It was about a famous 130-year-old deli in New York City called Katz’s Delicatessen. The Lower East Side neighborhood around the deli had gotten fancier — and property taxes and overhead had gotten expensive. The deli was on the brink of shutting its doors, but the owner learned he was sitting under a whole lot of money.
In New York City, you can buy and sell the air above or around your building so that a real estate developer somewhere else can build taller. The deli was able to stay open after the windfall the owner made selling the air rights. That got Katie in Oakland wondering if air could save some of the places she cares about.
Chin asked Bay Curious: “As we see more and more gentrification, are there any similar mechanisms that different nonprofits or arts organizations could take advantage of, like selling the air space above where they operate?”
Building Sky High
Salesforce Tower is San Francisco’s largest skyscraper and the tallest office building on the West Coast. But the tower would be 100 feet shorter — 51 stories instead of 61 — if it didn't take advantage of a program called the transfer of development rights, or TDR for short.
The TDR program is San Francisco’s version of New York City’s air market.
In San Francisco, how high you can build is limited by two things.
The first is the location of your building. In some neighborhoods, like the Sunset, buildings can be only about 40 feet high — about four stories. But downtown, the city allows buildings as tall as 1,000 feet high.
The second thing that determines how high you can build is the amount of land you build on. Larger lots usually mean taller buildings.
But if you use TDR, you can go beyond those two limiting factors and build higher.
To understand how it works, picture an imaginary cube.
“On paper, for every property, we have this theoretical cube where development can occur,” says Corey Teague, zoning administrator of San Francisco’s Planning Department.
But the theoretical cube of space that the developer of the Salesforce Tower, Boston Properties, had to build on wasn’t as big as they wanted.
Through the TDR program, they found a building by the waterfront — the Rincon Annex Post Office — that had a cube of air for sale exactly the size they were looking for.
“And so in the easiest sense,” says Teague, “it’s literally transferring that cube of space and adding it on top of their cube, to give them an even bigger cube to build within.”
Although lots of cities have air markets, San Francisco’s is fairly unusual. The city designed the program with an important limitation for an important purpose: You can buy extra cube space only from historical buildings.
(The cities of San Jose and Oakland don't have their own version of an air market, but in Oakland, many in the historic preservation community are calling for the city to create one similar to San Francisco's as part of the Downtown Oakland Specific Plan.)
San Francisco's program provides an incentive to preserve historical buildings because many can’t actually use their cube space because, well, they are historical, and there are limits to the renovations they can make.
So, the TDR program makes their unused air rights valuable.
After the air rights are sold, the owner of that building is required to use some of those funds to maintain the actual structure — such as making it earthquake-proof or repairing the facade.
San Francisco’s TDR program was created in 1985, just after the city saw a huge development boom where a lot of high-rise office buildings were built. People worried that historical buildings would be demolished and lost forever.
“There was a term that was thrown around by some folks called Manhattanization,” says Teague.
To date, the program has saved over 100 historical buildings downtown.
“The development rights that were there aren't just going unused. They're going for additional development somewhere else in the city that can accommodate it and where we do need that development,” he says. “And so it's really a win-win.”
The TDR Program and the Arts
When it comes to helping out struggling arts organizations in the Bay Area, like our question asker Katie Chin asked about, this program doesn’t do much.
I talked to the planning department, the mayor’s office, arts organizations and a TDR broker, but in all of San Francisco, I managed to find only one arts space that has used the program: the Luggage Store Gallery.
Co-founder Laurie Lazer says the gallery serves between 20,000 and 25,000 people every year through events such as art workshops, exhibitions and an experimental music series.
"A lot of artists left the city and a lot of spaces just went ‘kaput,' " Lazer says. "They blossomed and then they fell."
But the story of the Luggage Store is a bit different. It starts in the late 80's when Lazer first saw the building.
“One day I was riding my bike down Market Street,” says Lazer, “and I'm always looking and I saw these windows. And at that time there were these light fixtures, and it just looked like really glorious.”
The building had a large “For Rent” sign out front, and before long Lazer was renting the space. When the owner died a few years later, the building went up for sale.
Lazer and her co-founder didn’t want to leave, so they managed to find enough wealthy investors to buy the property and lease it back to them.
But in 2013, when the real estate market was doing very well, those investors came back to Lazer with bad news.
"So basically a couple of partners said, 'You know what? We want to sell,' " she says.
In order to stay in the building, Lazer and Smith had to buy it from the investors. That’s when they teamed up with a local nonprofit, the Northern California Community Loan Fund, and figured out they could use a combination of low-interest financing, grants from arts foundations and the TDR program.
Lazer and Smith sold their air rights for more than $200,000.
“It helped us significantly because raising $200,000 for us is a lot of work,” she says.
Lazer and her co-founder are still slowly paying off their investors. They have until 2022 to raise $1.7 million.
“We need culture and we need art," she says. "Come on, we need it! I mean the city needs it."
And at least in this case ... a little bit of air kept one arts organization alive.
Keeping Arts in the Bay
We've compiled a list of resources for arts organizations that need sustainable solutions for staying in the Bay Area: