The City Planning Commission on Wednesday will vote on whether to set certain air rights prices in West Chelsea to $625 per square foot.
The price is a jump from the $500 per square foot proposed in October and follows pushback from Community Board 4 and other officials, who argued that the price lowballed the value of development rights in the district. Proceeds from the air rights will be dedicated to an affordable housing fund run by the city, as part of a 2005 rezoning of the district.
In a November letter to the City Planning Commission, the community board recommended that the price instead be set at $800 per square foot.
The group’s chair Delores Rubin and co-chairs John Lee Compton and Betty Mackintosh, argued that City Planning shouldn’t have included certain air rights sales when it calculated the median price of the rights in the district. They said the sale of 507 West 28th Street in May — in which air rights sold for $150 per square foot — dramatically lowered the median. Five other deals from around that time sold for an average of $886 per square foot, and the board members argued that the West 28th Street deal was an outlier that likely resulted from something other than market conditions.
“We recognize that the recent market for [High Line Transfer Corridor] floor area has been ‘hot’ and may differ from a longer-term, stable market,” the community board wrote. “The board believes, however, that the underlying factors that convinced developers that they could earn a good return in West Chelsea even with the high price of development rights — including proximity to the High Line, the Hudson River Park and the Meatpacking District — will persist and will become even more important with the build out of the Hudson Yards.”
The city calculated the new price through a weighted average, in which the latest air rights sales in the area played a larger part.
When the city downzoned West Chelsea in 2005, it also created a few options for developers to bump their floor area ratio (FAR) back up in some areas of the district. Property owners can buy air rights along the High Line Transfer Corridor, a 100-foot-long area along the High Line between West 19th and 30th streets. Or, they can use a combination of those air rights and inclusionary housing density bonuses.
The city also established a rule that once 90 percent of the High Line’s air rights were sold or used, property owners would be able to up their FAR by contributing to an affordable housing fund. City Planning certified in September that the 90 percent threshold had been met.
Anne McCaughey, an attorney with Herrick who specializes in land use issues, said private property owners in the district still collectively have 90,000 square feet of air rights they could potentially sell. The pricing of the city’s development rights could make it difficult for these owners to sell off what remains — especially if they seek higher prices.
Michael Smith, a partner at Herrick, noted that buying the density bonus from the city would require some extra steps and take a bit longer than private zoning lot mergers but said it’s a relatively simple process. He said he doesn’t think the pricing will necessarily disrupt the ability for private owners to sell their air rights, seeing the city’s development rights as just another option for developers to increase the size of their development projects.
“It’s just a new opportunity, something else that’s on the menu,” he said.