Historic Preservation and Air Rights: Two Great Tastes That Taste Great Together

(Image: NYC.gov)

The recent saga over Toll Brothers' plans to build a residential tower on Jeweler's Row has invigorated Philadelphia's historic preservation movement, and touched off an interesting side debate about the alleged trade-offs between historic preservation and promoting sufficient housing growth.

In one telling, preserving short buildings in the central business district, like on Jeweler's Row, comes with an opportunity cost. We could have several hundred new units of housing if the buildings get replaced. Sansom Street is really close to the Market-Frankford Line and is right in the central business district. Every other factor besides Jeweler's Row being a unique and charming street points to high-rise mixed-use zoning being the most appropriate choice for that location.

On the other hand, many people rightly feel that Jeweler's Row is an important place in Philadelphia and argue that maintaining the character of the street has an intrinisic value.

But we don't really have to choose between building enough housing and preserving the city's architectural and historic inheritance, because Philadelphia actually has infinite space in the sky and development rights are transferable from property to property. There's no good reason why the total supply of development rights ever needs to shrink. Jake Blumgart's recent article on Jeweler's Row at PlanPhilly highlighted this concept briefly, but it's worth teasing out further.

The backstory is that Toll Brothers is using a wonky "unity of use" claim to basically transfer unused development rights from some of the shorter parcels on Jeweler's Row in order to build a taller tower, with the idea that there is a "unity of use" to the whole site.

"Essentially, Toll Brothers is purchasing the FAR from the four properties without purchasing the properties themselves. They argue that this esoteric idea is feasible because there will be a “unity of use”—a legal principal that allows multiple properties to be counted as one without lot consolidation—between the five parcels.

Members of the public criticized that arrangement at Tuesday’s CDR meeting, arguing that there is no transfer of development rights in the current zoning code and that the new height is of questionable legitimacy."

Preservationists who oppose the demolition of the Jeweler's Row buildings are arguing somewhat opportunistically that the zoning code has no transfer of development rights provision, and they're correct about that (though "unity of use" doesn't seem to require such a provision,) but outside of this specific case, it would be great for the preservation cause if there were.

Here's how it works. If you own a property in Philadelphia, you have some development rights (sometimes called "air rights" when referring to the developable air spaceover top of a property) which are spelled out in the zoning code. There are certain types of structures you can build "by-right" just by pulling a permit, and what you can build is determined by the zoning category the city has assigned to your property.

Oftentimes you'll see developers trying to get more development rights than the city has assigned to their properties, requesting variances from the zoning board to build a taller structure than they're allowed to by-right. But you also have a lot of structures around the city that aren't using all of the development rights they're entitled to--they have a shorter structure than they're allowed to have by law. To boil down the Jeweler's Row story, the site's development rights were much, much more expansive than what currently exists there now, creating an economic incentive to tear down the buildings and use all their development rights.

This is where the opportunity comes in: what if you could preserve Jeweler's Row by designating the structures as historic, but instead of destroying the unusued development rights in the process, put them in a "bank." Call it the Air Rights Bank. Development rights go into the bank, and then on the other side, Toll Brothers could buy those development rights from the bank to build taller than the zoning code allows on a different site.

It's easy to imagine a clever financing scheme where the Air Rights Bank collects fees on these kinds of transactions to purchase development rights from over-top of more historic properties all around the city.

This is all much more complicated in practice and there are a variety of approaches the city could take, but the basic idea is that there's no inherent reason why historic preservation needs to be in tension with growth, given the inexhaustible supply of "land" in the sky over Philadelphia.

Where would people be allowed to "cash in" the development rights?

This is the major hang-up, as there is always some local opposition to increased density, and particularly low-parking multifamily buildings. To work correctly, the rights would actually have to be exactly the same as the rights invoked when building a by-right project--not subject to local negotiation.

There's no single right answer as to where the development rights should be applied, but one intuitive option would be to piggyback on this idea from Councilmembers Blondell Reynolds-Brown and Bill Greenlee to encourage more housing growth around transit stations.

The Council members co-sponsored a bill this week (which we'll be digging into in a subsequent post) to add "transit-oriented development" zoning overlays to an unspecified number of transit station locations. The bill language hasn't been released yet, but the Inquirer is reporting the overlays would allow taller structures with less parking than is normally required within 500 feet of transit stations. Buildings could be required to have active ground-floor uses, and open-air parking lots would be restricted within the zones.

The goal is to make better use of Philly's underused transit network by increasing the number of dwellings with good transit access for those residents who don't care to own a car (and thus shouldn't have to pay for on-site parking.) Allowing developers to spend the development rights they purchase in these zones, which would already be targeted for more growth, would certainly dovetail with those goals.

Both policies would entail a heavy political lift, but it's at least possible to envision--if you squint--some vocal citywide constituencies like preservationists, developers, and transit advocates banding together on a win-win solution.

