Housing Policy

NIMBYs Should Pay Developers, Not Sue Them, To Save Their Views

In a beautiful display of how markets can resolve conflicts, Manhattanites pay a developer to not block their view.

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One of the many virtues of markets is their ability to turn seemingly intractable conflicts into mutually beneficial trades. For evidence, look no further than a real estate deal in New York City that has managed to make peace between a housing developer and some would-be NIMBYs.

Last week, The New York Times published a story about the residents of a 12-story loft building in Manhattan's Chelsea neighborhood who, faced with the prospect of a new condo building that would block their view of the Empire State Building, decided to bargain rather than litigate.

The building's inhabitants offered to buy the air rights from their neighborhood developer for $11 million. Residents on the upper floors paid up to $1 million, people on the lower floors paid less, and those on the bottom floor paid nothing at all. People who didn't have the cash to pay their full share relied on loans from their neighbors.

In return, developer Gary Barnett ceded his right to build anything other than a three- or four-story structure on his property.

"It's not common," Barnett told the Times. "Most of the time, they sue you and try and stop you somehow. These people stepped up to the plate and paid market value for the building rights."

It's true that conflicts over new developments are rarely worked out so harmoniously. Often, view-conscious property owners resort to legal or administrative action in order to either stop an unwanted project from going forward or delay things long enough to force a developer into making concessions.

One reason for this is that it's often much cheaper to weaponize the planning process and the legal system than to work out a voluntary agreement. The stricter a city's land-use regulations and the more discretion its planning process gives bureaucrats, the more appealing the former option becomes.

In San Francisco, for example, the planning process heavily favors community input over property rights, and planning officials have a lot of power to layer conditions on new developments beyond what the city's already exacting zoning code requires. In addition, California environmental laws make it possible to slow things down with administrative appeals and lawsuits that can take months, if not years, to resolve. With this setup, it's no surprise that NIMBYs there rely on courts and bureaucracies rather than negotiating like the Chelsea residents.

Reason has covered a number of cases of NIMBY strong-arming in San Francisco, including when a totally zone-compliant single-family home was delayed for more than a year because neighbors resented the loss of a garden that the new house would replace. There have also been multiple cases where apartment projects were delayed because the new buildings would cast shadows.

In each case, project opponents could have tried to buy the land the offending project was to be built on. Or, like the Chelsea residents, they could have offered the developer cash compensation to build a smaller building that would cast fewer shadows.

One benefit of market arrangements like the one described in the Times story is that people have to actually put a price on these competing uses. The relative costs and benefits of building new housing over preserving a great view can be hashed out, and a mutually beneficial outcome can be reached. But when land use regulations stop these normal market mechanisms from functioning, competing interests are funneled into bureaucratic systems where the process is driven by politics and decisions have clear winners and losers. The result is an incessant conflict.

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  1. The result is an incessant conflict.

    Welcome to life?

  2. A capitalist solution to a property rights issue – I wouldn’t call the people involved NIMBYs.

    1. Yeah, the view was out their front windows.

    2. Indeed. People resolving their differences without involving the heavy hand of the State? Inconceivable!

  3. It’s like handing over your lunch money to a bully to not beat you up.

    1. In the version of the article I read, people in a 12 story building were mad at a developer for planning a higher high rise nearby. I hope somebody buys the lot directly behind the planned high rise and build a 30 story building.

      1. Why? They wanted a piece of their neighbor’s property and did the right thing and paid for it. The neighbor wanted to sell and they wanted to buy. There is nothing wrong with what went on here. This is how it is supposed to work.

        1. Well said, John.

        2. Yes. And now they own air over another building, but they don’t own all of the air between themselves and the Empire State Building. If some rich twit wants to waste money on air, great. I hope they get nothing for their money when the owners of the other lots realize the bonanza they’re sitting under.

          1. It is their money. They can spend it as the please. They are free to buy easements on the other lots too, though those lots are further away and would have less effect on their property.

            1. I didn’t dispute they’re allowed to do it. I just hope it ends badly for them.

              1. And I don’t see why. There is nothing wrong with buying someone else’s property.

              2. I just hope it ends badly for them.
                Someone is jealous of those with money.

                1. Oh, come now. I dislike anybody who lives in NY or DC.

      2. So you want the capitalist solution to fail, thus encouraging future folk to weaponize bureaucracies to maintain their status quo.

