Phyllis Hattis laments the impending loss of direct sunlight on her Picasso. Casting a literal shadow on her apartment is a proposed 90-storey condominium tower, reaching almost 1,000 feet into the sky. “To see this painting without light and without air is to lose it,” she explained in a recent article on Bloomberg Business.
Almost every Manhattanite has feared what would happen if a new construction blocked the sun or a view from a cherished window. And with rampant development taking place, this concern is more warranted than ever. How do developers seem to squeeze ever more building onto small lots? The key to understanding is simple:
air rights. By Michelle ColmanMonday, December 18, 2017
New York City has nary an inch of unoccupied land to build upon, which is why it is jam-packed with high-rise buildings and towering skyscrapers jutting into the sky. That’s why NYC’s vertical real estate space is just as precious as the land beneath it, spawning a different kind of real estate grab known as air rights.
One of the most critical factors regulating the height of a new development is a building’s floor-to-area ratio (FAR). FAR is the maximum number of square feet that can be built on a site relative to the square footage of the lot. A building’s FAR, however, can vary depending on the location of the lot (i.e., its zoning district or whether it faces a wide street or narrow street), the use of the building (commercial, residential, community or manufacturing) and whether the building offers a benefit to the public (i.e., public outdoor space or affordable housing units). In New York City, air is just as costly and dear as land
So what are air rights and how can a developer get them?
It all began with the 1797 Slate vs. David court decision that involved two stolen barrels of herrings buried 15 feet under the accused’s yard. The court determined that anything above or below the soil belonged to the possessor of the soil. This legal concept of air rights was based in the Latin phrase Cuius est solum, eius est usque ad caelum et ad inferos, "For whoever owns the soil, it is theirs up to Heaven and down to Hell." In the early 1900s, after the invention of airplanes and increase of air traffic, the space above the soil was amended to “within the range of actual occupation.”
Every lot in Manhattan has a maximum density restriction. Air rights, sometimes referred to as Transferable Development Rights (TDRs), allow landowners to sell any unused development rights to adjacent lots. The new owner of those air rights can build the greater density desired and exceed their height and setback requirements.
The density restrictions, determined by the zoning laws, are known as Floor Area Ratio (FAR), which is the ratio of floor area to lot size. Nyc.gov gives the example that on a 10,000 square foot zoning lot in a district with a maximum FAR of 1.0, the floor area on the zoning lot cannot exceed 10,000 square feet. If a building has a 20,000 square foot zoning lot in a zoning district with a maximum FAR of 5, it cannot exceed 100,000 square feet of floor area. Illustration credit NYC gov
As anyone who’s ever walked through SoHo on a Saturday knows, NYC is one of the densest and most expensive cities in the world. It should come as no surprise then, that air can be just as coveted and costly as land. As a result, owning and selling air rights can be a hugely lucrative process. There are three primary ways this transfer process occurs. (Source: Michael Tapp via Flickr Creative Commons)
Over the past 55 years, New York City has developed a system of transferring air rights in order to achieve both broad and specific urban planning goals. Broadly speaking, real estate developers are motivated to build tall because higher floor units command higher prices since buyers are willing to pay a premium for views and light.(Source: Henning Klokkersan via Flickr Creative Commons)
AVERAGE PRICE PER SQUARE FOOT
Gary Barnett, the President and Founder of Extell Development Corporation, famously took 15 years to assemble the property and air rights for the One57, the slender 90-story tower on 57th street, which is quickly becoming known as Billionaire’s Row. Reports suggest that Extell has several tens of thousands of leftover air rights from One57 to build on another site on the block.
The Municipal Arts Society of New York’s (MAS) map, titled “Accidental Skyline,” shows all available air rights in Manhattan. According to MAS “The thought process behind the project was that by raising awareness, neighborhood residents could decide to take a more active role, if they so choose, in the approval process that a potential developer would need to go through,” since most air rights transactions are private transactions between developers and property owners.
The average price per square foot for condos in Manhattan last month was $1,781. That’s finished condos that you can move into. How much is air? According to the Department of City Planning, Manhattan air rights average $225 per square foot citywide. (To put the price of NYC air rights in perspective, the national housing average price per square foot is $64.44, according to the US Census Bureau. So, yes, NYC air is more than three times as expensive than a house in most of the country.)
