How to use air rights to improve US cities

After the amazing 2017 YIMBY conference organized by East Bay Forward, many of our American friends have been asking about air rights.

Air rights or ‘Tradeable development rights’ (‘TDRs’) are used in New York and in some 22 other states.¹

Zoning systems with TDRs set two limits for each property – the ordinary zoning envelope and a higher envelope that can be reached if the landowner buys from other property owners their space under the zoning envelope. Professor David Schleicher of Yale has suggested the envelope can be seen as a ‘budget’, or the overall allowable amount of building.

Schleicher notes that TDRs are often used to subsidize certain land uses like New York’s ‘theaters’.

In New York, TDRs can normally only be used by another landowner on the same block, but Schleicher suggests that they could be tradeable citywide.

Subject to state constitutional requirements, one way to overcome electoral obstacles to more housing could be to propose a reform that allocates TDRs to every registered voter (including tenants and people who are homeless, not just landowners) on the date of the reform. Those TDRs would have a financial value and each voter could choose to sell them when they wanted.

The use (not the initial allocation) of the TDRs could be limited to certain areas of the city – near transit for example – to make their use less controversial and keep development away from the neighbourhoods that are historic or most resistant to change.

Basically the reform would hand every voter a valuable right that they could sell when they want to, while guiding new development to the right areas. We think it could be a powerful way to win majority support for reform in US cities with fewer objections to tall buildings and fewer historic buildings to protect.

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1. Much of this description is adapted from Schleicher, David and Hills, Jr., Roderick M., Planning an Affordable City (November 13, 2015). Iowa Law Review, Vol. 101, pp. 91-136, 2015; Yale Law School, Public Law Research Paper No. 558; Yale Law & Economics Research Paper No. 530. Available at SSRN: https://ssrn.com/abstract=2690311