After years of talk, the city is ready to tear down NYCHA’s Fulton and Elliott-Chelsea houses and replace them with 2,000 new apartments, an urgently needed move that could point the way forward for New York’s crumbling supply of public housing.
While city officials wait for the federal government’s green light to begin the work, the project’s price tag is rising rapidly.
It’s now expected to cost $1.9 billion to redevelop the Fulton and Elliott-Chelsea houses, according to a presentation given to Manhattan Community Board 4 in October. The price has probably risen further considering that last month the cost of iron and steel jumped by 4%, a rate the trade group Associated Builders and Contractors described Thursday as “particularly fast.” The $1.9 billion estimate marks a 25% increase over a forecast made in 2023.
Rising prices for materials are driving up costs for public works and commercial construction, forcing developers to delay or dial down their plans. The New York Building Congress expects total construction spending to decline by nearly 10% this year, to $63 billion.
Tariffs are starting to affect prices too. Associated Builders and Contractors attributed last month’s steep increase in steel prices to “tariffs providing domestic producers with increased pricing power.” The Washington-based group with 23,000 members said input costs for nonresidential projects are rising at a “far too hot” annualized rate of 9%.
The rapid escalation in costs poses a particular challenge for the New York City Housing Authority, commonly known as NYCHA, whose portfolio needs $80 billion worth of repairs.
“Rising costs underscore the importance of moving forward with urgency to address the mounting capital needs at these developments and across the entire NYCHA portfolio,” an agency spokesman said.
“This project has been kicking around since 2018,” said Sean Campion, director of housing and economic development studies at the Citizens Budget Commission. “If we started then, it would have been much faster and at a much lower cost.”
The NYCHA spokesman said the price of the Fulton and Elliott-Chelsea project has risen because asbestos and lead-abatement work is driving up the cost of demolition, while rising material and labor prices have lifted the cost of construction. Floorplans have been increased to better accommodate community spaces, apartments and mechanical systems. Costs for borrowing money to finance the project have also risen.
The U.S. Department of Housing and Urban Development didn’t respond to an email seeking comment about the approval status of the Fulton and Elliott-Chelsea work.
NYCHA hopes its plan to demolish and develop public housing in Chelsea with a combination of public and private money is a formula that can be repeated elsewhere. For its part, the city has teamed up with The Related Cos., the developer of Hudson Yards, which with other partners has committed to investing $63 million to demolish the aging public housing in Chelsea and build anew, according to the community board presentation. The balance of the project would be paid for by a combination of tax credits, bonds and land leasing.
That last source could be the key to the project and ensure demolition and redevelopment proceeds even if costs continue to rise. Because Fulton and Elliott-Chelsea sit on some of the most valuable land in NYCHA’s portfolio, if more money is needed, the city-owned ground could be leased on a long-term basis, said Campion. Related wants to develop 2,500 market-rate and 1,000 affordable apartments on the sites.
Not just NYCHA
It’s not just public housing projects that have cause for concern. Everyone in the market for lumber, sheet metal and concrete is feeling the pinch.
“Some things have come back down in price a bit, but nothing is as cheap as it was a few years ago,” said Max Koeppel, director of leasing at Koeppel Rosen, a firm that manages 20 commercial buildings in Midtown.
A few blocks north of the Fulton and Elliott-Chelsea houses, Vornado Realty Trust has been trying for nearly 20 years to develop a 2 million-square-foot office tower on the site of the former Hotel Pennsylvania, across from Madison Square Garden. Piper Sandler analyst Alexander Goldfarb estimated in a report this week that the tower would now cost $4 billion.
Getting it done at that price would require rents of at least $150 per square foot, he told Crain’s, or at least 25% higher than tenants paid to move into Hudson Yards. But he doesn’t think the issue has to do with international trade.
“Costs have soared over the last four years, and it has nothing to do with tariffs,” Goldfarb said. “That’s inflation.”