And these prices have been rising fast: Tenantwise, a New York real-estate services company, says that air rights rose 47 percent in one year to 2013. M. Myers Mermel, chief executive of Tenantwise, told the Wall Street Journal: “Air rights have matured into an indispensable financial component to a number of large developments. In some cases, developers have paid the same price a square foot for air rights as they did to buy the land… [air rights] are the top revenue producers in any building because they become the new upper floors.” If these prices leave you gasping, you might need to look for something other than air (rights) to breathe.
A look at the religious institutions lobbying to get inside the pearly gates of a rezoned Midtown East and cash in on air rights — and their spiritual counterparts who’ve already sealed deals around NYC
An example of air rights in use: a high-rise building extends over a four-story building in Manhattan Air rights are the property interest in the "space" above the earth's surface. Generally speaking, owning, or renting, land or a building includes the right to use and develop the space above the land without interference by others. This legal concept is encoded in the Latin phrase Cuius est solum, eius est usque ad coelum et ad inferos ("For whoever owns the soil, it is theirs up to Heaven and down to Hell."), which appears in medieval Roman law and is credited to 13th century glossator Accursius; it was notably popularized in common law in Commentaries on the Laws of England (1766) by William Blackstone; see origins of phrase for details.
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Assemblage is the process of joining several parcels to form a larger parcel; the resulting increase in value is called plottage.
Assemblage — The combining of two or more adjoining lots into one large tract. This is usually done to increase the value of the individual lots because a larger building capable of producing a larger net return may be erected on the larger parcel. The resulting added value is called plottage value. The developer often makes use of option contracts to tie up the right to purchase the desired adjacent parcels. Care must be taken through exact surveys to avoid the creation of gaps or strips between the acquired parcels through faulty legal descriptions.
Plottage value — The increased usability and value resulting from the combining or consolidating of adjacent lots into one larger lot. Plottage is also referred to as assemblage, although the latter is more often used to describe the process of consolidation. The term is often used in eminent domain matters to designate the added value given to lots that are contiguous. Jul 10,2014 / By John Reilly / 1,639 Comments
Assemblage can increase the value of the real estate such that the new plot is worth more than the sum of its parts. This can have property tax implications. Farlex Financial Dictionary.
This lesson will discuss assemblage in real estate. A definition will be provided along with a discussion of how appraisal of property would be conducted. Upon completion, the reader should have a good understanding of this concept in real estate.
When dealing with assemblage in real estate, the appraisal process is a little different than normal. Appraisers may be faced with the task of figuring out what a property is worth when it is created from two smaller properties. Clients, like Meagan, may be willing to pay more than the properties were appraised for when separated. What is the property actually worth? The buyer is likely to be willing to pay more until they reach a point where assemblage of the tracts isn't feasible. This is a premium is known as assemblage value.Assemblage value is what appraisers will take into consideration when determining the value of the properties together.
Assemblage presents a unique development strategy that can greatly benefit both buyers and sellers if proper market analysis is conducted. The basic idea involves pursuing an area of land that has more value than current occupants realize. Interested parties identify two or more adjacent lots that have the potential to be combined. The larger combined lot resulting from this combination provides many more development opportunities and increased land value. Assemblage developments can either be for commercial or residential property development uses.
A simple assemblage scenario involves two adjacent lots. Both lots could be similar in size – 90 feet wide, for example. They could both be priced at $300,000 independently. They could both contain two small homes next to a multi-family building. The highest and best use for the two lots that the houses sit on is likely not being met. Their combined potential lot size of 180 feet wide is much more appealing for development. Because of this, the value could potentially be greater than $600,000 after they are combined since the assemblage dramatically increases the development possibilities for this space. A person interested in an assemblage deal would approach the two small house owners pitching an idea to purchase both pieces of land. If the area that the houses are in is predominantly a rental area, then it could make sense to develop a multi-family development on those lots.
The term plottage is used to describe the result of an assemblage development. Plottage is the new value created by the assemblage deal.
Combining two or more parcels of land to be sold as one large tract. An assemblage often commands higher price than the total price of two smaller individual parcels. ... The price would be a lot higher because it was an assemblage and that meant that there would be more land sold.
The concept of assemblage is based on combining parcels for the purpose of establishing the highest and best use of a single parcel. Using the assemblage theory can significantly alter the outcome of an appraisal. Even if there are different property owners, the assemblage process helps demonstrate that the combination ...
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