By R&E's David J. Rosenberg 

Development rights transfers—commonly known as "air rights deals"—are a critical yet underutilized strategy for unlocking value in New York City real estate. These transactions, technically referred to as zoning lot mergers, enable developers to acquire unused “zoned capacity” from adjacent properties, adding buildable square footage to their projects.

Unlike many zoning bonuses that require lengthy approvals, development rights transfers can proceed as-of-right if they meet basic zoning requirements. In today’s challenging market, where financing and regulatory hurdles make new construction increasingly difficult, this makes them one of the most reliable paths to maximizing development potential.

What We’re Covering

Here’s how developers, property owners, and brokers can capitalize on this opportunity:

• How Zoning Lot Mergers Work – The key requirements for a successful transfer.
• Who Can Benefit – Homeowners, small landlords, and nonprofits can monetize unused rights.
• New Landmark Transfer Rules – How City of Yes is expanding landmarked property deals.
• Beyond Air Rights – Other zoning advantages developers can unlock.
• Why Now? – Market conditions making these transfers more attractive than ever.

Understanding the Basics: The Dynamics of Zoning Lot Mergers

A zoning lot merger allows a development site to absorb unused development rights from a neighboring property, provided that:

• The receiving site has additional room in its zoning envelope (common for larger sites and corner lots).
• The selling site is adjacent (or connected through an intermediary property on the same block).
• Both parties recognize the limited market and negotiate accordingly.

Unlike typical land sales, air rights transactions operate in a constrained market:

• Sellers typically have only one or two potential buyers.
• Buyers often have limited options for acquiring the exact rights they need.

This dynamic makes deal structuring critical—understanding valuation, zoning constraints, and negotiation strategies is essential for both sides.

Capitalizing on Untapped Potential

Many property owners hold unused development rights but lack the resources or interest to build. This creates a lucrative opportunity for:

Small Property Owners & Landlords

For homeowners and small landlords, selling development rights offers a way to cash in on neighborhood growth without selling the property or taking on construction risks. The proceeds can be used to:

• Fund renovations or maintenance
• Reduce debt and financial burdens
• Reinvest in other real estate assets

Nonprofits & Religious Institutions

Many faith-based organizations and nonprofits sit on underdeveloped real estate. Selling air rights can provide capital for:

• Mission-driven programs
• Building restoration or expansion
• Long-term financial stability

According to a 2024 NYU Furman Center report, faith-based organizations in NYC collectively hold over 86 million square feet of undeveloped residential floor area. With new zoning reforms under City of Yes, this number has only increased.

Landmarks: A New Frontier?

Historically, landmarked buildings faced significant barriers to transferring development rights.

Pre-City of Yes:

• Transfers were restricted to adjacent lots.
• Deals required a full ULURP review, creating bureaucratic bottlenecks.
• Fewer than 15 successful landmark air rights deals in 50 years, mostly in Manhattan.

Now Under City of Yes:

• Transfer areas expanded to include the entire block and adjacent street frontages.
• Streamlined approval process aims to unlock more deals—especially in the outer boroughs.

While approvals from City Planning and the Landmarks Preservation Commission are still required, these reforms could make landmarked properties an increasingly viable player in development rights transfers.

Not Just for Air Rights: Other Strategic Benefits

While maximizing FAR (Floor Area Ratio) is the most common motivation for zoning lot mergers, these deals also offer other zoning advantages, such as:

• Accessing “qualifying residential site” bonuses under City of Yes.
• Securing wide street frontage to meet height and setback requirements.
• Increasing dwelling unit count in residential projects.
• Circumventing restrictive lot coverage requirements.

For developers, these added benefits can enhance project feasibility and significantly boost returns.

Why Now Is the Perfect Time for Transfers

In today’s market, development rights transfers offer:

• Predictability – No need for discretionary approvals if zoning conditions are met.
• Flexibility – Works across a range of property types and zoning districts.
• Freedom from Additional Restrictions – No new affordability mandates or agency oversight.

With increasing regulatory constraints on new development and rising construction costs, air rights deals remain one of the most stable, as-of-right strategies for unlocking value.

The Bottom Line: A Creative Solution to a Complex Problem

For developers, property owners, and brokers, mastering development rights transfers is an essential skill in navigating NYC’s evolving real estate landscape.

• For Developers: A cost-effective way to secure additional FAR.
• For Property Owners: A way to monetize assets without selling or building.
• For Brokers: A lucrative, growing market segment with high-value deals.

With zoning reforms making air rights deals more viable than ever, now is the time to explore these opportunities.

📞 Need expert guidance? Whether you’re looking to structure a deal, assess value, or navigate the latest regulatory changes, Rosenberg & Estis can help. Contact us today to discuss how to maximize your property’s development potential.

Founded in 1975, Rosenberg & Estis, P.C. is widely recognized as one of New York City’s pre-eminent real estate law firms. R&E provides full-service representation and advice in every aspect of real estate, from performing due diligence and evaluating financing, to handling joint ventures, acquisitions and leasing, construction and design team agreements, property tax exemptions and abatements, land use and zoning matters, Real Property Income & Expense (RPIE) filings, real estate tax certiorari, co-op and condo offering plan filings and board representation, distressed situations workouts, foreclosures and bankruptcies, trust and estate planning, as well as the litigations and negotiations which sometimes ensue when deal-making. R&E’s wealth of experience in New York real estate makes it the ideal thought partner for owners, developers, not-for-profit corporations, educational institutions, sponsors, equity investors and lenders in both real estate transactions and in all court venues.