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Aaron Wunsch commented 2017-03-07 09:31:48 -0500
@benjamin I’m in complete agreement. My point in highlighting the (vast) structural disadvantages preservationists face was to suggest that the “obstructionist” label is unfair. What you’re really describing is a scattered, ad-hoc approach to preservation that grows directly out of the deficiencies you identify (better than I have). We desperately need demolition delay based on simple criteria, e.g. age of building (other cities do this). We need a comprehensive survey of the city’s historic resources (the existing one is woefully inadequate) and a resulting slew of protections (new historic districts and individual landmarks). We need a preservation plan (other cities have them, and the State has flagged our deficiency: http://www.phillyarchaeology.net/wp-content/uploads/2016/05/Phila.-Certified-Local-Government-Evaluation-Report-2015.pdf ). I particularly appreciate you pointing out that, in order to be effective, preservation must be baked into other parts of city code (zoning). So, I guess it comes down to perspective. Where some see obstructionism, I see valiant if inadequate stop-gap efforts undertaken largely at the grass-roots level. Until we get the kinds of reforms you identify, that’s the best we can hope for.
Benjamin She commented 2017-03-06 20:50:07 -0500
@aaron But where do you, as the preservationist, want to direct your accrued energy? You want to prioritize funding such a Commission with such a lackluster, negligent track record as this? What do you think they’re actually going to do with that money, make more nominations of their own volition? They have no quota to fill. If the scheduled dates for all the various committee meetings were actually increased to more than once a month, maybe we would have more opportunities to get results in before the wrecking ball. You talk for lengths about the inherent structural disadvantages of preservation in this city, yet try to pin this on some kind of BIA boogeyman while forgetting these issues need to be fixed through Code ordinance before repeatedly trying again and again at the Designation Committee board. Preservation is not something that only has to be the sole domain of preservationists. You know as much: developers seeking Federal tax credits on potential properties will <a href=“”http://planphilly.com/articles/2016/06/15/fishtown-peco-plant-to-be-considered-for-historic-designation">http://planphilly.com/articles/2016/06/15/fishtown-peco-plant-to-be-considered-for-historic-designation">go out of their way</a> to nominate on both the federal and historical level. And the code governing the Historical Commission is, short of garbage, glaringly incomplete: a lack of a true demolition delay ordinance automatically applied to all buildings meeting a certain age criteria means these unproductive cat-and-mouse games where the nominee has to race to file before the demolition permit, and the Commission can punt and kick the can down the road until the building gets demolished anyway. We don’t need to solely rely on a group of amateur enthusiasts to vouch for Philadelphia’s unlisted and unloved buildings. A robust system of incentives like this one and a re-engineered tax abatement will get developers on board, while stricter code regulations will lay ground rules for the Commission’s actions and make sure more cases get heard and accepted without calling the validity of the nomination into question every single time. The built-in advantages of the BIA lie within top-level ordinance; unless preservationists start lobbying for policy changes then they will never match developers at ground level.
Aaron Wunsch commented 2017-03-03 11:14:12 -0500
Let’s begin by addressing the false equivalency suggested by this comment. “Preservationists” are, by and large, a few people who care about the issue enough to volunteer their time to write nominations and show up at public meetings. They are not a large, well-funded body like the Building Industry Association of Philadelphia (BIA), whose members have a direct financial stake in the outcome of their lobbying. They are not paid to attend public meetings like developers and their representatives. Their time and resources are scarce, generally squeezed out of day jobs in other fields. I’m not sure what “truly fighting for preservation across multiple use cases and avenues” would look like, but I’m pretty sure it would resemble the official duties of the City’s Historical Commission, as spelled out in its ordinance. And here we get to the essence of false equivalency. For while City government showers developers with perks via lax zoning policies and a ten-year tax abatement, there are no structural incentives to support preservation. The Historical Commission is among the worst-funded of its kind in the country. There are no tax incentives for having one’s building on the local register. The commission’s director never speaks about the public value of preservation or, for that matter, addresses public audiences at all. He does, however, see fit to warn developers about the dangers posed by “11th hour nominations” at private events like this http://www.biaofphiladelphia.com/annual-conference – failing to mention that without an adequate survey of the city’s historic resources, virtually ALL nominations will be “11th hour” because that’s all that a small body of citizen-volunteers intent on keeping their neighborhoods intact can possibly hope to produce while working other jobs. Did I mention that his boss used to be the president of the BIA, and that her successor to that title now heads the Toll Bros. division hoping to demolish Jewelers’ Row? Show me the “preservationist’” equivalent of such built-in advantages and then we can have a serious conversation.
Benjamin She commented 2017-03-02 12:25:12 -0500
@aaron Wunsch, I don’t believe for a second that the City condones unity of use as a means to preservation, or that they’ve cared about alternative preservation methods at all. The ruling for that still resides with Commonwealth Court in their statement on Dilworth House. But either method is simply a different legalistic avenue to achieve the same benefit for both developer and preservationist. Given past examples, it’s not hard to conclude that preservationists in the city have been putting more effort into denying developers a means to reuse rather than truly fighting for preservation across multiple use cases and avenues.
Aaron Wunsch commented 2017-02-28 14:32:24 -0500
Good article but this line is misleading: “Preservationists who oppose the demolition of the Jeweler’s Row buildings are arguing somewhat opportunistically that the zoning code has no transfer of development rights provision…” In fact, it is the City telling preservationists that there’s no TDR in Philadelphia while simultaneously suggesting the arcane “unity of use” provision can serve a similar function – so long as it works to the benefit of developers rather than preservationists. TDR was on the books in Philadelphia until 2012, when it was removed because it wasn’t being used. That looks pretty short-sighted in retrospect.
Benjamin She commented 2017-02-23 23:53:43 -0500
I don’t see why TDR’s need to be pooled into a “bank”, aggressively purchased or managed by the city, or be restricted to TOD overlays (especially those as minuscule as on the Council bill). The City’s only job is to determine the highest and best zoning for each property. Developers don’t need to use TDRs in the majority of cases when they aren’t building towers on rowhouse-sized lots, and when there is a reasonable CMX-4/5 underlying zoning in place. Instead of letting developers constantly abuse the “unity of use” ambiguity, developers should be able to submit to L&I an agreement with an adjacent property to buy their unused FAR for an agreed-upon price. That’s basically how it’s done in NY. TDRs should also be barred for parking lots and potentially for non-historic properties as to not limit their own development potential. Of course, the corollary to all this is that TDR proponents need to push back hard on the campaign to downzone underbuilt historic properties, with the point that this mechanism simultaneously protects vulnerable properties while relieving developer pressure to build on extant lots, but if only the underlying zoning is respected.