Property access and zoning rules could derail universal care expansion despite state funding
In a city where daycare costs an average of $26,000 a year, it’s little wonder that a candidate promising universal childcare stormed to an election victory last year. But even after Governor Kathy Hochul and Mayor Zohran Mamdani last week announced a $4.5 billion plan to bring that vision closer to reality, one critical issue remains unsolved: where those kids will go. The announcement came a month after the state revived and expanded New York City’s childcare center property tax abatement, an incentive that has gone largely untouched by landlords since launching in 2023. “There’s a lot of new facilities, and they don’t have the abatement,” said Ben Williams, a property tax expert at Rosenberg & Estis. “Why wouldn’t you apply for the abatement if the city is going to give an abatement? Landlords just don’t know about it.”
The Space Problem
Childcare facilities are unevenly distributed throughout the five boroughs. Although there is a surplus of more than 10,000 seats for three-year-olds, parents commonly find themselves on yearlong waitlists. In the 2023-2024 school year, Bath Beach in Brooklyn had 633 applicants for 234 seats, while the Upper East Side had hundreds of empty seats. There is no central data source for newly permitted or open facilities, nor is there a way for brokers to easily pinpoint community space for childcare centers. That can cause operators to search for pricey retail space, forcing up tuition costs beyond reach of many families. Demand will likely only increase under the city’s universal childcare push.
Real Estate Economics
To meet universal demand, the city would need 68,500 seats for three-year-olds in preschool, known as 3-K, according to a 2025 report by the Office of the NYC Comptroller. That is 16,000 more seats than what currently exists. Plus, approximately 96,000 three-K and pre-K slots don’t have full-day or full-year options, another issue that may need to be addressed. The five-year property tax abatement enacted last year aims to increase the number of seats citywide. Landlords that create or expand facilities can offset up to $350,000 in taxes regardless of location. Those in childcare desertsareas where there is a disproportionate ratio of children under five to available seatscan receive as much as $750,000.
Discovery Problem, Not Financial
The change is a major increase from existing limits. Under the previous program, there were only 47 beneficiaries with roughly $1 million in abatements for creation of approximately 3,500 childcare seats. But the issue goes beyond funding. Childcare facilities are treated as community facility uses under zoning laws, and for those serving younger children, the space must be on the ground floor. Sourcing eligible locations is the biggest headache for operators. “It’s not a financial problem, in my opinion. It’s a discovery problem,” said Nathaniel Mallon, co-founder of Verada brokerage. His firm launched a petition calling for the Department of Buildings to create ways to find community facility space to make the process easier. Mallon has met with officials from the Department of Buildings and City Planning, asking for a search filter on DOB Now, the city’s real estate platform for building permits and applications. “Unless you raise your tuition to over $50,000 a year, you’re pretty much capped at paying $70 or $75 a foot,” Mallon said. “In North Brooklyn, Manhattan and Western Queens, the average retail rent there is higher. You just can’t make it work.”
Operator Stories
Buckle My Shoe Preschool has operated in buildings owned by GFP Real Estate for more than 30 years, demonstrating that long-term partnerships work. In 2023, it opened a 7,000-square-foot daycare at the base of an office building in Chelsea. “In order to start a school, it is very cost-prohibitive,” said Buckle My Shoe Executive Director Linda Ensko. “You have to wait, and the waiting is not as much with the Health Department as with the Buildings Department.” See Department of Buildings resources and City Planning zoning guidance for property owners exploring childcare conversions and compliance requirements.
