Air For Sale
By Brian Redlein
The price of air in New York City is becoming more expensive as trading of air rights is more prevalent than it’s ever been before.
Air rights are unused or excess development rights measured by square footage and transferable when zoning permits it from one buildable lot to another. This allows developers to not just tailor their blueprints to the lot they own, but annex the airspace above and around their property. This process is essentially an invisible merger of zoning lots that results in taller, colossal towers with increased profitability.
Air rights trade for 50 to 60 percent of what the earth beneath them would sell for, with one catch – once sold they are gone for good. The formation of air rights tax lots used to be fairly common and this would enable the sale of air rights to far more potential receiver sites on a given corner or block. Nowadays however, unless in an extremely rare case with a landmarked building, these deals are usually restricted to properties that share at least 8 feet of lot line. Nevertheless, air-rights trades continue to rise as they can make the difference between a marginal and a profitable project. For example, a developer of a residential property should always aim to build as high as they can because they can get the higher sales prices 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.
Before 1916, air and light were not an inalienable right of New Yorkers. Since then, zoning rules have imposed varying height restrictions on new construction. The concept of air rights, also called transferable development rights (T.D.R.’s), as a salable commodity came about after a 1961 revamping of city zoning regulations that established density quotas for every block. The restrictions are defined by the ratio of floor area to lot size; the floor-area-ratio (F.A.R.) determines a building’s permissible bulk and varies by zone.
Air rights are generally worth nothing unless a developer wants to buy them and apartment owners often don’t own unused air rights; they are more likely controlled by the co-op or condo corporation that runs the building. Supply and demand determine their worth, and transfers are complicated by a raft of zoning rules governing building height, density, setbacks and other technicalities.
Developers usually approach potential sellers after conducting a zoning analysis of potential supply sites. In some neighborhoods height and density restrictions make significant air-rights transactions unlikely.