New York City's Proposed East Midtown Rezoning and the Use of TDRs

I am very excited for the opportunity to blog on the Land Use Prof Blog over the next month.  Thanks to Matt Festa and the other editors for inviting me to do so.  As Matt mentioned in his introduction, I am a Research Fellow at NYU's Furman Center for Real Estate and Urban Policy.  For those not  familiar with the Center, we are a joint endeavor of NYU's law and public policy school and we conduct interdisciplinary legal and empirical research on land use, affordable housing, housing finance, neighborhood change, and a host of other urban issues.  Although we particularly focus on issues in New York City, we are increasingly pursuing projects in other cities and working on national affordable housing and urban policy issues.

My plan during the next month is to talk about a few interesting projects I am pursuing with the Furman Center, a few of my personal research projects, and of course to write about new land use issues. 

For this first post, I thought I would discuss one of the big land use issues on our radar here in New York, Mayor Bloomberg's recent proposal to rezone a significant part of East Midtown Manhattan, in the area around Grand Central Terminal.  Over the past decade the Bloomberg administration has dramatically altered New York City's zoning through over 100 rezonings affecting approximately one-quarter of the city's land.  This new proposal, which includes changes in the rules governing the use of the air rights/transferable development rights over Grand Central (the rights at issue in Penn Central, only a fraction of which have been sold) raises a number of interesting issues and questions.

The proposed rezoning (see the Department of City Planning study presentation) covers 78 blocks and seeks to encourage the development of more modern and taller office buildings in an area where the average office building is currently over 70 years old.  The proposal would allow new buildings substantially taller than what currently exists in the area and potentially as large as the Empire State Building.  These new buildings, which would only be allowed on sites that cover a block's full frontage on one of the area's avenues, would provide larger floor plates, fewer internal supports, and other amenities the City feels are needed for the area to stay competitive with business districts in "global competitor cities."

What is particularly interesting is that -- rather than simply upzone the area to allow these larger buildings -- developers would be able to obtain greater densities (through a higher maximum floor-area-ratio) as-of-right (meaning no required city planning approval process) only by either purchasing transferable development rights (TDRs) from nearby landmarks (the major seller being Grand Central, which has nearly two million square feet available) or by obtaining a bonus in exchange for a contribution to a City fund dedicated to area improvements.  Beyond these as-of-right FAR increases, even taller buildings (close in size to the Empire State Building) could be constructed, but would be subject to a Special Permit process, which would include a design review and would require certain public improvements to be provided. 

The proposal raises a host of issues.  If additional density is desirable in the area, why not simply rezone, rather than require the purchase of TDRs on the private market or contributions to a City fund? Is the City simply selling an upzoning or demanding an exaction from developers?  And of course, for area residents and workers and potential developers other concerns exist:  what effect would these new buildings have on the nearby subway, which already operates above capacity, and how much will it cost to buy these additional square feet of permitted development?

The proposal is also interesting because it represents the latest example of the City's creative use of transferable development rights, a tool that in New York has historically operated in a manner akin to density zoning or, in the case of landmarks, as a means of mitigating the effects of development restrictions.  These new programs in New York use TDRs instead as a means of furthering traditional and quite specific planning and land use goals in a manner more akin to how TDRs have been used in suburban and rural areas nationwide.  The City's proposal builds upon the use of TDRs in the rezoning of West Chelsea, site of the elevated High Line Park, and at Hudson Yards, an area west of Penn Station in Midtown Manhattan.  Both these districts involve the innovative use of TDRs to serve a variety of planning, preservation, and development goals.  Vicki Been and I will be exploring these themes further in a forthcoming article. 

At the Furman Center, we are also nearing completion of the first comprehensive database of TDR transactions in New York City.  We have recorded data on over 400 of these transactions between 2003 and 2011 and have begun reviewing the data to learn more about the market for TDRs in New York and how developers use them in place or in addition to other tools for increasing the size of a project.  I plan to say more about this data, our plans for it, and its relevance for thinking about TDRs in other cities in a future post.

 John Infranca