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Public Works: Selling Air Rights, Manhattan Style

Is selling air rights the solution to Toronto's transit funding woes?

Public Works looks at public space, urban design, and city-building innovations from around the world, and considers what Toronto might learn from them.

Photo by {a href="http://www.flickr.com/photos/rezavaziri/4015144396//"}Reza Vaziri{/a} from the {a href="http://www.flickr.com/groups/torontoist/pool/"}Torontoist Flickr pool{/a}.

In case you missed Joe Warmington’s column in the Sun on Tuesday, it’s titled “Is selling air rights Toronto’s future?” The piece gets off to a promising start, but then digresses into an hysterical rant against Dalton McGuinty’s Ontario (“It might as well be Cuba, North Korea, or China”) before finally returning to the subject of air rights 13 paragraphs later.

Inasmuch as there’s a thread of logic to the thing, it seems to be this: with McGuinty on the way out, deep thinkers like PC leader Tim Hudak and Councillor Doug Ford (Ward 2, Etobicoke North) are emerging from the Grit gulags with novel ideas about how to fund the subways that everyone wants but no one can afford.

Doug Ford, as senior member of the Ford brain trust and NFL booster club, opined that the City could rake in some subway shekels by selling “air rights” to City-owned properties. To this notion Joe nods enthusiastic assent, noting that “Real estate moguls like Donald Trump are involved in this kind of thing all the time in New York City.”

So will the Donald show us the way? Are air rights the magic formula to fund an underground from Pearson to Pickering?

Well, first, let’s define our terms. Because it’s not clear whether either Ford or Warmington actually understand exactly what’s meant by “air rights.”

As commonly used in New York, air rights are more formally referred to as Transferable Development Rights, or TDRs. Essentially, if a building is not built as high as zoning laws permit, the owners can sell the rights to the extra floors to an adjacent development.

TDRs have often been used by the owners of heritage buildings who need extra cash for maintenance, and figure that it won’t make much difference whether the condo next door is 32 storeys or 36 storeys anyway. Selling thin air can be lucrative: air rights in NYC have on occasion gone for more than $400 per square foot.

The idea has been used in Toronto in the past—though here we call them “density transfers.” When the Scotia Plaza was built in the ’80s, air rights purchased from the National Club next door gave the tower some extra height. Campbell House, at Queen Street West and University Avenue, raised money to preserve its surrounding green space by selling density to the Canada Life block next door.

So there’s precedent.

However, before we order up the Cristal, consider the differences between New York and Toronto. Most of the deals done in New York are private and on a small scale. The buyers are wealthy individuals looking to add a rooftop garden to their penthouse apartment and the like. While profitable for the sellers, New York’s air rights do nothing for the City except provide a few extra bucks in taxes.

More importantly, large-scale developments looking for serious air rights are, for the most part, likely to be condo projects. Here in Hogtown, the average condo is priced at a little over $500 per square foot, with high-end units typically coming in between $700 and $800. In Manhattan, the average condo sells for over $1,000 per square foot [PDF], with ultra-luxury suites commanding a mind-blowing $10,000 or more.

That means developers down south have a whole lot more margin to work with when negotiating for air rights.

Also, Toronto builders are quite happy to buy extra height through the infamous Section 37 of the Ontario Planning Act, which allows them to trade off density in return for agreed-upon community improvements—a strategy generally far cheaper than paying full freight in the air-rights market.

There’s also the question of what air rights the City could sell. In the article, Ford references the Rosedale subway station as an example. Unfortunately, in the latest draft zoning bylaw, that station is designated for transportation use and open space. And so it probably won’t have density to sell, anyway.

What about other sites? Say, the space above the hypothetical subway stations along Eglinton and out into Scarborough? Any dollar estimates at this point would be wild speculation. But even in the unlikely event that a developer would be ready to pony up $200 per square foot for density along an underpopulated transit corridor, that’s a paltry $2 million for 10,000 square feet. Subways cost an estimated $250 to $300 million per kilometre to build.

The concept of selling air rights above City properties is sound enough, but basic math says the subway money isn’t going to be found there. Back to the drawing board, boys.

CORRECTION: October 18, 2012, 3:10 PM This post originally stated that air rights in NYC had occasionally gone for more than $400,000 per square foot. That is incorrect, and the post has been updated.

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