    2. More like giving some of your lunch money to the kid in front of you in line, so he doesn’t buy the last cupcake that you want to buy

  4. It is called an easement. You can have an easement for light just as much as you can for say ingress and egress across the property.

    This was traditionally the solution to all of these sorts of issues: covenants and easements. If you didn’t want your neighbor building a big building blocking all the sunlight on your yard, you bought an easement to the light from him. You want to live in a neighborhood where all the of the houses sit on a lot of at least 1/4th of an acre? Get together with some like minded people and go out and buy some land, and build a development where all of the homes are subject to such a covenant.

    The common law had a solution to literally every issue. The more government steps in and moves the law away from it, the worse things go.

    1. The common (or case) law didn’t solve the problem of a citizen’s finding “like-minded” partners to finance, up front, what’s needed to plan, buy up land, and build a subdivision. So developers do this instead, and often include the covenants and easements you’re describing. Most citizens buy homes in these, or buy extant homes, but all buyers must get a real estate agent and make sure the research is finished before signing. Common law, prevalent in England up to the 17th century or so when it was supplemented by statutory law, never anticipated the complexities of a crowded modern country.

  5. How much did they pay the owner of the Empire State Building for providing such a worthy structure to view?

    1. You can’t trespass the eyes.

  6. Would have been interesting to see what happened if the $11 million wasn’t enough.

  7. No. The people should pass initiative measures strictly controlling all development, and banning the kind they dont want. Simple and more direct. Also cheaper.

    1. People do not have the moral right to infringe on the property rights of others including the property rights of developers and aspiring homeowners. To do so is anti-libertarian, anti-free enterprise, communist, and anti-American. One’s property rights end at one’s property line. All limits on development should be repealed, except to mitigate negative externalities (parking, etc.).

  8. you could make the same argument re zoning classifications. You want some more exclusive zoning rule – pay a higher prop tax rate.

  9. The best solution is for Developer A to acquire the air rights before building, and include the cost in prices asked for the units there, whereupon it can advertise “protected view above nth floor.” That way residents don’t end up having to pay off or sue a Developer B wanting to build above the height of floor n – 5. Alternatively, condo buyers better do their research if they expect their vistas to prove permanent. A lawsuit is usually cheaper than the rights, but I believe most such suits lose in the end. The kind of deal narrated here is unlikely wherever floor space is expensive enough to justify skyscrapers.

  10. It isn’t just places like NY and SanFran either.

    I have a friend who built a house in West Palm Beach. It was a really nice house in a really nice neighborhood. (yes, that means rich folk) So first he had to contend with neighbors who didn’t want him to have any second floor windows. They were worried that his bedroom window would allow him to see into their back yard. So a bunch of negotiations with the county, city and homeowner’s association later, he gets a taller hedge out back and reduced windows on the sides of the second floor that are smaller and higher than is reasonable. But whatever.

    That took a year.

    Then there was the air conditioner. They originally had it on the plans for a nice, normal location at the rear corner of the house, along the side. But someone objected. Apparently there are setback rules in the county. But the HOA rules state that it has to be on the side. After much wrangling with lawyers it was determined that there was literally no location on his property where it was legal for him to locate an air conditioning unit. (and he needed two big ones) All the codes had conflicting requirements.

    So another several months of negotiation and they issued a variance to put it on the side – as long as he hid it with landscaping.

    Then another several months of fighting over the landscaping. Yes, the city and county and HOA each wanted to pick the type of shrubbery. And they disagreed about which kind they liked.

    I think there was something else in there about their kosher kitchen. (they did the full monty – two of everything. Two sinks, two counters, two stoves, two ovens….) Apparently there are codes about that stuff too.

    Anyway, all said and done it was 2.5 years longer than projected to get into the house, all due to pissy neighbors filing various objections with various governing bodies. I seriously asked why he didn’t sell out and pick another place – or buy out the guy living in the house behind his. Woulda been cheaper.

    Final kicker….

    The neighbor who objected to the second floor windows and caused all the problems, seriously impacting the home in a negative way? Yeah, they moved shortly before actual construction began.

  11. Exactly, this is how the free market works! No need for the State to get involved or issue bans and mandates.

  12. The windows whose view would have been blocked are lot line windows; the building was originally a factory and there would have been no windows on that side of the building. The proposed development would have meant those windows being bricked up, meaning their room could no longer have been legal bedrooms. This would have decreased the value of the apartments much more than any lost view.

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