Here in New York City, with limited square mileage, developers often build up rather than out, occupying valuable vertical real estate space. In fact, higher floor units, whether in commercial or residential buildings, often command higher prices because they come with some stunning views of the city and better natural light.
However, New York City puts limits on overall development to help ensure the livability of the city. We don't want street after street of skyscrapers, causing areas to become too dense and overdeveloped.
That's where something known as "air rights" comes into play. This refers to the empty space above a building that is unused. For example, if a building is only five stories when it could potentially be 20 under the zoning code, other developers can buy those air rights and add extra stories to their building.
Air space can be every bit as valuable as land in New York City. Developers can make a considerable amount of money selling their air rights.
Air rights transfers don't always have to involve adjacent properties. However, so-called "zoning lot mergers" between adjacent buildings are the most common types of transfers.
Transfers between properties that are near one another, but not contiguous, are allowed between a property designated by the Landmarks Preservation Commission as culturally or historically significant and a nearby property. Many of these LPC-designated landmarks aren't extremely tall, so there's room for vertical growth in the neighborhood without it becoming too dense.
Air rights can also be transferred between non-contiguous properties in "special purpose districts." These include areas like the Special Hudson Yards District and the Special West Chelsea District, which have specific zoning goals.
If you are purchasing or selling air rights, it's essential to make sure that you are in compliance with all city ordinances and that you are receiving or paying a fair price. Real estate and legal professionals can provide guidance and assistance.
Source: StreetEasy.com, "What Are NYC Air Rights All About?," Mariela Quintana, accessed Sep. 08, 2016