Federal pause snarls Gateway tunnel funding and pressures NYC construction

New York City, October 3, 2025

News Summary

Federal officials have paused disbursements tied to the $16 billion Gateway tunnel amid budget disputes and an administrative review of DEI-related spending, leaving billions held and threatening schedules and thousands of construction jobs. Work continues in the short term but mounting uncertainty could delay the Hudson River rail link and ripple through procurement and hiring. Separately, a 20-story Bronx public housing tower partially collapsed after a suspected boiler explosion with no reported injuries. New York City’s construction sector remains below pre-pandemic employment levels and Manhattan is the world’s most expensive building market, adding cost and timeline pressure.

Federal pause clouds major Hudson River tunnel, Bronx housing damaged by boiler blast, and city construction faces slow recovery while Manhattan remains the world’s costliest building market

Key developments: Federal action has paused disbursements for a major tunnel project under the Hudson River, creating immediate uncertainty for a $16 billion project and for thousands of construction jobs and commuters across the Northeast. In the Bronx, a likely boiler explosion led to the partial collapse of a 20-story public housing building’s chimney but did not cause injuries. At the same time, New York City’s construction employment remains below pre-pandemic levels and Manhattan continues to be the planet’s most expensive construction market.

Gateway tunnel funding pause and immediate effect

Federal officials announced a pause in disbursements tied to a review of funding and compliance that has put the future of the Gateway tunnel project into uncertainty. The Gateway tunnel project has an estimated cost of $16 billion. The pause stems from a federal review tied to broader budget disputes and recent guidance about program compliance. It is unclear how long the pause will last or what the long-term effect will be on work already under way.

Work on the tunnel was continuing for the short term because of the way it is budgeted, but construction leaders warned that even the threat of funding being pulled is another obstacle for a project that has been in the works for decades and is already under construction. The federal Department of Transportation had previously set aside $700 million in a budget proposal earlier in the year for the tunnel. A bi-state agency overseeing the work described the development as a pause in disbursements and said it remains focused on keeping the project on scope, schedule, and budget.

Local and political reactions, and project history

State leaders expressed confidence that the project should be kept moving and described it as something that should be above politics. Federal comments about withholding funds have prompted concerns that firms may change hiring and materials-ordering decisions if the long-term status of the funding is threatened. Industry leaders cautioned that such changes could ripple through hiring, supply chains, and timelines for related projects across the region.

The new tunnel is intended to supplement an existing Hudson River tube that is more than a century old and which slows trains between New York and New Jersey and impedes high-speed rail rollout on the Northeast Corridor. The idea has a long history of fits and starts, including a ceremonial groundbreaking in 2009 and setbacks when state cooperation was withdrawn in earlier years. The project was revived after major storm damage to the old tunnel and later benefited from large federal allocations in recent administrations.

Bronx NYCHA partial collapse after likely boiler explosion

In the Bronx, a likely boiler explosion occurred during a routine test of a building’s boiler room and caused the brick chimney running the 20-story length of the building to crumble at about 8:10 a.m. The partial collapse affected a residential corner of a building in the Mayor John Purroy Mitchel Houses complex. There were no injuries or fatalities reported.

Gas service for all 11 structures in the Mitchel Houses complex was turned off following the incident. Inspectors examined the foundation, went door-to-door in the damaged building to ensure apartments were structurally sound, and planned demolition on remaining parts of the chimney to access the basement and the boiler room. Officials noted that the building complex was built in 1966 and that capital needs across the public housing portfolio are substantial. The Mitchel complex is projected to need nearly $717.5 million in changes through 2044, with building heating renovations on the list costing almost $116.6 million over the next two decades.

Construction employment still lagging, with uneven recovery

New York City’s construction industry remains smaller than it was before the pandemic. In 2024 the city averaged 143,100 construction jobs, an 11% decrease from 161,300 jobs in 2019. The slower recovery in the city has left the state 4% below its 2019 construction employment levels. The main factor in sluggish hiring is lagging demand for non-residential construction; nonresidential spending was $22.2 billion in 2023, which is 3% lower than in 2019, while residential spending surpassed 2019 levels by 2023, reaching $22.8 billion.

The sector shows pockets of strength in remodeling and multifamily incentives, and several upcoming megaprojects and transit capital plans are expected to create jobs. The Metropolitan Transportation Authority has a $68 billion capital plan for 2025 through 2029 that will drive station accessibility work, bridge and tunnel repairs, and new transit starts.

Manhattan as the world’s costliest construction market

A global consultancy found that New York City is the most expensive construction market on the planet, with cost per square foot for new buildings averaging $534. Comparable costs cited include $512 per square foot in San Francisco, $500 in London, $445 in Los Angeles, $431 in Tokyo, and $296 in Amsterdam. Industry factors cited include high land and financing costs, premium labor and unionization, specialized building standards, difficult permitting, and a marketplace that favors highly customized marquee projects.

Labor costs are high in the New York metro area, with an average hourly wage figure in a recent survey higher than the national average. Prevailing wage rules, project labor agreements, and Local Law 97 sustainability mandates add to specialty labor and materials demand. An aging local workforce and constrained immigration are additional headwinds for labor supply.

Software investment and industry events

Private-equity firms are investing in the construction software subsector, with firms such as KKR, GrowthCurve and Main Capital among those making investments. Industry events are scheduled in coming years, including an event on October 29-30, 2025 at Convene Brookfield Place, 225 Liberty, New York, and another on February 22-25, 2026 at JW Marriott, Orlando Grande Lakes.

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Outlook and next steps

The pause in tunnel disbursements and the boiler incident are reminders of how funding and aging infrastructure challenges intersect with safety and jobs in the construction sector. Industry groups and city officials are monitoring developments and weighing potential impacts on hiring, procurement, and project timelines. Key variables to watch include whether the federal pause is lifted, the outcome of structural inspections and repairs in the Bronx, and the pace of nonresidential project starts as interest rates and public subsidies evolve.

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Additional Resources

• Politico: Federal pause snarls funding for Gateway tunnel
• Wikipedia: Gateway Program
• ENR: Partial apartment building collapse in NYC possibly triggered by boiler
• Google News: Bronx Mitchel Houses boiler explosion
• Crain’s New York: NYC construction jobs still below pre-pandemic levels
• Encyclopaedia Britannica: New York City construction (search)
• Commercial Observer: New York City construction labor costs 2025
• Google Scholar: Manhattan construction costs
• Syracuse.com: New York’s ban on gas equipment in new homes is coming
• Google Search: New York ban on gas in new homes

Author: Construction TX News

TEXAS STAFF WRITER The TEXAS STAFF WRITER represents the experienced team at constructiontxnews.com, your go-to source for actionable local news and information in Texas and beyond. Specializing in "news you can use," we cover essential topics like product reviews for personal and business needs, local business directories, politics, real estate trends, neighborhood insights, and state news affecting the area—with deep expertise drawn from years of dedicated reporting and strong community input, including local press releases and business updates. We deliver top reporting on high-value events such as the Texas Construction Expo, major infrastructure unveilings, and advancements in construction technology showcases. Our coverage extends to key organizations like the Associated General Contractors of Texas and the Texas Building Branch, plus leading businesses in construction and real estate that power the local economy such as Austin Commercial and CMiC Global. As part of the broader network, including constructioncanews.com, constructionnynews.com, and constructionflnews.com, we provide comprehensive, credible insights into the dynamic construction landscape across multiple states.