But Barnett’s Fifth Avenue air rights deal offers a solution for rent-stabilized properties in crisis.
Barnett’s Extell Development is acquiring 130,000 square feet of air rights from the Metropolitan Club on Fifth Avenue for its mixed-use project at 655 Madison Avenue – a deal made possible by the city of Yes.
The club’s 790 Fifth Avenue is a landmark. Before City of Yes, it could sell air rights to a very limited number of adjacent properties, but because the market was microscopic, a deal never materialized. According to PropertyScout, the club uses only 42 percent of the theoretical square meters.
The city’s Yes for Housing Opportunity, which passed in 2023, allowed landmarks to transfer air rights to more distant locations. The Barnett development site is a full block away from the Metropolitan Club, but can now acquire the club’s rights.
If Extell uses the additional 12,000 square feet to build more apartments, it would mean homes for hundreds of additional people and millions of dollars in additional tax revenue. I think we can all agree that these are good things.
Another plus: the Metropolitan Club receives money from sales. Landmarks are expensive to maintain and proceeds from sales will be used to fund ongoing maintenance under a plan submitted to the Landmarks Preservation Commission.
Given the additional costs the commission imposes on buildings when it turns them into landmarks, expanding their ability to sell air rights was the least the city could do.
Why not help rent-stabilized buildings in the same way?
They too are taxed by the government: the state strangled their revenues by passing the HSTPA in 2019. It also made the law permanent, removing landlords’ power to negotiate changes. Demolition of these buildings is extremely difficult because tenants are entitled to perpetual lease extensions.
Even if an owner can buy out enough tenants to reach an 80 or 100 percent vacancy rate, the state Department of Housing and Community Renewal sometimes denies permission to substantially renovate the building and take it out of rent regulation. HCR has become increasingly stingy in this area.
For many owners, there is no escape from this financial vice. All they can do is save time by postponing maintenance.
Newly elected Mayor Zohran Mamdani is looking for ways to help landlords maintain their rent-stabilized buildings without raising rents. Giving them the ability to sell air rights to a wide range of buyers is one way to do that – and would also allow developers to build more housing, which is also desperately needed.
NIMBY groups like Village Preservation and people in Queens who voted for Andrew Cuomo would express hysterical opposition to the prospect of more apartments, but Mamdani owes them nothing.
Tenant groups, meanwhile, would likely support a measure that raises money from developers and ensures it can only be spent on upgrading rental buildings. YIMBY groups would welcome the creation of housing.
Developers hate Mamdani’s plan to raise taxes, but are happy to pay for air rights. And unlike a tax increase, the city could liberalize air rights transfers without a new state law.
The housing shortage is crushing New Yorkers, and rent-stabilized buildings are falling apart. Mamdani and Julie Menin, the next speaker on the City Council, could get their terms off to a good start by generating revenue, literally out of thin air, for two of the city’s most pressing needs.
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