New York City is set to rewrite the script on urban living as the iconic 5 Times Square tower, once home to corporate giant Ernst & Young, prepares for a dramatic transformation into residential housing. The 38-story office skyscraper will be repurposed into 1,250 residential units, with a quarter reserved as permanently affordable; a bold move to combat Manhattan’s deepening housing crisis.
On May 22, the board of Empire State Development unanimously approved the buildings repositioning as residential housing, a number of outlets reported.
While 37,000 square feet of the tower will be used for retail purposes, over 900,000 square feet will be used to develop 1,050 studio apartments and 200 one-bedroom apartments.
“Confronting a decades-long housing crisis requires creating new housing in every neighborhood at an accelerated pace — even here at the ‘Crossroad of the World’ in Times Square,” the City’s mayor, Eric Adams, said in a statement.
Twenty-five percent of the units will be put aside as permanently affordable, meaning New Yorkers in the area who earn up to 80 percent of the areas median income will enjoy preferential rental rates. Designating this many units as affordable housing will also allow the developers to take advantage of a generous office-to-housing tax incentive.
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Construction is scheduled to begin by the end of this year and the first phase is expected to be complete sometime in 2027, officials say.
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Transforming underutilized office space
The move is part of a growing trend to reimagine office space largely left vacant following the COVID-19 pandemic.
Currently, the ground lease on the tower is held by RXR, and the City owns the tower.
RXR will be developing the site in partnership with Apollo Global Management and SL Green, Pincus reported late last year.
In a statement, RXR Chairman and CEO, Scott Rechler, said, “The City and State of New York have shown that, through innovative public-private partnerships, we can transform underutilized office spaces into a thriving residential community, helping to address New York’s pressing housing crisis.”
While the building is adorned with flashy signs typical of Times Square, behind the signs sits empty offices. The building is nearly 80 percent vacant as of today, city officials say.
Constructed in 2002 as the official headquarters of Ernst & Young, the accounting firm vacated the space in 2022, moving its operations to a property on the West Side.
The conversion represents yet another office tower in the BIg Apple to be converted into residential housing.
Another project at 25 Water Street, the former home of JPMorgan Chase, the National Enquirer and the New York Daily News started redevelopment in 2023 and is expected to be complete in November this year.
In addition, Goldman Sach’s former Wall Street headquarters, located at 55 Broad Street, is expected to be completed by the middle of this year and will be home to 571 luxury rental apartments.
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New York’s housing crisis
The most recent vacancy data says that citywide the rental vacancy rate was around 1.4 percent, with rent-stabilized units even lower at 0.98 percent, an indication of an extremely tight housing market.
The low vacancy rates have contributed to soaring rent costs in the city, with the median rent in the BIg Apple clocking in at around $3,500 per month, making the city unaffordable for many residents.
In New York, nearly 30 percent of renters are considered severely rent-burdened, spending over half of their income on housing.
Compounding the problem is a mismatch between jobs and housing. Over the past decade over 1.2 million jobs have been created in the Big Apple, however only 400,000 new homes were built, leading to immense competition for housing, according to state data.
To blame is the underproduction of housing, stagnant wages, an aging housing stock and policy and regulatory challenges.
State authorities say, ”Restrictive zoning laws, red tape, and lengthy approvals processes make building new housing more difficult.”
