Penn Central 2.0

Abstract

A transferable development right or “TDR” refers to the air space above a zoning lot that can be sold to neighboring landowners who seek to build structures that exceed the maximum height permitted by zoning. Until recently, if a developer in Midtown Manhattan required TDRs, he or she needed to acquire them from a landmark building. The city originally intended this scheme to benefit landmark owners, whose properties are regulated from utilizing the full envelope of their air space. However, in 2015 New York City amended its Zoning Resolution to allow developers to build higher in exchange for providing public amenities—without having to purchase TDRs from anyone. This type of “zoning bonus” may significantly impair TDR values. Yet development bonuses often generate needed infrastructure, and whether TDRs merit the same degree of constitutional protection as land remains unclear. This Note engages in the first sustained analysis of TDRs as the principal subject of a regulatory taking by examining whether a regulation that diminishes the value of TDRs, as opposed to the underlying fee estate in land, constitutes a taking. Specifically, this Note uses Grand Central Terminal’s current claim against the City of New York as a lens through which to examine this issue. It then advances a framework by which to analyze the future generation of cases involving the diminution in value of TDRs. This Note concludes that while the position of Grand Central’s owner is not constitutionally protected, viable policy arguments exist for municipalities to provide incentives that support a robust TDR market.