Brooklyn has been the center of the New York City real estate development story for so long that the question many developers now face is whether the borough still makes sense for ground-up multifamily. Land prices in the established neighborhoods — Williamsburg, DUMBO, Cobble Hill, Park Slope — have risen to levels that are difficult to underwrite against construction costs that have also risen substantially since the early years of the borough's transformation. But Brooklyn is a large and varied place, and the neighborhoods where multifamily development still makes sense are not the ones that generate the most press coverage.
What follows is a developer's-eye view of where Brooklyn multifamily is still feasible, what costs look like on the ground, and what the financing and investor market is currently requiring to fund these projects.
Where ground-up multifamily still pencils in Brooklyn.
The parts of Brooklyn where new multifamily development can still be underwritten to a reasonable return are, broadly speaking, the parts that are not yet fully discovered. East New York, Canarsie, Flatlands, and New Lots — the southeast quadrant of the borough — have land prices that remain meaningfully lower than North Brooklyn or the established brownstone neighborhoods, active transit access (the A, C, J, and Z trains all serve this corridor), and real demand for new rental product driven by population density and limited new housing supply over the past decade.
Ridgewood, which sits on the Brooklyn-Queens border and is served by the M train with direct access to Midtown, has been an area of active development activity over the past five years. Land costs in Ridgewood are higher than in East New York but still meaningfully lower than in Bushwick or Bed-Stuy, and the neighborhood's existing mixed residential and light industrial character has historically allowed a variety of project types. Tahoe Development Group's Fresh Pond Road project in Ridgewood represents the kind of neighborhood-scale multifamily development that can still be executed successfully in this part of the market.
Flatbush and Crown Heights, central Brooklyn neighborhoods with deep residential roots and strong subway connectivity, have also sustained development activity at the smaller end of the market — four- to twelve-unit buildings that take advantage of existing R-6 and R-7 zoning on the avenue corridors. These are not large projects, but they're projects where a developer with good subcontractor relationships and disciplined execution can still achieve an acceptable margin.
What construction costs actually look like today.
Hard construction costs for ground-up multifamily in Brooklyn currently run $290 to $400 per square foot of finished building area, depending on the finish level, the building's structural system, and the site. This is not the $200 per square foot that some deals were underwritten to in 2015, and any project that assumes otherwise will encounter a painful correction at the contractor pricing stage.
The largest drivers of cost variability are foundation conditions and mechanical complexity. Brooklyn's geological profile is inconsistent — parts of Flatbush and East Flatbush have poor bearing soil that requires deeper or more expensive foundation systems, while parts of Ridgewood and Crown Heights sit on more favorable conditions. The only way to know before you commit is to do a soil boring, which costs $3,000 to $6,000 and is worth treating as part of acquisition due diligence rather than post-closing design. A foundation cost overrun of $100,000 to $200,000 on a smaller multifamily project erases most of the project's margin and is entirely avoidable.
Mechanical, electrical, and plumbing systems have become a larger share of total construction cost over the past several years as energy code requirements have increased and as heat pump and all-electric systems — which are increasingly required or strongly incentivized under New York City's Local Law 97 compliance framework — add upfront cost relative to traditional gas-fired systems. Factor this in during design development, not at bid time.
What lenders and investors currently require.
Construction lending for Brooklyn multifamily is available from regional banks and community development lenders, but the underwriting has gotten more conservative since the rate environment shifted in 2022 and 2023. Lenders today are looking at debt service coverage on the stabilized rent roll with meaningful haircuts to projected rents, they're applying vacancy rates that reflect actual market conditions rather than optimistic pro forma assumptions, and they're requiring equity contributions in the range of 30 to 35 percent of total project cost on new construction deals.
That equity requirement, combined with current land prices and construction costs, means that the projects getting financed are either deeply experienced developers with strong track records, or projects with subsidized components (affordable housing set-asides, LIHTC equity, or other public funding) that improve the equity stack. Speculative multifamily development — a first-time developer buying land, hiring an architect, and trying to get a construction loan on a pro forma — is not finding receptive lenders in the current environment. Experience and relationships matter more than they did in a period of cheaper and more available capital.
Accredited investors in Brooklyn multifamily projects currently expect equity returns in the range of 14 to 18 percent IRR for ground-up development, reflecting both the genuine risk of the construction period and the higher cost of capital in the current environment. Projects that were underwritten to 12 percent returns in 2020 are being re-underwritten at those levels or declined. The projects that attract capital at reasonable terms today are the ones where the development team has a specific track record in the submarket and a realistic, conservative underwriting model.
What experienced Brooklyn developers know that others don't.
Subcontractor relationships in Brooklyn are highly localized, and the difference between a well-connected developer and an unfamiliar one can easily represent 8 to 12 percent of construction cost in subcontractor pricing. Contractors who have worked repeatedly with a developer trust the relationship and price accordingly. A developer going to market for the first time in a new submarket, with incomplete drawings and a tight timeline, will consistently see higher prices from every trade.
Community board dynamics in Brooklyn also require attention. Brooklyn's community boards vary significantly in their posture toward development — some are actively supportive of new housing, others are deeply skeptical of anything that displaces existing character or attracts market-rate tenants at the expense of long-term residents. Understanding which community board your project falls under, what their recent history with similar projects has been, and how to engage them productively before the project enters the formal approval process is something you either know from having worked in the borough or learn at some expense.
Tahoe Development Group has been developing residential properties across Brooklyn and the wider New York City market since 1998. If you're working through a Brooklyn multifamily project and want a frank conversation about whether it makes sense and what it will take to execute, reach out directly.
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