The three types of Development Rights Transfer

Popular perception of New York paints the city as a land of towering skyscrapers and sleek, shiny offices, but a quick walk through a neighborhood like Chelsea quickly dispels that notion.  Most of the buildings there are stout, short, even tiny compared to the skyscrapers of the Financial District.  At the time many of them were built, New York City’s zoning code was far more The comparatively tiny buildings are that size in part due to New York City’s Zoning Resolution, which dictates the square footage of a building. 

 However, not all buildings in New York use the total square footage allotted to them by the Zoning Resolution for a variety of reasons.   Under the Zoning Resolution, these buildings have what’s called “unused development rights,” which they can transfer to other, nearby buildings under special circumstances.

 Zoning Lots Mergers
In a zoning lot merger, two or more adjacent but separate lots can group properties together and be considered a single lot for zoning purposes.  This way, the “unused space” one building has can be used towards another building on the same, new lot.  This transfer is known as “as-of-right,” meaning that no city approval is required as long as the landowners follow certain prescribed transaction procedures and provide proper documentation.  It’s important to note, however, that zoning lot mergers can only take place between adjacent lots.

Landmark Transfers
Certain buildings throughout the city are designated as landmarks, forever prohibiting them from building upward or making any sort of substantial architectural changes at all.  As a result, unlike other buildings, they can never make use of future zoning code changes allowing for larger square footage.  To capitalize on what would otherwise be unused development rights, these buildings can sell the rights away to other, nearby buildings.  Unlike zoning merger transfers, landmark transfers can sell rights not only to adjacent lots, but to lots across the street and across intersections.

Given the special status of landmark buildings, it only follows that this type of rights transfer is more heavily regulated.  Landmark building owners wishing to sell unused development rights must agree to maintain the landmark as is and obtain a permit from the City Planning Commission, which must evaluate the proposal through the long and cumbersome Uniform Land Use Review Procedure (ULURP).   As a result of the strict government regulations and stipulations for landmark transfers, the buying market for landmarks’ unused rights is smaller than for regular zoning merger transfers.

 Special Purpose District Transfers
In order to preserve areas that serve a certain purpose or possess particular unique characteristics, the City designates certain neighborhoods as “Special Purpose Districts.”  These neighborhoods are subject to regulations regarding permissible types of industries and building styles.   For instance, in order to preserve the countless venues that gave Midtown’s famous “Theatre District” its name, demolition of theatres in the Special Midtown District approval by a City Planning Commission.

Unlike the two previously mentioned transfer processes, unused development rights in Special Purpose Districts can be transferred not only to buildings directly nearby, but to any property within a designated zone.  The towering skyscrapers planned in one of Manhattan’s biggest development projects in recent years, the Hudson Yards Development Project, have benefited massively from buying the unused development rights in the Special West Chelsea District.