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Legal Alert

Changes Proposed to the Sale of Transferable Development Rights in San Francisco Will Open the Market Once Again

Changes Proposed to the Sale of Transferable Development Rights in San Francisco Will Open the Market Once Again

Legislation has been approved that would expand the zoning districts from which transferable development rights ("TDRs"), commonly known as "air rights," may be transferred.  The TDR program allows owners of historic buildings to sell the development potential of their lots to the owners of other lots within the same zoning district.  The development potential is equal to the lot square footage multiplied by the Floor Area Ratio, minus the square footage of most or all of the existing building.  In return for allowing the sale of air rights, a historic building owner must agree not to build to the property's full development potential allowed by zoning laws once all TDRs are sold.  The program encourages the preservation of historic buildings since (1) additions of square footage are made impossible once all TDRs are sold, and (2) the proceeds from the sale of TDRs will be used by owners to preserve their historic buildings.

Currently, TDRs from a particular sub-zoning district may be transferred only to a similar sub-zoning district within downtown.  Under the legislation, TDRs could be transferred to and from any downtown zoning district and from the South of Market Extended Preservation District to any downtown district (in most circumstances).  The intent of the legislation is to create a more vibrant market for purchase and sale of these air rights, which has stalled at times because of the limitation on zoning districts from which TDRs may be transferred.  The Board of Supervisors approved the legislation on April 16, 2013.