ITS prospectus declares that One57 will redefine luxury New York living; its bland interiors are, apparently, the acme of Danish modernism. The best condominiums in the building are said to sell for $100m. Strangely, the sales pitch does not mention that this luminous skyscraper beside Central Park benefited from tax breaks generously provided by New York city. Uncertainty about the future of that handout helps to explain why the city is in the midst of a building boom.

After collapsing in 2009, demand for residential building permits has been rising steadily for five years, and lately has begun to surge (see chart). Census figures show that developers for residential buildings secured permits for nearly 42,000 units in the first six months of 2015 alone—more than double the number issued in the whole of 2014. Almost half these units are slated for Brooklyn, where land is less dear than on Manhattan.

The city needs the housing. The population has swollen to 8.4m, up nearly 3% since 2010, but the housing stock has not kept up. A tight market with few vacancies (a 3.45% rate in 2014) has been pushing up prices. The median rent paid in the city grew by 12% between 2005 and 2013, after adjusting for inflation, according to NYU’s Furman Centre on housing policy. More than 12% of all rental housing is now considered overcrowded, according to the city’s latest Housing Supply Report.

Yet growing demand does not entirely explain this surge in promised supply. Building permits in June alone rivalled the number issued in all of 2013. One factor is a flood of money coming in from overseas. Developers are benefiting from investors from China, Russia, Brazil and other countries where wealthy people are looking for a relatively safe place to park their money. New York city’s steadily rising property prices are still seen as a relative bargain when compared with London and Hong Kong, says Stuart Saft, a real-estate lawyer at Holland & Knight.

The sudden spike is largely attributable to a clause in the city’s complicated property-tax code, which taxes different types of abode at different rates, and favours homeowners at the expense of renters. In order to reduce taxes on the construction of new multi-family high-rises—which tend to be taxed at especially high rates—developers rely on something called the 421-a programme, which exempts new construction from property taxes for decades on the condition that they also build some more affordable units, and is yet to be renewed by the state legislature.

Launched in 1971 as a way to spur investment in what was then a rather decrepit city, it has since helped generate around 251,000 of the city’s 2.2m rental units, a significant share—approximately 35%—of new construction in the city, according to an analysis from the New School in New York. This includes an estimated 37,400 affordable units, mostly in Brooklyn, as of 2013. The fact that this benefit could disappear in 2016 helps explain why so many developers are rushing to break ground now. “We’ve been working day and night to get the permits in time,” says Omri Sachs of Adam America, a developer with several big projects in Brooklyn.

The 421-a scheme costs the city an estimated $1.1 billion in lost tax revenue every year, making it a pricey way to build new housing. The developers of One57 qualified for the tax-break by subsidising 66 affordable flats in the Bronx. This and other subsidies will cost the city nearly $66m in forgone property-tax revenue over ten years for this building alone, according to the Independent Budget Office (IBO).

The IBO is quick to say that properties like One57 are hardly representative of the scheme’s recipients. Most developers argue that the city’s runaway land prices and high construction costs make big rental projects unfeasible without tax breaks. The cost of buildable land below 96th Street in Manhattan has risen nearly 80% since 2011, according to Cushman & Wakefield, a real-estate firm. It then takes another three years, on average, to get something built. Charging rents high enough to make a profit is hard enough: add property taxes, which are among the highest in the country, and it becomes close to impossible.

Advocates add that in time the tax exemptions expire, ensuring new 421-a buildings increase the city’s tax base. But take away the subsidies and land values ought to fall, which would make building cheaper. Bill de Blasio, New York’s mayor and no friend of the owners of $100m apartments, wants to keep the 421-a scheme in place, with some changes. His proposals would kill the tax breaks for new condominium or co-op buildings, unless they are modestly-priced developments in the outer boroughs. He has also raised the proportion of affordable-housing units each new development must include to as much as 30%, up from as little as zero. To sweeten the deal, qualifying buildings can rely on the tax break for 35 years—ten years longer than before.

This revised 421-a plan is scheduled to take effect in January 1st 2016, but only if developers and construction unions can agree on wage-levels for workers. Otherwise the tax exemption expires at the end of the year—and with it an incentive for new rentals in the city.