Residential Conversion Opportunities in New York City

Authors: Wesley O'Brien and Nick Williams

While policymakers are considering potential strategies to boost housing production through the conversion of vacant offices, there are existing New York City zoning regulations that create opportunities to reposition certain older commercial and manufacturing buildings for residential use.

In the wake of the COVID-19 pandemic, New York City office vacancies have remained high, particularly in older buildings. At the same time, the City is experiencing a housing shortage, and repurposing unused offices for housing would seem to be a straightforward way to tackle both challenges. Even in districts where residential use is permitted as of right, however, accomplishing a conversion can be difficult, as purpose-built commercial or industrial buildings often have deeper floor plates, more floor area, and greater lot coverage than would be permitted for a new residential building.

Policymakers have announced potential reforms that would address these challenges, including in the "Making New York Work for Everyone" action plan, announced by Governor Kathy Hochul and Mayor Eric Adams in December, and the "Office Adaptive Reuse Study" published by the New York City Department of City Planning this month. Proposals include revisiting the residential floor area limitation set forth in the State's Multiple Dwelling Law ("MDL"), which caps residential use at a floor area ratio ("FAR") of 12 (i.e., twelve times a property's lot area); expanding the geography in which older buildings can be converted using relaxed standards to include all high-density commercial districts; and allowing non-residential buildings constructed prior to 1991 to utilize favorable light and air regulations when converting to residential use.

The proposed reforms would be welcome additions to the toolkit used by property owners and their consultants as they navigate the post-COVID real estate landscape. In the meantime, there are existing zoning controls that owners of aging commercial and manufacturing buildings can leverage in many areas of the City to convert buildings to residential use.

As-of-Right Conversion of Older Buildings

In zoning districts where residential uses are permitted as of right (generally, districts with an "R" or "C" letter designation), buildings that comply with current residential bulk regulations and other applicable provisions of the New York City Zoning Resolution (the "Zoning Resolution") may be converted to residential use through a straightforward permitting process at the Department of Buildings. However, residential bulk controls and light and air requirements are often more restrictive than those applicable to non-residential uses, and many purpose-built commercial buildings do not comply with current residential requirements.

Fortunately, the Zoning Resolution provides additional flexibility for buildings constructed prior to December 15, 1961 (or, south of Murray Street in Manhattan, prior to January 1, 1977), through regulations set forth in Article I, Chapter 5. These controls were enacted in 1981, 10 years after the legalization of live-work loft conversions for artists in SoHo, to address demand for residential conversions in other business districts where housing is permitted as of right. Among other things, Article I, Chapter 5 allows for conversions of eligible buildings to residential use without regard to underlying residential floor area limitations, as long as certain minimum requirements are met with respect to light and air, unit dimensions and residential open space.

These zoning rules apply in specified Community Districts in Manhattan south of 59th Street and along the East River waterfronts of Brooklyn and Queens, as shown on an online mapping tool recently launched by the NYU Furman Center, as well as in certain "special districts" in Jamaica, Queens; St. George, Staten Island; and Coney Island, Brooklyn.

Relief from Residential FAR Limitations. Any building converted pursuant to Article I, Chapter 5 is exempted from the residential floor area limitations set forth in the Zoning Resolution for the applicable zoning district, and such buildings generally are not subject to the Statewide cap of 12 FAR for residential uses. This means, for example, that an existing office tower constructed in lower Manhattan at an FAR of 15 could be entirely converted to residential use, subject to meeting certain unit and area dimensions, average size, open space and light and air requirements, and other requirements set forth in Section 277 of the MDL. In these instances, floor space used for mechanical equipment may also be converted to residential use, effectively increasing the total permitted floor area of a building.

Relaxed Light and Air Standards.In addition to waiving residential floor area restrictions, residential units converted pursuant to Article I, Chapter 5 are allowed to meet relaxed light and air requirements set forth in the MDL. For example, while new construction residential buildings generally require 30 feet of open space at a rear lot line, the MDL permits residential units to rely on smaller yards (20 feet or less) typical of commercial and manufacturing buildings. In cases where it is not feasible to fully meet the relaxed MDL requirements, a waiver may be sought from the New York City Board of Standards and Appeals.

Open Space Requirements. Depending on the number of new residential units, at least 30% and up 50% of a building's gross roof area must be provided as accessible open space to residents and their guests, with no fees charged. Balancing this requirement with mechanical equipment needs and other requirements, including Local Laws 92 and 94 of 2019, which, where applicable, mandate the provision of rooftop green space or solar panels, may present design challenges. For such cases, zoning provides a mechanism for the Chairperson of the City Planning Commission to modify the open space requirement if the Chairperson certifies that the roof area is either unsuited for open space or cannot be made suitable at a reasonable cost.

Process. In most cases, conversions relying on Article I, Chapter 5 may be accomplished on an as-of-right basis by obtaining permits from the Department of Buildings following the submission of zoning plans detailing the proposed conversion and the building's compliance with applicable zoning controls. Many architects practicing in New York City are familiar with these controls, and building owners typically consult land use counsel for assistance in navigating this process.

Additional Residential Conversion Mechanisms

The Zoning Resolution also includes a number of other mechanisms that may be used to facilitate residential conversions of older buildings. As described below, the utility and availability of these mechanisms will depend on the particular history and location of a given building.

Flatiron and Garment Center Conversions. Throughout portions of the Flatiron and Garment Center neighborhoods (i.e., C6-2M, C6-4M, M1-5M and M1-6M zoning districts), buildings located in historic districts or designated as individual landmarks by the Landmarks Preservation Commission may be partially converted to residential use pursuant to a certification by the Chairperson of the City Planning Commission if floor area is preserved for commercial or manufacturing use. Additionally, such buildings may be fully converted to residential use pursuant to an authorization by the City Planning Commission if a maintenance program is established for the building.

Change of Non-Conforming Use. In districts that are outside of the Community Districts in which Article I, Chapter 5 applies and where residential uses are permitted, portions of a building occupied by a legal non-conforming use (i.e., a use that was legal at the time it was established, but which is not allowed under current controls) may be converted to residential use without regard to applicable district bulk or parking requirements. However, this mechanism does not waive the current Statewide floor area cap (12.0 FAR), and light and air requirements of the MDL would need to be met for any new residential unit.

Zoning Variances. The New York City Board of Standards and Appeals is authorized to grant variances, or waivers, of provisions of the Zoning Resolution. These may include modifications of bulk controls to facilitate an otherwise as-of-right residential conversion or a waiver of a prohibition on residential use in a manufacturing district. In general, in order to obtain a variance to allow a conversion to residential use, a building owner must demonstrate to the Board that there are unique physical conditions affecting the subject property, which are not "self-created" and which create practical difficulties or an unnecessary hardship in complying with as-of-right zoning controls, and that as a result, the requested variance is necessary to allow the owner to realize a reasonable return on investment.

The current efforts by the City and State would facilitate the conversion of more unused commercial space to residential use, and are to be applauded. In the meantime, as demonstrated by the recently announced plan to convert the 22-story office building at 25 Water Street to residential use, there is a strong demand to repurpose older commercial buildings for housing, and the Zoning Resolution already provides several pathways for creative developers and their teams to meet these objectives.

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