The Air Up There
You can buy bottled water. You can buy plots of land.
And in New York (and some other places), you can buy air rights. But what are “air rights?”
An increasingly common component of development across NYC, “air rights” are a type of development right in real estate. The owner of a building sometimes has the right to use and develop the air rights. The public can own development rights too, as in the case of air rights over the Hudson River Park. A 2013 law passed by the New York State Legislature allows the sale of this public resource.
The NYC Department of City Planning has a very clear explanation on their website as quoted below.
Development rights generally refer to the maximum amount of floor area permissible on a zoning lot. When the actual built floor area is less than the maximum permitted floor area, the difference is referred to as “unused development rights.” Unused development rights are often described as air rights.”
“A transfer of development rights (TDR) allows for the transfer of unused development rights from one zoning lot to another in limited circumstances, usually to promote the preservation of historic buildings, open space or unique cultural resources. For such purposes, a TDR may be permitted where the transfer could not be accomplished through a zoning lot merger. In the case of a landmark building, for example, a transfer may be made by CPC special permit from the zoning lot containing the designated landmark to an adjacent zoning lot or one that is directly across a street or, for a corner lot, another corner lot on the same intersection.”
We should note that the issue of how air rights or unused development rights can be transferred is now under review by the Administration for potential modifications. According to an internal report, NYCDCP is looking for “new strategies for unlocking development density” for over 93,000,000 sq ft of development rights. The City has reached out to GVSHP and other preservation groups about this process, and we intend to participate vigorously as well as keep the public informed about any changes being contemplated and any positives or negatives we see in them.
The use of air rights could also be an important piece of a gargantuan proposal, like the current plan for the St. John’s Development site in Community Board #2, one block east from the Hudson River.
Usually air rights are purchased on the open market, so the price is easy to determine- what someone is wiling to pay in a competitive forum. When disposing of public resources there is often a a bidding a process, so the public gets the best value for its property. Whether it is at an auction of seized automobiles, or disposing of land, the state has a process for seeking bids for items worth over $15,000. In other instances they are mandated just to obtain an appraisal.
In the first of potentially many deals transferring air rights generated by Hudson River Park (unless we can secure needed restrictions), there has been an appraisal for 200,000 sq ft of air rights at $75,000,000. The widely reported offer from the developer came in at $100 million, which could seem like a great deal (the much-needed repairs of Pier 40, which the proceeds from the sale of air rights will go towards, were estimated to cost $104.5 million in 2014.)
The current appraisal for the market value of the air rights over Pier 40 made available in this deal used as an assumption that the ULURP process was successful, and that any value it added to the property was completely separate from the value of the air rights. GVSHP, and others, have raised questions about the fact that the air rights sale is part of a broader package of zoning changes the city is offering for this site that would increase its value dramatically. Thus considering the value of the air rights as only the addition of 200,000 square feet of developable space on this site seems to miss an important component of their true value.
Another aspect of an accurate appraisal of the value of air rights is that as you go higher in a building, the value of the space increases, at least for residential uses. According to Robert A. Jacobs (as quoted in the NY Times), a land-use specialist and partner at Belkin Burden Wenig & Goldman who lectures on air rights at the city bar association: “The technology available is such that if you’re a developer of a residential property you should build as high as you can, because you get the higher sales price for the higher floors. The race to accumulate light easements and air rights is tied to the mandate for these high-priced condos to offer views worthy of the purchase price.”
The two top floor penthouse units at 160 Leroy Street, across the street from the St. John’s site, are now priced at $48.5 million and $29.5 million. 160 Leroy Street will be 14 stories, while the St John’s proposal includes building up to 34 stories, and would have many more units with unobstructed Hudson River views.
As part of the analysis for 160 Leroy Street, they did account for expected differences in sales price for the height location in the building as well as the kind of views the unit would enjoy (i.e. City, River, a mix). This level of analysis seems to be a more accurate attempt to calculate the real value.
Whatever the situation, the use of “air rights” is a complicated and potentially tricky proposition. That is among the reasons why GVSHP has fought for and helped secure contextual zoning for nearly one hundred blocks of our neighborhood. By imposing height limits and building envelopes, contextual zoning for all intents and purposes almost entirely eliminates the possibility of air rights transfers.
It’s easy to think, however, that all air rights transfers are bad, and that we’d simply be better off without the process altogether.
While it’s true that in many cases air rights transfers facilitate out-of-place or in some cases even ridiculously tall or large buildings, in other cases they can help preserve low-scale buildings, landmarks, religious edifices, and other less profitable but ultimately desirable structures. In some cases, transferring air rights from such a building to another development site creates a viable means of saving it — generating income that allows the lower-scale building to remain, in perpetuity, while shifting the development from that site (where it would have resulted in the building’s demolition) to another site. Such methods have been used to help save and preserve many a New York City landmark, including Grand Central Terminal and nearly all our Broadway Theaters.
Of course then the question becomes when, how, and to where are those air rights moved, and is it worth the trade-off? This seems to be exactly the question the City is considering re-opening. And we intend to be all over it. Stay tuned.