The Midtown East Rezoning Dilemma


There has been a lot of talk about the recent proposal to change the zoning in Midtown East, and there are three reasons why this initiative would be great for New York City.

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The first is the jobs the new development would create. The second is the new tax revenue that this new wave of development would create. And the third is the fact that this new development is necessary to keep New York City competitive on the world stage.

For several months now, the Department of City Planning has been proposing a rezoning of Midtown East. Those who support this initiative who talk about the jobs it would create are hypocritical if they oppose development in other areas of the city. If development creates jobs in one area of the city, it creates jobs in other areas of the city.

Tax revenue would increase with new development. However, tax revenue would increase with new development in any area of the city, so there is nothing unique here about Midtown East.

In terms of making the city more competitive, new development anywhere helps with this issue. So why is Midtown East such a hot topic today, endorsed by so many public officials? It is because there is such a high percentage of commercial tenants in the area that politicians are not likely to get flak from NIMBYs (not in my back yard) who want to keep out towers that “block out the sun” in their neighborhoods. It’s also because this area has a significant number of obsolete buildings and underutilized lots, which can be transformed to higher and better uses.

The Department of City Planning is trying to keep New York competitive with other world-class cities, while creating jobs and increasing tax revenue, by implementing this new zoning incentive package. Looking at the skyline of Midtown Manhattan over the past several decades, and comparing it to the dynamic changes occurring in skylines worldwide, it is clear that New York has a long way to go to keep up with expanding cities across the globe.

In an effort to create the modern office space so desperately needed in New York, a proposal to incentivize large-scale commercial developments in Midtown East has been placed on the table.

This new zoning initiative would provide existing property owners with the ability to create significantly more square footage by demolishing existing buildings and replacing them with larger buildings. The additional footage is obtained by purchasing development rights from the city as well as, potentially, private sellers in the market. These lower cost rights, allowing for much larger buildings, is supposed to create the motivation for owners to build new, modern office space.

Initially, the rezoning was proposed for only the largest sites, leaving only a couple of dozen likely candidates, which could have taken advantage of this new program. Realizing the narrow focus of the proposal, modifications have been proposed to allow this rezoning to affect a larger number of sites. But the question remains: Will it achieve its objective?

Recent modifications include reducing the minimum site size to 25,000 square feet with 200 feet of frontage on a wide street, meaning that only block-front properties will qualify for this upzoning. Also being proposed is an ingredient of residential use to compliment the commercial uses in the new buildings, which could be as much as 20 percent of the new development.

In order to increase the size of developments in the district, a district improvement bonus could be taken advantage of by purchasing air rights from the district improvement fund. The revenue raised through the sale of these rights would serve to enhance the infrastructure within a neighborhood. To the extent that rights are going to be used for residential purposes, they would be purchased at a different value than rights to be purchased for a commercial development.

The purpose of this rezoning is to take obsolete office properties and create an incentive to vacate them, demolish them and build new, larger office buildings—a worthy objective.

While this rezoning proposal is well intended, it could have a much more dynamic impact on the marketplace. If the 25,000-square-foot floor-plate requirement was dropped to 10,000 square feet and the requirement to be along a major avenue was dropped, many of the side streets in Midtown East would be redeveloped. They typically contain buildings that are significantly below their highest and best use. Many four- and five-story buildings could aggregate to sites of 10,000 to 20,000 square feet, which would make appropriate sites for new office construction in Midtown. These sites would be easier to justify demolishing and would provide much more of the needed modern office space that the city requires. The jobs and tax revenue would follow.

Why be so restrictive with the applicability of this much-needed incentive?