Proximately Tradeable Air Rights

I live in DC. In DC there is a height restriction on buildings. The height restriction has both good and bad effects. The good effects are that DC is a really nice city, it feels less claustrophobic, has better light and air circulation than taller cities, and can sustain plants at street level better as a result. From the top of a 6 story building, you can see most of the city, and the monuments stand out among the rooftops. The bad effect is that the available space for housing is significantly reduced, which drives up housing costs and tends to push the working poor out of the city.

The method DC uses to cap the height of buildings is simple pretty simple: a building can be no more than 20 feet taller than the width of the street that it faces. This has the benefit of allowing taller buildings on larger streets, and shorter buildings on smaller streets, which ensures that the sky is never too closed off. However, it has some perverse effects. Because of the way buildings are built, it is not cost effective to build higher than a certain height if you can’t build a skyscraper. This is to say that the cost of building taller buildings does not increase smoothly with height; it rises smoothly through the first few floors, jumps at some point around 6 floors, and then continues smoothly thereafter. The problem is that this jump occurs below the height cap for most areas of DC, so that even though a developer might be legally allowed to build a taller building, it would mean a much greater expense without the benefit of being able to build very many more units. As a result, it is frequently more cost effective to build buildings even shorter than the height restriction.

A better way would be a system of Proximately Tradeable Air Rights. The system would work like this: Each lot of land would own up to a certain height, say the current height restriction. But property owners would be able to sell the unused portion of the space above the lot to nearby property owners, who could then stack the rights and build above the height restriction. As a result, a person could build a true skyscraper, but only by purchasing the air rights of all the surrounding property, ensuring that very tall buildings would be spaced out about the city, preserving the air and light, and efficiently allowing for the creation of more units of housing. Air rights would only be purchaseable from nearby lots, say lots within a half-mile radius. And the air rights would remain associated to their original property, so that they couldn’t leap frog across the city. This system effectively caps the volume of real estate, rather than the height, and lets that volume be allocated efficiently. It thereby minimize lost resources in the form of unused vertical space, and makes it easier to control how much livable space actually gets built than does a pure height restriction.

The system would be hard, but not impossible, to implement in the city as it is. It would take some time to see its effects. It would also lead to other fights, such as neighborhoods not wanting tall buildings in their back yards. But this fight already occurs, and in some ways it would easier to settle: a community organization could simply buy up all the surrounding air rights and hold them to prevent their neighbors from selling them. They would penalized in the form of high property taxes or association fees, and there would a significant incentive to sell them, but any property owner has that option if they really prioritize a short surrounding neighborhood.

This system uses the power of markets to organically space out tall buildings, allowing for a denser urban center that still feels open and pleasant. It allows for increasing the net volume of living space without a tendency towards completely blocking out the sky. It requires little additional regulation and oversight, but still achieves the current city aesthetic.

I like the idea, it is a very clever thought and an interesting fix to the housing shortage created by the limitations.

It has a few problems…

Nearby is ill defined, and would have to be one of the first things adjudicated to pass such a law. Does across the street count, or only buildings facing the same direction? What about the other side of the ally way?

It would be interesting to watch companies buy buildings around them, tear them down, and use the now free “Air Rights” to build higher buildings… I’m imagining that you would want it based on cubed space, so it would be like stacking buildings on top of themselves… Though that is assuming that it would be cost efficient to build vertically, and to leave the space blank vs just building horizontally…

Might get a lot of [size=150]SUPER TALL[/size] buildings surrounded by [size=85]flat parking spaces[/size]…

If you do it just on one dimension, height, the problem becomes tall, long and wide buildings surrounded by a little bit of parking. (height exchange, but no depth or width…)

It would also put a exchange value on not building above a specific level, and you might actually see an increase in the costs of housing in the area as the unused portion of the house (the space above it) suddenly increases dramatically in value, provided it hasn’t already been given away.

Another problem you would have to face is “hereditary” empty space. If the space can be sold, does the next owner of the space have to uphold the sell? It might drive down the resell value as people looking to buy property suddenly have to worry about if the space above their house has been sold to someone else. The cost of the house before the sell would be significantly higher than after, because of the long term consequences…

Usually, if something can be sold, it can be rented… Would the owners of smaller buildings find a new revenue source in such a policy. What happens to buildings that are renting a space, and they fail to make the payment or the landlord of that space decides to rent to another person? Do they have to knock the top off of their building.

