Op-Ed | How zoning adds value

Zoning can be used in many ways by owners, investors and developers to add value to their properties.
First, as we have previously discussed, there are discretionary approvals available through the Uniform Land Use Review Procedure (ULURP).  One type of discretionary approval through ULURP is a rezoning, which would change the property’s zoning district designation.  A rezoning could increase the amount of buildable square footage a property is allowed, and/or   change the allowed use altogether, for example, from commercial or industrial to residential.
Land use counsel would study the surrounding area to investigate if the property is a good candidate for a rezoning, for instance, if there are nearby higher density zoning districts, taller buildings, access to public transportation, location on a wide street, and/or similar uses, among other things.
Another type of approval through ULURP is a special permit.  There are many special permits in the zoning resolution that could allow for a modification of the use, parking, and bulk regulations.  Each special permit has specific findings that the city planning commission must make in order to grant the relief requested – special permits are subject to “call up” by the New York City Council, which makes them subject to council approval as well.
There are other special permits in the zoning resolution that are not subject to ULURP, but are under the jurisdiction of the New York City Board of Standards and Appeals (BSA), which are also discretionary approvals.  In either case, land use counsel would investigate whether the project could potentially meet the required findings for the specific special permit.
Another discretionary action by the BSA is a variance.  A variance allows a deviation from the zoning resolution.  The BSA has jurisdiction once the city buildings department issues an objection to an application (i.e., the objection can be appealed to the BSA).  The primary standard for granting a variance is that there are unique physical conditions on the property, and that as a result of such unique physical conditions, there is no possibility of a reasonable return without the variance.  Making a variance case is a complex process involving studies of the property’s uniqueness, financial analyses, and potentially other studies such as engineering or geotechnical reports.
Discretionary actions are not the only way zoning can add value.  There are “as-of-right,” means by which a property’s value could be enhanced.  For instance, through a development rights or “air rights” transaction.  Zoning generally allows unused development rights to be transferred between contiguous properties.  For instance, if your neighbor’s property is allowed to be built with 100,000 square feet of floor area and their building has 75,000 square feet, then the unused 25,000 square feet may be able to be transferred to your property, so you can build 25,000 square feet more than you otherwise could.
Acquiring such unused development rights is “as-of-right” and requires no discretionary approvals.  It is done through a business transaction with the neighbor, where a price per square foot is negotiated and agreed to, and then the parties enter into a purchase and sale contract and then proceed to closing.  The most important closing document is a Zoning Lot Development Agreement, generally known as a “ZLDA.”  Transferring development rights require that the properties be merged into a single “zoning lot” (the tax lots of the properties themselves remain separate). A ZLDA sets forth the rights and obligations of the parties with respect to the merged zoning lot, including allocating development rights between the parties and, if desired, providing for light and air or other easements.
Other non-discretionary means to obtain additional development rights or “bonuses” for a property are through “certifications.”  The most common bonus certification is for a plaza, which is available in certain zoning districts for properties meeting specific requirements.  If a plaza is provided in accordance with the standards in the zoning resolution, through a certification from the chair of the City Planning Commission (CPC), the amount of square footage that could be built on a property could be increased by up to 20%.  This entails a process with city planning including a landscape architect preparing drawings that meet the various technical specifications.
A certification from the CPC chair is also available for the transfer of development rights from a landmark to a property on the block on which the landmark is located, as well as all properties across a street or street intersection from the block.  Through discretionary processes with city planning, bonuses can also be obtained for certain sites near mass transit stations where transit improvements are provided through an agreement with the Metropolitan Transportation Authority (MTA).  Other types of bonuses are available in the zoning resolution.
Another way to add value is by interpretations of the zoning resolution that can be sought from the DOB through determination requests known as ZRD1s.  These involve devising an argument why a favorable reading of a statute should be taken, which would be beneficial to the property and/or the project.  The subject matter of a determination request can vary widely; for instance, a determination could be used to facilitate the conversion of additional square footage to residential use, the preferred layout of apartments being converted, the desired configuration of an enlargement to an existing building or a new building itself, the replacement of revenue-generating signage or billboards, and/or confirmation that the intended use of a property would be allowed, among other things.  Such an interpretation or determination is not a “variance,” because the DOB is not allowing a deviation from zoning, but rather issuing an interpretation of the zoning resolution, as it is the agency vested with such authority.
These are just some of the many ways that value can be added to a property or a project through zoning.
Dan Egers, a shareholder of Greenberg Traurig, focuses his practice on New York City land use and planning. The views expressed are his own.
Ed Wallace, co-chair of the New York office of Greenberg Traurig, served as the last Manhattan city councilmember at large and chief of staff to the City Council president. He has represented Columbia, Fordham and NYU in obtaining land use approvals. He is counsel to the Citizens Budget Commission.