State Budget Approves Elimination of 12 FAR Cap in New York City

The New York State FY 2025 budget legislation enacted on April 20^th included an important and long-awaited housing reform for New York City: elimination of the “12 FAR” cap for residential buildings. City officials and housing advocates have been pushing for this change for many years, and the idea acquired increased momentum as the City’s housing crisis worsened. The state legislation aligns with zoning changes that the City has proposed as part of its “City of Yes for Housing Opportunity” text amendment.

 “Floor Area Ratio” (FAR) is the ratio between the floor area of a building and the “zoning lot” on which it is situated. The limitation on FAR for residential uses dates back to 1960, when it was enacted as part of the State’s Multiple Dwelling Law (MDL) in order to make the State law consistent with the residential bulk controls in the 1961 comprehensive amendments of the New York City Zoning Resolution. Those amendments introduced the concept of “floor area” on a “zoning lot” as a device to regulate building bulk and established a maximum of 12 FAR for residential use.

Housing advocates, urban planners, and the real estate industry have long argued that this limitation is unnecessarily restrictive and irrational. The cap has not prevented large, mixed-use buildings, which can exceed 12 FAR by combining office and/or hotel uses with residential in the same building. It has also not prevented “supertall” buildings, which for the most part have been built by assembling development rights through as-of-right zoning lot mergers. What the 12 FAR cap has done, however, is to limit the construction of new housing.

The budget bill, adopted by the Legislature and signed by the Governor on April 20^th, amends MDL Section 26(3) to allow the FAR for residential uses on a zoning lot to exceed 12, but only in the following circumstances:

1. Either (A) where the City creates zoning districts that permit this greater FAR through its mandated public review process including, if applicable, the Uniform Land Use Review Procedure (“ULURP”) or (B) where there the project is sponsored by Empire State Development Corporation (“ESD”), the State’s economic development agency, as described below; and
2. Where the City’s zoning districts mandate a minimum affordability percentage that is equivalent to or exceeds its Mandatory Inclusionary Housing (MIH) program. MIH currently requires that at least 20-30% of residential floor area on a zoning lot be affordable, depending on the targeted income level.

Such zoning districts do not currently exist under the Zoning Resolution. However, the City is proposing to create them as part of the City of Yes for Housing Opportunity text amendments, which are expected to begin public review on April 29th. City of Yes would create two new zoning districts: an R11 district and an R12 district, which would permit up to 15 FAR and 18 FAR, respectively, of residential use. The regulations for these districts would be added to the Zoning Resolution, but they would not exist anywhere in the City until they become available for use in an area either through further changes to the zoning text or through a subsequent zoning map amendment, both of which would require compliance with MIH.

The budget legislation amending the MDL also imposes certain limitations on the use of this authority to exceed 12 FAR for residential uses:

• The affected property may not be located in a New York City historic district.
• A building exceeding 12 FAR cannot be built on the same zoning lot or tax lot as an existing building with less than 12 FAR unless that building meets the requirements for the issuance of a Certificate of No Harassment under Section 27-2093.1 of the NYC Administrative Code.
• The property may not be located on the same zoning lot as a building with “joint living-work quarters for artists” or “interim multiple dwellings,” pursuant to Article 7-B or 7-C of the MDL.
• Any tenant of a building demolished to construct a building that exceeds a residential FAR of 12 must be offered financial compensation or a lease of a comparable unit at a comparable rent.

The new law would also allow residential buildings to exceed 12 FAR in projects sponsored by ESD, which has the power to override local zoning. The legislation requires, as a condition to doing so, that the project reserve at least 25% of its rental dwelling units for lease to families with a range of incomes equal to or less than a weighted average of 80% of the Area Median Income. The same limitations listed above for City rezonings would apply to ESD projects, except that ESD must also find that there is a feasible method for relocation of families and individuals displaced from the project area.

Please contact Kramer Levin’s Land Use team to discuss the potential impacts of the legislation on current and future assemblages and on the analyses of future development projects.