This could also create a larger group of lobbyists looking to expand the height restriction, which would have major repercussions. The difference in space purchased previously and the new limits becomes another new value to be sold. Like creating new land… While there would also be people worried that their space would suddenly decrease in value… It would be a new commodity, one based on aesthetic…

Don’t take this as negativity, I do like the idea. It’s more of a QA moment.
The Jerk Economist in me would love to watch this happen… (Mostly the jerk)

As construction technology improves and higher buildings become possible, how would that affect prices?

Not terribly, buildings have been able to go higher for quite a long time. The only reason not to is because of stairs v elevators. No one wants to walk up to the 100th floor… But, as elevator technology improves, prices for space would reduce… The problem is that DC has created an artificial shortage, limiting the amount of space available (San Francisco is a god of this practice). The only thing they can look forward to is higher prices in the name of beautiful surroundings. Technology does them no good.

Unless we get the extra-dimensional space stuff worked out… (Man, I would love a bag of holding.)

I think the system would still be justified as technology improves. At some point the jump in cost at ~6 floors will disappear or become less salient relative to other building costs. For example, say the current cost of building a foundation that can support 50 floors above it is several times the cost of the land it’s built on. In the future, the cost of that foundation will probably go down as technology improves; the cost should eventually fall low enough to wash out the difference between a 50-floor foundation and 6-floor foundation, so that even if the cost to build a 50-floor foundation remains 2 or 3 times as much as a the cost to build a 6-floor foundation, it is the difference between 2% and 4% of the total cost of the project.

But even so, the benefits of this system remain: tall buildings are spread out among the city. The total volume of space is set as a single measure, i.e. the height to which property owners own. There is a market for the additional space, so that tall buildings are efficiently allocated, e.g. a business center could have several skyscrapers clustered, while the surrounding area would be particularly low-rise. It puts a little more market force into the height of buildings while avoiding some of the tragedy of the commons of unrestricted upward growth.

Eric, you raise several interesting questions.

“Nearby” would need to be set, and changing the definition would change the maximum height of buildings and the overall landscape of the city. We would want it to be set such that the tallest buildings could take advantage of efficiencies of the marginal floor above the ~6 floor threshold. But I also think we wouldn’t want the “nearby” radius to be so big that we end up with a large concentrated center surrounded by low suburbs. The goal (to my aesthetic, anyway) would be to have tall buildings scattered about the city, so that no cluster blocked views or air or sunlight. I suggested a half mile, but that might be too much. I don’t think we need the exact value to judge the worth of the general idea, but it’s interesting to consider what different radii would do to the topology of the city.

We might want to say that only the space above a certain height can be traded, because an office park-esque wasteland of a city would not be desirable. Again there are a lot of ways we could play with this: a hard cap on what air rights can be traded; a gradation such that air rights higher off the ground allow for more building that those bought at ground level; a requirement that any unused ground level space be allocated a certain way (e.g. 30% to parks) to discourage turning it into parking lots.

I don’t think the increase in value of unused space would significantly discourage building higher. Since there is a market, as more people decide not to build and to instead sell their air rights, the price falls, making building higher a better investment.

This is an interesting question. I’m not sure how building on rented land usually works; I believe it’s done in industrial contexts, but I don’t know how it’s worked out, especially regulatorily. But I don’t think this would be particularly hard to deal with. First, we have to ask what it really means to “build” above a certain height. If I have my roof right at the maximum height, can I not stick a satellite dish on the roof? What about a lawn chair? My guess is that this is already mostly solved because some types of changes to a building require permits, and others don’t. It would be a simple matter of requiring that a builder show a proof of ownership, and not merely of possession (i.e. it’s not enough to rent it).

In a similar vein, I think selling the space would be permanent; when the air rights were transferred, the deed would be amended to reflect the change and the new deed would be registered as deeds already are (which they have to be to enforce things like bank liens, easements, etc.).

This is something I hadn’t thought through, but I think you’re right. If a full-block mall wanted to build up its entire footprint, it shouldn’t be enough to buy a few stories of air rights from a small lot next door. Selling in cubic feet would make more sense, or maybe cubic yards or larger depending whether we’re very concerned about people building really really tall chimneys.

