Out of Thin Air
How ‘air rights’ have transformed New York’s skyline
“How can you buy or sell the sky?” That was the question Chief Seattle, leader of the Duwamish Native American tribe, asked after white settlers sought to purchase his tribe’s land as part of America’s westward expansion during the 19th century.
Seattle may have been trying to skewer the idea of property rights by presenting, in his view, a patently ridiculous situation. After all, how could one buy land, if one could not buy the sky? But he would have never anticipated that a century and a half later, the empty spaces above buildings would actually be bought and sold among developers.
Today, that commodity is referred to as air rights.
Air rights have transformed the New York skyline and contributed to the rise of skyscrapers like the 90-story One57, which looks over Central Park. Many of these pencil-thin buildings tower over their smaller siblings, sticking out like a sore thumb and submerging pedestrians in their shadow.
But how do air rights work?
Air rights are simply the unused space above a building. For example, each building in New York has a height limit, which differs from district to district. If the building falls short of this ceiling, the owner of the property collects the difference left over as air rights.
With the exorbitant premium placed on space in saturated cities like New York, developers often have no choice but to build upwards. Zoning regulations however have prevented the construction of super-tall towers. To bypass height restrictions, land developers need to amass a large number of air rights. They buy up multiple properties in a targeted area and then transfer all of the air rights from these properties to a nearby building they are hoping to build on top of. This allows the developer to erect lucrative high-rise condominiums with breathtaking views. As a result, air rights are in great demand among those looking to profit from the recent influx of nabobs, tycoons and magnates in New York, many of whom want to park their wealth in pricy real estate.
But the lofty value of air rights is only a modern-era phenomenon.
Before the 20th century, real estate lawyers subscribed to the Common Law principle “Culus Est Solum, Cius Est Usque Ad Coelom.” This was a fancy way of saying that anybody who owned the ground, also owned the entire column of air above it.
The age of unrestricted ownership, however, came to a close after planes began to soar across the sky. The amount of air space allotted for each building fell, usually to 500 feet, to prevent errant aircraft colliding into tall towers. It is only after height restrictions came into place that air rights became difficult to come by, and thus highly sought after.
Nowadays, air rights can fetch up to $600 per square feet, depending on the neighborhood. In comparison, the average price per square feet of a residential home is around $1,400 based on early 2015 figures. Unsurprisingly, fierce competition has led to a burgeoning market for legal deeds to such air rights.
A memo in 2006 revealed that one of the reasons Tishman Speyer, the former owner of Stuyvesant Town, acquired the housing complex was to secure its air rights, which is now valued at a whopping $350 million. A fact which did not escape the notice of its more recent owners, Blackrock, a private equity fund, according to the Wall Street Journal. Though unable to build on top of existing apartment buildings in Stuyvesant Town, Blackrock’s deal with De Blasio’s administration enabled it to sell the air rights to other developers in the city.
So the next time you see that local eyesore screeching out of the skyline, try to remember that it came out of nothing but air.
