2024)	Share of Total NYC Housing Units (2024)	Manhattan Permitting Levels vs. 2019 (2024)	Manhattan Share of Total Permitting Activity (2019)	Manhattan Share of Total Permitting Activity (2024)	Brooklyn Avg. Bldg Size (2023)	Brooklyn Avg. Bldg Size (2024)	Brooklyn Avg. Bldg Size % Change (2024)
Bronx	517,193	570,439	10.3%	15.3%	N/A	N/A	N/A	N/A	N/A	N/A
Brooklyn	1,001,315	1,115,828	11.4%	30.0%	N/A	N/A	N/A	24.2 units	27.3 units	13.1%
Manhattan	862,465	930,431	7.9%	25.0%	80.6%	43.6%	35.3%	N/A	N/A	N/A
Queens	855,236	919,665	7.5%	24.7%	N/A	N/A	N/A	N/A	N/A	N/A
Staten Island	178,026	185,196	4.0%	5.0%	N/A	N/A	N/A	N/A	N/A	N/A
New York City	3,414,235	3,721,599	9.0%	100.0%	N/A	N/A	N/A	N/A	N/A	N/A

Sources: ¹

VI. Outlook and Forecast for Residential Remodeling (2025-2026)

Projections Based on Current Trends

The immediate outlook for the NYC residential remodeling market is characterized by a period of adjustment and potential contraction, primarily influenced by the recent decline in new permits and residential spending, coupled with the absence of key policy incentives and ongoing economic headwinds. After 2023, the NYBC estimated overall construction spending stalled in 2024, increasing by just 0.9% to $68.9 billion, partly due to elevated interest rates.¹ In its October 2024 forecast, the NYBC expected overall spending to decrease by 6.9% in 2025 and then recover somewhat to reach $65.5 billion in 2026.¹ This forecast is for overall construction spending, but residential is a significant component, especially given that residential construction spending is estimated to have declined by 16% in 2024.¹ The decline in permits in 2023 and 2024 further indicates that a return to pre-pandemic (2010 to 2019) growth trends, which averaged 4.5% annually, has not yet occurred.¹ These projections provide a critical forward-looking perspective for strategic business planning and policy formulation, allowing stakeholders to anticipate market conditions.

The forecast for overall construction spending to decrease by 6.9% in 2025, following a 16% decline in residential spending in 2024, strongly indicates a challenging period ahead for the residential remodeling market. Given that alterations constitute 95% of permitted activity, this contraction in spending and the persistent lag in new permits suggest that the volume and value of residential remodeling work will likely decline in 2025 before a potential modest recovery in 2026. Since residential construction spending declined significantly in 2024, primarily due to the 421-a expiration, and alteration projects comprise the vast majority of permitted activity, it is a logical inference that the overall construction spending forecast will heavily influence the residential remodeling segment. The continued decline in permits, a leading indicator, and the absence of a strong policy incentive suggest that the pipeline for new, large-scale alteration projects, especially those adding units, is likely to remain subdued.

The market will likely shift towards smaller, essential, and high-ROI remodeling projects driven by individual homeowner needs to improve existing living conditions rather than large-scale development or unit creation. The high demand for housing and low vacancy rates will continue to provide a floor for remodeling activity, as homeowners prioritize improving their current residences over navigating a challenging and expensive sales market. However, the capacity of the construction industry, marked by declining employment and fewer firms, will remain a limiting factor, potentially leading to higher costs and longer project timelines. The market’s ability to recover to pre-pandemic growth trends will largely depend on the reintroduction of significant policy incentives, stabilization of material costs, and a reduction in interest rates to improve project feasibility and developer confidence.

VII. Conclusions

The New York City residential remodeling market is at a critical juncture, defined by its inherent reliance on alterations to address a severe housing shortage, yet simultaneously constrained by economic headwinds and a policy vacuum. The overwhelming dominance of alteration permits since 2010 underscores that residential remodeling is not merely a segment of the construction industry but its very core in NYC, serving as a primary mechanism for expanding and improving the city’s housing stock.

While recent years have seen record net housing unit additions, these completions largely reflect a backlog of projects initiated during a period of favorable incentives, particularly the now-expired 421-a tax abatement program. The subsequent decline in new permitting activity and the estimated sharp drop in residential construction spending in 2024 signal a significant slowdown in new project starts. This indicates that the robust housing growth observed in 2023-2024 may not be sustainable in the near term without renewed policy support.

The market’s underlying demand remains exceptionally strong, driven by critically low vacancy rates and high levels of overcrowding. This fundamental scarcity continues to incentivize homeowners to invest in their existing properties for functional expansion and quality-of-life improvements, especially as the sales market presents affordability challenges and slower transaction times. However, this demand is increasingly met with supply-side constraints, including persistently high construction material costs, elevated interest rates, and a shrinking construction workforce and firm base. These factors collectively increase project costs and reduce the feasibility of large-scale alterations aimed at increasing housing density.

Geographically, Brooklyn has emerged as a key growth engine for residential alterations and unit additions, demonstrating stronger permitting activity and increasing average building sizes, while Manhattan has seen a relative decline in its share of overall permitting. Specific neighborhoods within the outer boroughs have experienced exceptional housing unit growth, largely through intensive remodeling and adaptive reuse.

The outlook for 2025 suggests a challenging period for overall construction spending, which will inevitably impact the residential remodeling sector. Without new, substantial policy incentives to offset rising costs and stimulate investment, the market is likely to see a contraction in the volume of large-scale, unit-adding alteration projects. The focus may shift towards smaller, essential renovations driven by individual homeowner needs. Sustained growth and the ability to meet NYC’s housing goals will depend on a concerted effort to address the high cost of construction, the availability of skilled labor, and the implementation of effective, long-term housing development policies.

Works cited

1. The Construction Sector in New York City: Post-Pandemic Trends, accessed July 29, 2025, https://www.osc.ny.gov/files/reports/pdf/report-8-2026.pdf
2. Housing Production in New York City, accessed July 29, 2025, https://www.osc.ny.gov/files/reports/pdf/report-24-2025.pdf
3. 2025 Housing Supply Report – Rent Guidelines Board, accessed July 29, 2025, https://rentguidelinesboard.cityofnewyork.us/wp-content/uploads/2025/05/2025-HSR.pdf
4. New York Housing Market Report June 2025 – Rocket, accessed July 29, 2025, https://rocket.com/homes/market-reports/ny/new-york