I must start by saying, I’m not trying to be an ass. I am one, but I’m not trying to be… LOL

I am very good at seeing the problems with things, and pointing them out. That is all I am doing. I am not attempting to troll or anything of the like…

True, very true.

Not quite what the tragedy of the commons is about. It’s more about publicly shared space, like a park, not owned buildings. (But, that’s not really relevant to the rest of your point.)

This would be a very math heavy question. We would need to find the amount of available space, in the area first. Divide that by the number of buildings you would want to exceed the normal limit. And this would, roughly, tell you how big of space you would want to allow.

Limiting it to a set height above would create a desire for parking garages. A company buying the neighbors, taring them down, building a garage for the employees of the company (or residents of the complex), the rest of the height going to the building. This is one possible response of the market.

It would be interesting to see prices fluctuate and level. I do agree that increasing the amount of available property would decrease property value, but creating the second market would ideally balance that out. The secondary market quickly out pacing the price decrease would be only a possible consequence.

For the most part, the owner of the land will pay for the building to be built, and still owns the building. When a building is rented, on the land, if the owner wants to kick the person living there out, and rent it to a new person they can.

In essence, the market is not in physical goods, but instead is in trading regulation restriction reductions (it could be called the three R market ). The physical space is not actually being occupied by anyone. Instead the right to build higher on unused space is being sold. The original space is still unoccupied. Got to be one of the worst fictional market’s I’ve ever heard of. No producing anything, simply the amelioration of restrictions. Way worse than Diamonds.

We would have people buying the air space, with no desire to build, simply trading in the Three R commodity market… Created by and partially run by politicians… Partially run, because the immediate results would be a boost, even if in the long run it means nothing. Which politicians could use to temporarily boost the market, to get reelected. Raising it even a foot could be huge.

The measurement type would not matter, we could measure it in light years if we really wanted (.0000000000000000000000000000000005 light years is still just a measurement). But, you do bring up another point, would there still be a second restriction on heights. It would be possible to buy space, then build one really tall object, that is not very wide or deep… Just to build a chimney or the like… (Entirely theoretical, I can’t think of a good reason to build this stupid thing… Though, just because my imagination is limited…)

I love the idea from an economic study perspective, but I would vote against it. Because I dislike more regulations, and this would turn into a cluster-fuck of a system. It would open the door for so many manipulations by people that know how to manipulate those things. One of the biggest problems with systems, however interesting, is that it makes life more difficult for any that aren’t complete bastards. The more complicated the system, the bigger the problems, the more it attracts bastards.

Think about people not owning the right to build another story on their house, because they sold it off, then having to buy it from their neighbor, so that building one owns the rights of building two, and building two owns the rights of building three…

Ugh, it goes on, at some point look up the rules on water rights… There is a perfect example of a bad system… Not that I have a good answer for it…

Eric, if you are trolling, you are an interesting troll, in which case you are at worst symbiotic.

This is a good point, and worth using as a bracket for the rest of the conversation. I learned recently of the Curse of Knowledge bias, which suggests that, for the intelligent and well-informed such as we, it is hard to appreciate how much the intelligent and well-informed would be advantaged by a more complex and theoretically elegant solution. I’ll return to this.

It’s about shared resources, which can be space, but even in the archetypal example of an actual common on which many farmers are grazing their cattle, it’s less about the space than about the utility of the space for grazing.

Here, we’re dealing with air and light as the commons. Each building that rises above the mean seeking a better view detracts from the view for the average building. Unchecked, there will be very tall buildings that still only offer air and light access for the top few floors. Restricting upward growth prevents that, so that the few floors that get light and air are those at ground level. My system would allow for isolated taller buildings, which would reduce air and light a little, but the decrease would be small from the perspective of any individual. Meanwhile, significant volume can be added to the total livable urban space.

This could happen, but I think there are significant disincentives. Foremost is practical: in an extant city, it would be prohibitively costly to acquire every lot in a block. It’s possible, but the investment payoff is significantly reduced. Add to that it is almost certainly cheaper to build a row of brownstones than a skyscraper, and you have a further incentive to use street space.

I will admit that I am biased here, though. DC is an old city with few mostly narrow roads, lots of traffic circles, one way streets, bike lanes and pedestrian-only areas, parks that interrupt streets, etc. I would guess that compared to other similarly sized cities, car ownership in DC is well below the average. I can’t see building parking garages around a skyscraper to be something that would sell particularly well in DC. I tend to think that it isn’t just this city where that would be the case - surely an apartment at ground level is worth more than a parking space connected to the neighboring lot. But when I consider the question, I do so from the biased perspective of my daily experience; maybe I don’t give parking enough credit.

But you can say the same of the common: one could “produce” a lot at once by loosening controls over grazing. In the short term, the town could support a larger cattle population. But in the long term, the population would collapse as the common became depleted.

Yes, but that’s true now as well. Certainly, a market would make it much easier to realize the benefit of a height increase, but there should still be some pressure for politicians to raise the current limit.

The fact that that doesn’t happen again suggests that people value the short stature of the city. After all, there is a common that’s being protected, and people may not want to give that up. Similarly, the first generation of buildings that buy up air rights and build several stories higher than their neighbors will have a very good reason to prevent a competitor from building a yet-taller building across the way. There will be value in being one of a few tall buildings, and at some point the pressure from tall building owners would politically match that of short building owners (and the trade association for tall building owners will probably be better organized than that of the rest of the building owners).

Sorry, I wasn’t clear about this (or you are trolling me). I meant that we would set the smallest units in which heigh could be subdivided. So even if a chimney were one foot by one foot by six feet, we might say that the owner would need to buy two cubic yards of air rights to build it. It would make it administratively easier.

Now let me return to the bastards. It’s true that the bastards would win. But we shouldn’t shut down a system just because the bastards win. A good system should be like a hamster wheel for bastards hooked up an electric generator. A well designed system is not one that prevents bastards from winning, but one that generates a lot of positive externalities from bastards trying to beat each other. And that’s exactly what markets do. Markets entice bastards, they reward bastards, and the bastards love them, but as they operate they generate a lot of good that inadvertently benefits everyone else.

I’ll take that as a compliment. Its mostly that I can come off as negative, and not helpful. Especially if I’m not thinking about it… (I’m Conservative, so “No” is an important part of my vocabulary.)

That is very interesting and one of the things I love the more I learn about Economics, They’ve got labels for all the fun things… Even if the labels are stupid… (Looking at you Rent Seeking)

My understanding is that it is specifically about public resources, stuff not owned by individuals, private property is not subject to the tragedy of the commons. When things are owned, the owner tends to take car of it, because of the incentives of ownership (resale, pride, etc). When no one owns it, those incentives do not apply. (Sorta similar to the types of government, in a monarchy the leader is at fault, in a oligarchy the nobility is at fault, in a democracy the people are at fault, in a bureaucracy no one is at fault… A comparison that just popped into my head that’ll have to think about… Probably just the normal problem with Moral Hazard…)

sure. (No response needed)

I could see that a city with limited street sizes would limit the amount of cars. The sections of Denver that have the smaller streets are a gigantic pain in the ass…

I’ll then admit an equal bias of having never been to DC. I have lived in Denver for most of my life, and while we have our tall areas, in the words of a friend, you can drive in any direction for about thirty minutes and be in borderline wilderness… I would never think to worry about how high a building is…

The difference is that something is being consumed. When the rights to build higher are transferred, the area above the house is not actually being transferred… At least Diamonds must be mined. Even programming code must be coded, there is intellect going into the process. This however is a limitation put on people, by the government, monetized to mitigate the consequences of the limitations.

Except that the pressure to raise the height normally is for a much greater size than would be under this policy. This reduces the normal pressure.

Small increments would mean a great deal when spread out over a mile, than they would when that mile is divided into individual houses… A foot raise over a mile would be roughly 303 cubic feet, or a floor (11’ tall) 1591 x 1591 feet. “It’s only a foot” would become a constant statement by lobbyists and politicians. (and it would be, until the 11th time they’ve done it.)

As to people valuing the short stature, I would not agree that is true based on the correlation that people have not argued to change it. I would guess most people are unaware of it until they try to build a house higher.

Nope, I just misunderstood.

That makes WAY more sense than what I was thinking, lol.

I like this. I’m keeping it.